Cancellation of Illegitimate Debts Instead of Bailout Umbrellas for Financiers

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demandside
demandside's picture

"The inflation of public indebtedness was an essential element for the enhanced power of financial capital. That inflation was a result of a conscious under-financing of the state and is a lever to enforce an austerity policy.  Financialization intensified the pressure for the reorganization of working conditions and the precariousness of work and living conditions...

State indebtedness is a result of an under-financing of public budgets by lowering direct taxes on income and on the profits and capital for firms. The top tax rates for incomes and corporate profits were reduced all over Europe since the middle of the 1980s... The system of state financing involves a transfer of wealth from wage-earners to the banks and investment funds... The state debts are not a result of excessive state spending. Rather they are an integrated element of the financiers' regime and an expression of a structural under-financing of public budgets.

The tight budgets were an important lever for implementing a harsh austerity policy. They serve as a pretext for restraining the state from certain sectors of the economy and executing privatizations and a comprehensive reorganization or even destruction of the whole welfare system - at the expense of wage-earners and the expropriated population..."

to read Christian Zeller's article "Cancellation of Illegitimate Debts Instead of Bailout Umbrellas for Financiers" published in the summer of 2012, click on

http://la.indymedia.org/news/2013/01/258093.php

 

 

Comments

hans nel
this is the reason to have

this is the reason to have truly poublicly held central banks instead of the private central banks we have now, like the so called Fed.

stuff
stuff's picture
What is an "illegitimate"

What is an "illegitimate" debt?

polycarp2
Probably since the Fed has

Probably since the Fed has thrown $11 trillion at finance with all of the Quantitative Easing nonsense and give-aways, government doesn't owe them anythng.

As a separate issue, borrowing non-existent money from a bank through fractional reserve banking so government can print it is rather absurd. We owe banksters money they didn't have in the first place. If they didn't have it, we shouldn't owe it.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
Quote:Probably since the Fed

Quote:
Probably since the Fed has thrown $11 trillion at finance with all of the Quantitative Easing nonsense and give-aways, government doesn't owe them anythng.

As a separate issue, borrowing non-existent money from a bank through fractional reserve banking so government can print it is rather absurd. We owe banksters money they didn't have in the first place. If they didn't have it, we shouldn't owe it.

Doesn't really answer the question, does it: "What is an 'illegitimate' debt"?

According to David Graeber, money is a measurement of debt, a measure of "one's trust in other human beings" (Debt, p. 46).

polycarp2
Probably since banks use

Probably since banks use fractional reserve banking to loan money to government that they don't  have...so government can print it..., makes the loans illigitimate debts.

If I loaned you money I didn't have and went to court to collect it, a judge would laugh in my face...and then throw me in the pokey for making a fraudulent claim.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
Quote:If I loaned you money I

Quote:
If I loaned you money I didn't have and went to court to collect it, a judge would laugh in my face...and then throw me in the pokey for making a fraudulent claim.

But you are not the sovereign.

Anybody who would borrow money from somebody without any demonstrates poor judgment in the extreme and probably deserves close psychiatric attention. You're talking about madness, not lending.

 

nimblecivet
nimblecivet's picture
stuff wrote: What is an

stuff wrote:

What is an "illegitimate" debt?

Some people might have some examples, though their list would not be complete. We don't know. Because of the bailouts and qe we don't know; that was half the reason for them. Once an institution goes bankrupt only then does the court system have the jurisdiction to sort out the various claims of those involved or affected. But given the lack of transparency of the financial sector and inevitable resistance to any inquiries necessary to resolve a particular bankruptcy case, say of one of the "too big to fail" institutions, such as the ones involved in laundering drug money, murder, etc., its unlikely at this point the state (even in the form of the federal government) has the ability to adjudicate these things. If I'm not using the term "bankruptcy" in the techinically correct sense, by referring to banks as "going through bankruptcy", then fine if you point that out but you know what I mean.

polycarp2
stuff wrote: Quote:If I

stuff wrote:

Quote:
If I loaned you money I didn't have and went to court to collect it, a judge would laugh in my face...and then throw me in the pokey for making a fraudulent claim.

But you are not the sovereign.

Anybody who would borrow money from somebody without any demonstrates poor judgment in the extreme and probably deserves close psychiatric attention. You're talking about madness, not lending.

 

Banks aren't sovereign either.  I'd say the U.S. is probably suffering from madness. Government is borrowng non-existent money through fractional reserve banking...and paying back money that didn't exist before it issued an I.O.U....a Treasury Bond.

Banks aren't lending money. They are lending the permission to print it. You're quite correct. It's madness. The debt owed to banksters is illegitimate.

Retired Monk - "Ideology is a disease"

MEJ
MEJ's picture
I like to ask people, "if the

I like to ask people, "if the richest countries in the world like the USA, Japan and many European countries are all in such deep debt, who is all that money owed to?"

The usual answer is China, but they only own about 8%.

I've been asking lots of people about the Boston Tea Party too. I still haven't found even one person who could tell me who owned the tea that was  Amazing.

Anybody watch Frontline's, "The Untouchables"? It about why no Wall Street criminals have been prosecuted.

stuff
stuff's picture
Quote:Banks aren't sovereign

Quote:
Banks aren't sovereign either.

Member institutions of the Federal Reserve System act with the authority of the sovereign.

stuff
stuff's picture
Quote:...who is all that

Quote:
...who is all that money owed to?

According to one economist:

Henry Hazlett wrote:
They tell us that the government can spend and spend without taxing at all; that it can continue to pile up debt without ever paying it off, because "we owe it to ourselves.” 

polycarp2
stuff wrote: Quote:Banks

stuff wrote:

Quote:
Banks aren't sovereign either.

Member institutions of the Federal Reserve System act with the authority of the sovereign.

You do realize that the member banks of the Federa lReserve  System are all private banks, don't you? Giving them sovereignty over the nations money supply...having to borrow non-existent money from the private banks before we can print it... is probably rather stupid.

Private Banksters aren't sovereign nations though you certainly wouldn't know that by the power we've given them.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
Quote:You do realize that the

Quote:
You do realize that the member banks of the Federa lReserve System are all private banks, don't you?

Of course. I also know that some on this Board would like to nationalize the banking system, but that would require a hell of a lot of "just compensation" to their private owners.

Quote:
Giving them sovereignty over the nations money supply...having to borrow non-existent money from the private banks before we can print it... is probably rather stupid.

The weren't given sovereignty, they act under the authority of the sovereign. If you can't see the difference then you can't see it.

nimblecivet
nimblecivet's picture
We could always privatize the

We could always privatize the whole thing: http://www.sfweekly.com/2013-01-23/news/debt-collectors-terrorize-consumers-for-prosecutors/

When a private debt collector misrepresents themselves as a government agency and collects "fees" with that authority then if you can't see the difference then you can't see it.

Bush_Wacker
Bush_Wacker's picture
I want to know why you or I

I want to know why you or I as individuals can claim bankruptcy.  Corporations and businesses can claim bankruptcy.  We the people, together can't claim bankruptcy.  Why the hell not?  Many people are allowed to pay off credit card debt to the tune of 20 cents on the dollar.  Why?  Because they are still paying back 20 cents that never existed and the bank is ok with that.  It's Constitutionally legal to mint money for US debt and it's Constitutionally legal to claim bankruptcy but neither is allowed to pay off past debt as a nation. 

polycarp2
stuff wrote: Quote:You do

stuff wrote:

Quote:
You do realize that the member banks of the Federa lReserve System are all private banks, don't you?

Of course. I also know that some on this Board would like to nationalize the banking system, but that would require a hell of a lot of "just compensation" to their private owners.

Quote:
Giving them sovereignty over the nations money supply...having to borrow non-existent money from the private banks before we can print it... is probably rather stupid.

The weren't given sovereignty, they act under the authority of the sovereign. If you can't see the difference then you can't see it.

True. The Sovereign State gave private banksters sovereignty over its monetary system. It was privatized. If you can't see it, you can't see it.

Not much different than Bolivia giving a corporation sovereignty over its rainfall. Bolivia took it back.

Probably instead of compensating banksters with bailouts, we should have just let them fail and re-boot with public banking. It was a lost opportunity. The entire banking system would have collapsed like a house of cards.  We'd have saved a bundle by simply letting them destroy themselves. Compensation not required. A non-existent business doesn't have to be bought.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
Quote:We the people, together

Quote:
We the people, together can't claim bankruptcy. Why the hell not? 

Because no one would ever lend money to "We the People" again, that's why.

stuff
stuff's picture
Quote:The Sovereign State

Quote:
The Sovereign State gave private banksters sovereignty over its monetary system.

What the sovereign gives, the sovereign can take

Quote:
It was privatized. If you can't see it, you can't see it.

That's right, we have a private banking system. Duh. Stop the presses!

We could nationalize the U.S. banking system if we wanted, but we would owe a hell of a lot of "just compensation" to the previous owners. I've said this many times without response.

If you can't see that we would have to compensate the private owners of our banking system for nationalizing their property, then you can't see it.

polycarp2
Good. "We the people" could

Good. "We the people" could issue our own money as provided in the Constitution. We wouldn't have to borrow non-existent money from bankers through fractional reserve banking so we could print it. They don't lend us money...they lend us the permission to print it. 'Tis costly for us, profitable for them.

Do note, however, that when Argentina repudiated the majority of its debt after banksters collapsed its economy, it's credit rating quickly went up. Its ability to pay new debt skyrocketed.

Retired Monk - "Ideology is a disease"

nimblecivet
nimblecivet's picture
stuff wrote: We could

stuff wrote:

We could nationalize the U.S. banking system if we wanted, but we would owe a hell of a lot of "just compensation" to the previous owners. I've said this many times without response.

That's because you ignore every argument you can't handle. Your assumption is that there would be "just compensation" due. No one else shares that assumption. 

stuff
stuff's picture
Quote: "We the people" could

Quote:
"We the people" could issue our own money as provided in the Constitution.

The Constitution delegates that power to the Congress, not to "We the People."

stuff
stuff's picture
Quote:That's because you

Quote:
That's because you ignore every argument you can't handle. Your assumption is that there would be "just compensation" due. No one else shares that assumption.

Perhaps because they don't understand the Fifth Amendment.

Bush_Wacker
Bush_Wacker's picture
stuff wrote: Quote:We the

stuff wrote:

Quote:
We the people, together can't claim bankruptcy. Why the hell not? 

Because no one would ever lend money to "We the People" again, that's why.

Really?  Tell that to the millions of Americans who've filed for bankruptcy multiple times and are still sick and tired of credit card applications arriving in droves in the mail every day.  Once you're debt free you become a very attractive borrower.  As far as the United States Government goes I would have a different approach.  Once debt free then THIS years budget should be determined by LAST years revenue.  If you take in 2 trillion in revenue then you know how much can be spent.  They can fight over their piece of the pie.  Budget surplusses are of no need.

Bush_Wacker
Bush_Wacker's picture
stuff wrote: Quote: "We the

stuff wrote:

Quote:
"We the people" could issue our own money as provided in the Constitution.

The Constitution delegates that power to the Congress, not to "We the People."

Congress is supposed to represent "We the People."  They are supposed to be one and the same.

Phaedrus76
Phaedrus76's picture
On nationalizing the banks,

On nationalizing the banks, and the Great Conservative Recession, at the time of the collapse we had 3 options available to us:

1- Let the banks go kaputt, and let the FDIC cover depositors, and then find other good banks to take over the deposits of the insolvent banks. Which would have cost the US taxpayer a ton of coin, the FDIC did not have the reserves to cover a widespread free market failure.

2- The bailouts as designed by Bernanke, and Emperor Shitforbrains.

3- Nationalize the insolvent banks. Make Lehman Bros, Bank of America, HSBC, GMAC etal wholly owned entities of the US of A. This option would have cost the govt the least amount of money, the FDIC was already on the hook for what the losses were, and there is no cost to nationalize an insolvent bank. Unless stockholders and bondholders wanted to atttempt to claim they'd make the losses good themselves, no one else was going to cry boo. 

Options 1 and 3 were best because the stockholders would have seen the share prices reduced to zero, allowing them to feel the full beauty of the free market. 

Option 3 also had the attraction in that it would have caused the heads of all conservatives to explode. 

Option 2 was the one with the least disruption to the markets, kept what little lending that took place to continue, and kept most Baby Boomers' 401k from collapsing.

stuff
stuff's picture
Quote:Once you're debt free

Quote:
Once you're debt free you become a very attractive borrower. 

Governments are not the same thing as individual borrowers. Plus, after personal bankruptcy, one's credit is not immediately restored.

stuff
stuff's picture
Quote:Congress is supposed to

Quote:
Congress is supposed to represent "We the People." They are supposed to be one and the same.

Nevertheless, they are not the same thing. The U.S. Constitution makes no provision for direct democracy.

stuff
stuff's picture
Quote:3- Nationalize the

Quote:
3- Nationalize the insolvent banks. Make Lehman Bros, Bank of America, HSBC, GMAC etal wholly owned entities of the US of A.

As soon as a buyer (with deep pockets) appears (Uncle Sugar), the prices of shares increase as a result. The only reason the shares were cheap was because nobody wanted to buy them.

nimblecivet
nimblecivet's picture
"No person shall be held to

"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

You apparently have read this several times. Unfortunately, your eyes seem to have jumped past "without due process of law" to "without just compensation." The entire point of the bailouts and qe was that each of those were and are a "hell of a lot" more expensive than what would be due to various parties after due process had run its course.

stuff
stuff's picture
Quote:Unfortunately, your

Quote:
Unfortunately, your eyes seem to have jumped past "without due process of law" to "without just compensation." The entire point of the bailouts and qe was that each of those were and are a "hell of a lot" more expensive than what would be due to various parties after due process had run its course.

No, "just compensation" was my point exactly. Calculate how much private investment there is in banks and then you'll get an idea of what the government would have to pay the owners for a nationalization.

nimblecivet
nimblecivet's picture
That's your opinion of

That's your opinion of "just." See Phaedrus' points above. The gov. does not have to pay what buyers want. I'm done here.

Phaedrus76
Phaedrus76's picture
stuff wrote: Quote:3-

stuff wrote:

Quote:
3- Nationalize the insolvent banks. Make Lehman Bros, Bank of America, HSBC, GMAC etal wholly owned entities of the US of A.

As soon as a buyer (with deep pockets) appears (Uncle Sugar), the prices of shares increase as a result. The only reason the shares were cheap was because nobody wanted to buy them.

Incorrect. All these entities were insolvent, or about to be insolvent. The share prices went to zero for every bank that went insolvent because they were worth nothing. No business continued to exist. Firms that are shutdown because they have are insolvent will not have some buyer appear suddenly to inject capital, otherwise this would have happened prior to them going insolvent. 

And Uncle Sugar would not be buying, he'd be taking over the insolvent banks, with the intention of then being able to operate them as a true Federally owned bank, much like the Bank of North Dakota. Sweden did the same thing in the late 1990's. Their govt also deregulated their banks, with the inevitable boom in real estate and bust, many banks were insolvent. Their king stepped in and they nationalized the insolvent banks, and regulated them.

Nothing like a large, national bank to keep the pirates at bay.

stuff
stuff's picture
Quote:That's your opinion of

Quote:
That's your opinion of "just." See Phaedrus' points above. The gov. does not have to pay what buyers want. I'm done here.

No, it has to pay them what the court orders.

stuff
stuff's picture
Quote:Incorrect. All these

Quote:
Incorrect. All these entities were insolvent, or about to be insolvent. The share prices went to zero for every bank that went insolvent because they were worth nothing. No business continued to exist. Firms that are shutdown because they have are insolvent will not have some buyer appear suddenly to inject capital, otherwise this would have happened prior to them going insolvent.

Insolvent is not the same thing as worthless.

Bush_Wacker
Bush_Wacker's picture
stuff must be a banker.  The

stuff must be a banker.  The only one I've seen on this board or any other for that matter that argues against the government's ability to pay off it's debt through the Constitutionally legal manner of coining what is needed.  Consistently argues against a debt free nation through any means other than paying principle and interest to the Fed.  All the while knowing that the money borrowed never existed.  It won't exist until it is back in the hands of the Fed and it's minions.

stuff
stuff's picture
Ex-banker. A "debt-free"

Ex-banker.

A "debt-free" nation is neither possible nor desirable. All ongoing enterprises use debt to finance their capital expenditures. Building a highway with current revenues would be impossible and financially imprudent.

Phaedrus76
Phaedrus76's picture
stuff wrote: Quote:Incorrect.

stuff wrote:

Quote:
Incorrect. All these entities were insolvent, or about to be insolvent. The share prices went to zero for every bank that went insolvent because they were worth nothing. No business continued to exist. Firms that are shutdown because they have are insolvent will not have some buyer appear suddenly to inject capital, otherwise this would have happened prior to them going insolvent.

Insolvent is not the same thing as worthless.

But what happens when a bank is insolvent, and the FDIC is taking themover on Friday afternoon? What is the value at that moment? What do the shareholders receive for their investment?

Bush_Wacker
Bush_Wacker's picture
stuff wrote: Ex-banker. A

stuff wrote:

Ex-banker.

A "debt-free" nation is neither possible nor desirable. All ongoing enterprises use debt to finance their capital expenditures. Building a highway with current revenues would be impossible and financially imprudent.

If that's true then the National debt can never be slowed down let alone reversed. 

Being an ex-banker, you would rather the government use bank credit for all expenses instead of tax payer revenue.  Imagine that.

stuff
stuff's picture
Quote:But what happens when a

Quote:
But what happens when a bank is insolvent, and the FDIC is taking themover on Friday afternoon? What is the value at that moment? What do the shareholders receive for their investment?

The FDIC protects depositors, not shareholders.

Shareholders stand at the end of the line when corporate assets are liquidated. First in line is the government, which claims assets for taxes. Next come bondholders, then lien-holders. Whatever is left over belongs to shareholders.

stuff
stuff's picture
Quote:If that's true then the

Quote:
If that's true then the National debt can never be slowed down let alone reversed.

That is correct. Federal debt is never eliminated, only refinanced. As long as the federal debt increases less than the national economy increases, the debt can be refinanced indefinitely.

Quote:
Being an ex-banker, you would rather the government use bank credit for all expenses instead of tax payer revenue. Imagine that.

No, I wouldn't, and I never said so. Current revenues should cover current expenses, except when a federal stimulus is appropriate. Current expenses include scheduled debt repayments. Current revenues should not be used to pay for long-term capital assets, which would be financiallly imprudent.

polycarp2
Actually, as loans (public

Actually, as loans (public and private) are re-paid, the money supply shrinks. If private borrowing isn't sufficient, it disappears. Under those circumstances, if government doesn't inject money into the economy...there comes a point where there isn't a circulating money supply.

Government has two options. It can borrow the permission from banks to print and spend it into the economy by giving them a Treasury Bond, or it can simply create it and spend it into the economy as provided for in the U.S. Constitution..

The collapse of the Argentine economy in 2001 is a prime example of a disappearing money supply. Barter communities were set up using barter scrip. There wasn't enough official money to get a haircut.

The Argentine collapse: Video:

 

http://www.youtube.com/watch?v=rH6_i8zuffs

Retired Monk - "Ideology is a disease"

 

polycarp2
stuff wrote: Quote: "We the

stuff wrote:

Quote:
"We the people" could issue our own money as provided in the Constitution.

The Constitution delegates that power to the Congress, not to "We the People."

Supposedly, government represents "We the People".

The Constitution gives government the power to coin money and state its value. It doesn't give that authority to banksters. Government should probably take that authority back...and stop borrowing permissison to create its own money.

Banksters loan government money they don't have through fractional reserve banking. Then government can create it...with a debt attached. 'Tis a stupid monetary system.

Personally, I prefer the Constitutional means. Government can simply coin money and state its value. Banksters aren't required in the process.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
Quote:The Constitution gives

Quote:
The Constitution gives government the power to coin money and state its value. It doesn't give that authority to banksters. Government should probably take that authority back...and stop borrowing permissison to create its own money.

Article I, Section 8 gives to the Congress power to "make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof."

 

polycarp2
You skipped part of it.

You skipped part of it. Bankster friends usually do.

Congress also has the power  "To coin money, regulate the value thereof"


http://www.law.cornell.edu/constitution/articlei

Govrnment should probably stop borrowing non-existent money from banks through fractional reserve banking so it can create it....and simply create it. It has the Constitutional authority to do that. The Founding Fathers weren't twits.

Retired Monk - "Ideology is a disease"

stuff
stuff's picture
As we have discussed

As we have discussed before--ad nauseum--the Constitution gives Congress the power to borrow money, which is the basis of U.S. currency. Establishing a Federal Reserve System is allowed under the necessary and proper clause regarding the financing of the U.S. government.

Bush_Wacker
Bush_Wacker's picture
stuff wrote: As we have

stuff wrote:

As we have discussed before--ad nauseum--the Constitution gives Congress the power to borrow money, which is the basis of U.S. currency. Establishing a Federal Reserve System is allowed under the necessary and proper clause regarding the financing of the U.S. government.

First of all a private banking system is neither necessary or proper.  Secondly I have noticed that most people on this board confuse the right to use power with a mandate to do so.  Congress has the power to borrow money but they are not demanded to do so.  The Constitution gives us options.

Phaedrus76
Phaedrus76's picture
stuff wrote: Quote:But what

stuff wrote:

Quote:
But what happens when a bank is insolvent, and the FDIC is taking themover on Friday afternoon? What is the value at that moment? What do the shareholders receive for their investment?

The FDIC protects depositors, not shareholders.

Shareholders stand at the end of the line when corporate assets are liquidated. First in line is the government, which claims assets for taxes. Next come bondholders, then lien-holders. Whatever is left over belongs to shareholders.

OK, so you don't know what happens with banks though. Not "corporate" but rather Federally Insured Banks? The govt comes in on Friday, declares the FDIC is taking over, and spends the weekend looking for another bank that is stable and can take the deposits, and this is usually 80-95% of everything over the FDIC limits, meanwhile the bondholders generally get nothing, all the worthwhile assets banks hold are deposits. The shares become worth nothing. There is no leftover, all the assets of the bank were deposits, plus real estate owned, and a bunch of loans which most likely are already worthless, otherwise the bank would not be insolvent.

 

stuff
stuff's picture
Quote:First of all a private

Quote:
First of all a private banking system is neither necessary or proper.

I appreciate your opinion, but that really is a matter for the courts to decide.

stuff
stuff's picture
Quote:all the worthwhile

Quote:
all the worthwhile assets banks hold are deposits.

So, "insolvent" means that the bank has zero reserves? All of its outstanding loans are non-performing?

Phaedrus76
Phaedrus76's picture
No, insolvent means the

No, insolvent means the reserves are below the legally allowable to cover their loans. And not all loans are non performing. But, if those reserves are not the banks "property" but rather customers' deposits. The next guy buying the bank doesn't get to take Mary Lou Rottencrotch's $3000 in her checking acct. And, if there was any "value" in the bank, some other bank or investor would already be on it, buying it up.

Banks that are going insolvent have no value to investors, otherwise, they would not need the FDIC. If a bank had value as it went insolvent, some White Knight investor would jump up and save the bank! They never do. These White Knoght investors did not save banks before the FDIC. They do not save them now. The Feds do. At that point, the shares' value is zero. 

The value is zero because Mary Lou Rottencrotch's deposits (and all other depositors) are insured up to $250k for a single person's acct, $500k for couples. So the FDIC uses the assets of the bank to protect Mary Lou and all other depositors up to those limits. Then, depositors above that amount are covered. Those people generally get 80 - 95% of their deposits back. After that, there is no assets left for bondholders, and certainly not shareholders. 

If any company is insolvent, what is the value of their shares? And not merely in a BK restructuring, but closed, deceased, mort, has ceased to exist, has no assets and still has liabilities?? 

The value is zero. The govt could choose to instead of having the FDIC dissolve the bank and find a stable bank to takeover, they could nationalize the bank, for no more cost than the FDIC route.