Wednesday, January 13, 2010
If Government Won't Break Up the Giant Banks, Let's Do It Ourselves
The giant banks aren't lending much to the people who need it. Fortune pointed out in February that smaller banks are stepping in to fill the lending void left by the giant banks' current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition.
Federal Reserve Governor Daniel K. Tarullo said in June:
The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks...But the government - instead of breaking up the giant banks who aren't lending to the people who need loans - is trying to prop them up using permanent bailouts. See this, this, this, this and this.
For example, while the number of credit unions has declined by 42 percent since 1989, credit union deposits have more than quadrupled, and credit unions have increased their share of national deposits from 4.7 percent to 8.5 percent. In addition, some credit unions have shifted from the traditional membership based on a common interest to membership that encompasses anyone who lives or works within one or more local banking markets. In the last few years, some credit unions have also moved beyond their traditional focus on consumer services to provide services to small businesses, increasing the extent to which they compete with community banks.
And - instead of separating different business activities (such as depository banking functions and speculative investments) - the government is actually allowing companies to get involved in a wider variety of business activities.
For example, economist Simon Johnson points out that Goldman Sachs recently converted to a "financial holding company", allowing Goldman to borrow money from the Fed at essentially no cost, and then invest it in any thing it wants. Johnson gives an example: Goldman bought a large share of the stock of a Chinese automaker. If the investment succeeds, Goldman will reap the profits. If it fails, the American taxpayers are on the hook.
And Goldman is apparently profiting from its combination of roles as both an investment brokerage house for other investors and as a large speculative investor itself. Specifically, Goldman apparently delays trades it makes for its clients long enough to use that inside knowledge of who is buying or selling what to make speculative investments for itself, oftentimes taking the exact opposite position for itself and its largest clients as the position it is recommending to its Mom and Pop investor clients.
Why are politicians letting this happen?
Could it be because the giant banks have bought and paid for Congress and the White House? See this, this and this.
We'll Have to Do It Ourselves
If the government isn't doing anything to fix this dangerous situation, we'll have to do it ourselves.
As a start, if Congress won't reimplement the Glass-Steagall Act (the Depression-era law which previously separated depository functions from speculative investing), let's manually separate these two types of businesses.
How?
Simple: let's pull our money out of the too big to fails and put it into small community banks and credit unions.
The giant banks may still make bucketloads of cash on their casino style speculative gambling (for now, at least), but after we've moved our deposits to more responsible, smaller banks which don't gamble as much, then we will have manually separated depository banking functions from the giant banks' speculative investing.
Get it?
The government isn't doing the job and fixing the problems which have led to the economic crisis ... so we'll have to do it ourselves.
Note: Some people say that moving our money out of the too big to fails will just mean that the government will give them more bailouts. But this misses 3 points:
- If the deposits are withdrawn, the giant banks will only be speculative gamblers, and at least our deposits will be safe and won't be mixed with their toxic assets
- The giant banks and their enablers in Washington will look even worse if they are bailing out companies that are solely and obviously gambling casinos
- The head of the International Monetary Fund, Dominique Strauss-Kahn, has warned:
The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.
Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.
"Most advanced economies will not accept any more [bailouts]...The political reaction will be very strong, putting some democracies at risk," he told delegates.
In other words, the government - fearing revolt - might be more hesitant to give another round of bailouts than people assume.I'm not looking at this with rose-colored glasses, and I realize that the TBTFs will act like the kid who killed his parents and then cries for pity since he's an orphan.
But I think that if the government is not doing its job, we should do it ourselves, and that a focused gesture of taking things into our own hands can only help.
12 comments:
→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).
→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).
→ The following types of comments will be deleted if we happen to see them:
-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over
-- Comments that explicitly call for violence
→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.
Posts
OK - but when they can borrow money at the Fed at no interest - and it's obviously organized crime at work - why do they care if we pull our money out?
ReplyDeleteThey'll get our money from the Fed no matter what we do.
This nation is headed for Civil War. The most recent "Council of Governors" Executive Order by Obama for military action against American citizens by state and federal troops means this corrupt govt is going to "go for" military totalitarianism. Obviously, they will seek to exterminate large sectors of the population as all govts like this do. So, anyway, when they release the military on the American people - there will be infighting and Civil War immediately as soldiers move to take control of battalions to protect American lives and liberty from communist/fascist military takeover. Then, of course, Americans will join with the military fighting for the liberty of the people.
I say this govt is coming down. Not trying to "get ahead of you" - just saying that now that the Council of Governors is being formed by Executive Order for these centralized fascists to try to control we depositors and citizens by military force (and overthrow of our present system of govt and freedom of the people)... well, it's nice to consider trying to break up the big banks by moving our money.
Except the Fed can print them all of our money the Fed wants to and Goldman Sachs asks for - transferring all our wealth to them no matter what as they increase the money supply and destroy the buying power of the money we have anyway.... AND, the govt is organizing for military takeover... SO, we're headed for Civil War here in the USA.
I say this govt will lose the war they launch against the American ppl and cannot maintain control of the military here.
These sons of bitches are going to get theirs when they make the mistake of releasing military troops on this land against American citizens.
(Just on my mind.)
Thanks for the post.
There is no such thing that "too big to fail". All the dinosaurs failed including Tyrannosaurus Rex!
ReplyDeleteToday's hearing in congress was great theatre proving that for any hope of better times we have to start from nationalizing the FED:
http://www.galacticwind.com/digest/2010/January.html#2
If you truly want to do this, pick credit unions to handle your banking, and only use a debit card for transactions. Burn your credit cards.
ReplyDeleteCredit unions are mostly non-profit and return their earning back to their members. Find one of these near you and visit them, you will be surprised at how pleasant of an experience it will be!
It think the sentiment the article tries to impart, is that these banks, which provide very little in the way of public service and certainly serve no public necessity, actually control too much of our nation's economic where-with-all, and only -due to their relationship with a corrupt form of government, which has historically sold-off parts of our economic system -every chance it could -for a profit.
ReplyDeleteWelcome to what pragmatism has wrought, again. And you thought this was about the rights of man and universal suffrage!
This is no different from what led up to the decapitation of Marie Antionette and Louis the XVI.
A guy actually got a $100 million dollar bonus for playing the numbers racket on Wall Street for a bankrupt bank this past year, -a bank that was at the time and is still being rescusitated with public bailout funds.
Hello? Is there anyone there?
If you are in debt, stopping paying the debt. It is your moral duty to do your part to help shut down any system that is so corrupt as is this one.
If you are not in debt, then demean and malign any debtor within earshot for their contribution to this immoral system -as is ours.
Debt funds our wars. It is the debtor who is killing the Iraqis and the Afghanis.
Tell the debtors to stop contributing to this hideous system that puts the price of everything out of reach, and - requiring debt or insurance to afford it.
Think of what the world has become! You now need insurance to have a baby in this country. You need insurance to die. You need a loan to buy a place to live, or to buy an automobile. Some fools get a loan to buy a TV or a couch!
When I was 12 years old, in 1962, I earned a dollar an hour, minimum wage. A brand new car could be purchased in 1962 for under a thousand dollars.
-Add it up, people. Think about it. YOU are slaves to what has pragmatically evolved into our economic system. And you are slaves that in effect support -buy your endless debt- a murderous government that is murdering millions of people around the world.
the "print this post" button is a blank page, Could you please make your site more printer friendly!? I enjoyed this article very much and wanted to share it with some friends. Thanks again!
ReplyDeleteI agree with Don Robertson, repudiate all debt. I've been thinking about the so called "national debt" and how we are told that we, our children, and their children will have to pay it! Oh, I don't think so, I never asked for a military,industrial, congressional, religious, (oh yes,the God squad is also involved)complex. No one asked if I would be willing to pay for enough nukes to wipe out the planet many times over, no one asked me if I would be willing to pay for useless $2 billion bombers. Some of you may remember the slogan, "no taxation without representation". Well that's me.
ReplyDeleteHave to agreed with a poster above; and add to it.
ReplyDeleteDoes anybody out there actually believe the U.S. debt will get paid off? In dollars of any substantial value? Of course not. Might as well believe in the tooth fairy.
That being said, now it's time to start edging toward the exits. Common, it's not your imagination, that really is smoke you see and smell, there really is a fire smoldering and about to flare. Heck, the elite saw this over a year ago...hence TARP. TARP worked so well for them that they just kept going to the well. And there was Joe Six Pack, all to clueless about being screwed again and again.
Wake up folks. Obama is FULLY on the side of the banksters. The banksters have no limits to their greed. If the U.S. public is a push over then the banksters will keep at it as they pull every last bit of wealth from the middle class.
Until they're stopped. By the only thing they understand. FORCE.
A piece of advise:
ReplyDelete...dont file your taxes yet...take your time...ask for delays...stalll...by some more time...
Dont be in a rush to pay your taxes and then lets see what the bankers will do.
moon
I totally agree with those above who are saying, "do not repay your debt". But go further. Do NOT file or pay Income Taxes. Cut the money off at the source.
ReplyDeleteThey're already so deeply in trouble, that it should quickly have an impact.
Stop fearing them. If you are afraid, you are GIVING them control of your life. They cannot "arrest" 200 million non-taxpayers!
Send in the military? What a joke. On THEM that is. That will blow up in their faces real fast.
They'll use "Blackwater"....so what? How many of us are there, well armed, and sick and tired of the ILLEGAL Federal Government? Give us a target, please.
Suzie Q is right. But people need to move their money closer to home anyway so they can have a tiny bit more say in how it's used. Also, the act of moving their money raises their involvement and awareness. When Uncle Sam finally attacks, the citizenry will have already been at least partially aware of what's afoot, and be more able to muster the righteous indignation required.
ReplyDeleteThere was a time, before so many people gave up on the US Govt., when some people were advocating a Govt. Bank:
ReplyDeletehttp://angrybear.blogspot.com/2009/02/commonwealth-bank-of-united-states.html
http://www.youtube.com/watch?v=Icqrx0OimSs
ReplyDeletehttp://www.youtube.com/watch?v=8AmfNft0Eow
http://www.youtube.com/watch?v=L8YAp_15pfc
While I think the premise is good (an attempt to change the system) the unstoppable wave of deflation is crashing down upon us.
Transitioning funds to local banks is a noble effort but one that will end up in vain.
Why? The system is going to crash. It will crash. Nothing can stop it. There is no safety net. No get out of jail free card.
The big boys know this and are planning for it as Suzie mentioned in the 1st comment. You can do it on their schedule or try to make it happen on yours.
Possibility here -
http://vipers-n-thieves.blogspot.com/
Moving money to small local institutions may hasten the collapse....I'm all for it.....but its not a safety net to protect your money!
Current production (GDP)cannot sustain current debt service....let alone an increase or even the future (SS, Medical, Pensions, etc etc etc). Game over!
The path to this point has been intentional and planned (Greenspan Sweeps program, drop in interest rates, relax of securitization rules - SEC, derivative expansion, etc). This will be the trigger event for the transition to the new world order....a new financial system that will sustain everyone. You won't be able to buy or sell outside the system.
...or it will fall apart into chaos and civil war as Suzie has described above.