The Next Big Crash Could Wipe Everyone Out, Except Wall Street

In 2008, I had recently graduated from college and was just beginning my professional career. I will never forget how different things were before and after the housing crisis/Great Recession. To be frank, I don’t think America has truly recovered fully from the widespread economic turmoil that occurred during and after the 2008 financial crisis.

While navigating the 2008 crisis was no walk in the park for millions of Americans, it could be nothing compared to the next big crash.

My colleagues, Justin Haskins and Jack McPherrin, recently wrote a new book about this very subject: The Next Big Crash: Conspiracy, Collapse, and the Men Behind History’s Biggest Heist.

This book bares a secret that Wall Street does not want the American people to know: “Wall Street’s biggest players rewrote the rules of asset ownership so that nearly all U.S. securities are legally owned by a single, centralized financial entity, while investors are left with only a weak contractual claim.”

That single, centralized financial entity is the Depository Trust Company (DTC). According to its website, the DTC was “established in 1973” to “reduce costs and provide clearing and settlement efficiencies by immobilizing securities and making ‘book-entry’ changes to ownership of the securities.”

As of this writing, the DTC retains “custody of more than 1.4 million active securities issues valued at US$87.1 trillion, including securities issued in the US and more than 131 countries and territories.”

Although it sounds too far-fetched to be true, Americans don’t actually own the stocks, bonds, mutual funds, and other assets held in common retirement vehicles such as Roth IRAs and 401(k) accounts. In reality, Americans own what are called “security entitlements.”

This is a significant, albeit sinister, development that could have far-reaching consequences when the next economic crisis occurs.

“In a major financial crisis, investors’ assets can be frozen and seized to absorb losses at failing firms—a scenario that has already happened on a smaller scale under existing rules, and could be made far easier if emergency powers are invoked.”

In other words, big banks will be insulated from major losses whenever the next big crash arrives.

Make no mistake, this is not legal theory; it has already occurred.

In September 2008, Lehman Brothers filed for bankruptcy due to their overleveraged positions in the subprime housing market. At the time, Lehman was more than $600 billion in debt. Eventually, the case was dragged through the bankruptcy courts.

When Lehman Brothers filed for bankruptcy, its custodian, JPMorgan Chase, made sure it was at the front of the line when Lehman’s assets were distributed. Ordinary investors who had accounts with Lehman were simply out of luck. They had to wait years to be reimbursed, although many were only awarded a fraction of what they were owed.

As Haskins and McPherrin note, “The legal framework that will govern the next major financial crisis is already in place, and it was explicitly designed to protect large institutions alone.”

This should send shivers down the spine of every American because the bottom line is that when the next big crash comes, whether it be months or years from now, big banks will be hunky dory while everyday Americans will get absolutely hammered.

“'The Next Big Crash' examines how these rules could play out when the next crisis hits, and outlines steps policymakers and ordinary Americans can take to avoid being left holding the bag.”

I highly recommend this book because every American will be impacted one way or another when the next big crash arrives.

Chris Talgo ([email protected]) is editorial director at The Heartland Institute.

Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.

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