Silver Banking? The Free Lakota Bank (Beware! Turns out it's a Scam!!!)
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Many people are looking to escape the traditional commercial banking system. Nearly 3,000 S&L banks went under during the S&L crisis of the early 1990s, and over 500 commercial banks (S&Ls were essentially extinguished as a class of banks after the S&L crisis) have joined them since the 2008 crisis. Today, the 6 largest banks control over 2/3 of all bank assets. And these huge banks don't make many loans, and even less to small businesses. JP Morgan, one of the largest banks, has just a 31% loan-to-asset ratio. The rest goes towards derivatives, wealth management, mergers and proprietary trading.
As for the bankruptcies of the cascade of failing small banks Too Small to Survive (TSTS), the FDIC has, so far, been able to handle such bank defaults by combining failing banks with stronger ones, or offering up its own money (the FDIC fund is currently set at $25B, though they have access to Treasury money at low rates), typically over a weekend, so that depositors seamlessly, albeit surprisingly, discover the bank they had deposited into on Friday is different from the one they have deposits in on Monday.
However, a recent American Banker article claimed the small banking model was "not sustainable."
And bailouts by the FDIC are NOT an option for the Too-Big-To-Fail (TBTF) banks, or, as the Federal Reserve more politely calls them: the Systemically Important Financial Institutions (SIFIs). Though the policy is still being developed, and may not be fully known until there is an actual SIFI failure, the FDIC will almost certainly not be able to make significant arrangements with its own limited resources to rescue such a bank. Since Dodd-Frank made "bail-outs" illegal, there is talk of "bail-ins," in which depositors' money would be turned into equity, in a failing bank.
Many people, including Public Bank advocate Ellen Brown, and probably the residents of Cyprus, who saw the results of a bank "bail in" first hand, consider this an inadequate solution. It is, at the very least, insufficient, and might even be impoverishing, depending on how much a depositor has in a particular bank account being converted into equity.
Now, there is a new option, but it's also a very cautionary tale.
In fact, the question of investing in the Free Lakota Bank
was first raised in the Public Banking Google Group, of which I am a part, and
was possibly recommended by World
Bank Whistle Blower, Karen Hudes.
I say "possibly" because Hudes actually recommended the "bank of the
Lakota Indians" but a Google and Bing search turned only this singular
reference to the so-called State
Bank of Lakota, which turns out to be just a small bank, though an old and
established one (est. 1900), having nothing to do with the Lakota people, but
just the town of Lakota, North Dakota. There was nothing else that looked like the right bank.
On the other hand, there were a plethora of references to the Free Lakota Bank (FLB). What's in a name? Everything, it turns out.
Since 2008, the Free Lakota Bank has operated as a "a private and sovereign property storage and security service."
A video from 2012 by the Ithanchan (basically, the CEO) of the Free Lakota Bank may be viewed here.
This is something quite different from a public bank, such
as the Chikasaw Banc2. The Chickasaw nation has
it's own Public Bank, though it is more of a hybrid than the State Bank of
North Dakota, being insured by the FDIC, which the BND is not.
From the bank's website:
Bank2 is a community bank committed to helping people build better lives. We are proud to be rated a 4-Star Bank by BauerFinancial, the most respected independent body rating financial institutions. Bank2 was also recognized by the ABA Banking Journal as the #1 and #3 community bank in the nation in 2009 and 2010 respectively.- Advertisement -
Bank2 is a wholly owned subsidiary of the Chickasaw Banc Holding Company. The Holding Company and thus Bank2 are 100% owned by the Chickasaw Nation. We have received state and national recognition through our efforts in Native America, and we are the #1 source of Native American home loans in the state of Oklahoma.
This is a bank of, by, and for, the people...of the Chickasaw Nation.
The Free Lakota Bank, however, is based on a different model. It is something called a "commodity bank." They advertise themselves as a "property storage bank" - the property being gold or silver, measured in ounces of either, depending on how the account is first set up. It's up to the depositor to convert his or her "fiat money" to gold/silver initially for deposit, though they do suggest an exchange service. However, one should be wary of these services, as dealers can take quite a bit off the top for conversion to gold/silver "coin" and the less "reprocessing" fees for conversion into coins, the better. Money paid to coin dealers is generally money lost, as there is little market for silver or gold coins, beyond the intrinsic value of the coins themselves. The Open Currency exchange recommended by the Free Lakota Bank has a sliding price scale for coins marketed to the bank, with presumably lower prices for bulk purchases.