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Break the Banks, for the Good of the People
Bailing out the big US banks has done nothing to improve them
The old system worked well for the banks so why should they embrace change? Indeed, the efforts to rescue them devoted such little thought to the kind of post-crisis financial system we want, that we will end up with a banking system that is less competitive, with the large banks that were "too big to fail" even larger.
It has long been recognised that the US banks that are too big to fail are also too big to be managed. That is one reason the performance of several has been so dismal. When they fail, the Government engineers a financial restructuring and provides deposit insurance, gaining a stake in their future. Officials know that if they wait too long, zombie or near-zombie banks - which have little or no net worth, but are treated as if they were viable institutions - are likely to "gamble on resurrection". If they take big bets and win, they walk away with the proceeds, if they fail, the Government picks up the tab.
This is not just theory; it is a lesson learned, at great expense, during the savings and loan crisis of the 1980s. In a financial restructuring, shareholders typically get wiped out, and bondholders become the new shareholders. Sometimes, the government must provide additional funds, or a new investor must be willing to take over the failed bank.
The Obama Administration has, however, introduced a new concept: "too big to be financially restructured". The Administration argues that all hell would break loose if we tried to play by the usual rules. Markets would panic. So, not only can't we touch the bondholders, we can't even touch the shareholders - even if most of the shares' existing value merely reflects a bet on a government bail-out.
This judgement is wrong. The Obama Administration has succumbed to political pressure and scare-mongering by the big banks and, as a result, has confused bailing out the bankers and their shareholders with bailing out the banks.
The Obama strategy's current and future costs are very high - and so far, it has not achieved its limited objective of restarting lending. The taxpayer has had to pony up billions, and has provided billions more in guarantees - bills that are likely to come due in the future.
Rewriting the rules of the market economy - in a way that has benefited those that have caused so much pain to the entire global economy - is worse than financially costly. Most Americans view it as grossly unjust, especially after they saw the banks divert the billions intended to enable them to revive lending, to payments of outsized bonuses and dividends.
This ersatz capitalism, where losses are socialised and profits privatised, is doomed to failure. Incentives are distorted. There is no market discipline. The too-big-to-be-restructured banks know that they can gamble with impunity - and, with the Federal Reserve making funds available at near-zero interest rates, there is ample money to do so.
Some have called this "socialism with American characteristics". But socialism is concerned about ordinary individuals. By contrast, the US has provided little help for the millions of its people who are losing their homes. Workers who lose their jobs receive only 39 weeks of limited unemployment benefits, and are then left on their own. And, when they lose their jobs, most also lose their health insurance.
America has expanded its corporate safety net in unprecedented ways, from commercial banks to investment banks, then to insurance, and now to cars, with no end in sight. In truth, this is not socialism, but an extension of long-standing corporate welfarism. The rich and powerful turn to the Government to help them whenever they can, while needy individuals get little social protection.
We need to break up the too-big-to-fail banks; there is no evidence that these behemoths deliver societal benefits that are commensurate with the costs they have imposed.
This raises another problem with America's too-big-to-fail, too-big-to-be-restructured banks: they are too politically powerful. Their lobbying efforts worked well, first to deregulate, and then to have taxpayers pay for the clean-up. Their hope is that it will work again to keep them free to do as they please, regardless of the risks for taxpayers and the economy. We cannot afford to let that happen.
- Posted in
108 Comments so far
Show AllObama 6 month report card:
Public speaking: B
Ethical content, moral courage & Substance: F
Well, I've seen this many times in the last week or 2. It's been 4 and 1/2 months. We're all somewhat discouraged and impatient, but let's stick to facts.
What would they be?
Here's a fact:
Perhaps his (Philip Mudd’s) most famous project to collect consumer data regarding falafel sales in the San Francisco area, believing that the sales records would somehow lead to Iranian terrorists. FBI criminal investigations division head Michael A. Mason reportedly put a stop to the program, saying it was “ridiculous” to put someone on a terrorist list because of the food they ate. The fact that falafel is not an Iranian dish was likewise not lost on many.
Mudd’s colorful history included coining the phrase “Pepsi jihad” to describe what he called the growth of extremism among young people on the Internet. He was also accused of advocating programs of ethnic targeting designed to snare Iranian-Americans who might by spies.
(From: Antiwar.com)
All right, now this nut job, this fanatical fool who probably couldn’t get a job cleaning toilets at PNAC, was being considered for a high level position in the Department of Homeland Security in the . . . OBYSMAL ADMINSTRATION. The contagious, incorrigible stupidity and incompetence of the George Wanker Bush regime just seems to live on and on.
"It is with sadness and regret that the president accepted Phil's withdrawal from consideration as Phil once again demonstrated his duty to country above all things," White House spokesman Nick Shapiro said.
Vern, right on.
But should Obama's first "report card" (as you say) be an 'F' (which he certainly deserves) or a 'PH' that stands for PHONY!
Oh, I know, we can use both grades and mark him as an 'F'ing 'PH'ony.
Alan MacDonald
Sanford, Maine
it's hard to analyze with a short track record... so lighten up.... we had eight years of Bush and that's plenty of time to see the failures and the overall disregard for the American citizen who doesn't make 500 K for a year... Obama took on a catastrophic situation and why don't you think about who could have handled it any better... good luck on that quest... you won't find anyone...
FDR handled the last Great Depression much better.
ah, you were there?
There's plenty of history on FDR. FYI, unlike Obama, FDR did not pass more so-called stimulus packages which were stuffed with more pork barrel and more tax breaks for the already well-to-do. FDR also did not bow to rightwing fascists or bail out Corporate America the way Obama is doing. Obama is already working hard to make himself a one term president and by 2012 he just might get his wish.
FDR took a break from stimulus spending in 1937. Things got worse.
FDR, like his cousin, saved capitalism by placating the masses. Capitalism does not, nor never has, deserved saving. Obama is a very pretty whore, cooing to us, throwing us a perfunctory hump (an election) and turning our money over to his corporate pimps.
Everyone of these articles advocates public action and response, in recognition that on EVERY front from the very moment Obama crossed the threshold, he has been building momentum in the wrong direction--the direction of the greatest presidential failure in our lifetimes. But as he assumes the mantle of Bush- more so with the passage of time-- there are those who demand that we wait and give him more time.
How can there be a movement or growing grassroots consensus holding Obama accountable or "making him do it" if so many voices take the wait and see, give him more time excuse? How much more of a betrayal does he have to be before you say "enough"?
Perhaps the biggest most bloated zombie bank should be the first on the chopping block-The Federal Reserve?
The author implies that the banks have little muscle left. On the contrary, the Federal Reserve (Fed)and the "private" banks will never lose their muscle; the Fed has authority to hand out money carte blanche with no accountability, and the "private" banks own the US Congress, as Dick Durbin told us in no uncertain terms.
Not only does the US financial industry remain unregulated, now they have a new profit center in Obama's NO WALL STREET BANK LEFT BEHIND Program, at great expense to US taxpayers.
Obama tells us that "everything the banks did to upset (more like plunder)the US economy was legal". What Obama doesn't tell us is that their practices and old "products" were decriminalized by deregulation during the past 30 years, while they bribed Congress to legalize new "products". Obama doesn't tell us that legality resulted only because Wall Street has the money to make the laws. Still expecting change from Obama ? Better hope he leaves you with some change in your pocket.
As dcouch pointed out, the first step in breaking up this crime cartel is to dissolve the US Federal Reserve and eliminate the zombie banks' easiest source of taxpayer-funded corporate welfare.
Yes!! Repeal the Federal Reserve Act of 1913. Our Constitution clearly states that the monetary affairs of our nation must be under the control of Congress and the Treasury Department---not private for profit banksters. And that is just what the Federal Reserve is---a cabal of private bankers out to make a big buck. They are so successful in making money that they 'donate' millions to our elected officials. The banking 'industry' is top dog in this nation now. It used to be the Military Industrial Complex Eisenhower warned us about---and then it was big Oil and now the greatest influence on our corrupt elected officials are the banksters. Didn't they just get 16 TRILLION DOLLARS when 98% of the people advised their Representatives to vote no on the bailout?
The Federal Reserve can just print money at their will. They don't need any ok from Congress. They are an independent unregulated agency whose purpose is to make a profit. Most people think the Federal Reserve is an agency of our government----WRONG!
By printing money at their will they cause the value of the dollar to decline. It is simple supply and demand. More dollars means each one is worth less. This is called inflation - and we also have deflation (when the value goes up). The important thing to know here is that both inflation and deflation are controlled by the Federal Reserve. What we have been told is the natural rise and fall of business cycles is really under the control and CAUSED BY the actions of the Federal Reserve. Knowing which way the cycle is going allows those in the know to make money on the downturn and well as the upturn.
What you could buy for one dollar in 1914 costs $21.02 today. We have lost 3.26% of the value each of years since the Federal Reserve was put in control of our monetary system. Wages of the working people have not gone up at this rate. You work harder and get less due to the existence of the Federal Reserve.
There is a bill in Congress now to repeal the Federal Reserve. Contact your Representatives and tell them you want them to vote YES on HR 833.
Considering all the economic and physical damage American banking has wrought, it is a testament to their lobbying operations that they continue to act as brazenly as they do (though their allies in the corporate media certainly help).
Obama is doing exactly what his corporate masters hired him to do. He's Trojan Horsing in all the most extreme right-wing pro-corporate policies with a flair Bush, McCain or any other of the troglodyte right-wingers don't possess and could never accomplish.
And because he looks like a nice guy and his words are like a beautiful harp he will DO IT WITH EASE.
In this bank robbery Summers and Geithner drew up the plan. Obama is carrying the pistol. The media is waiting in the lobby providing cover. And Goldman Sachs is driving the getaway car.
And those who voted for him walk past the bank blissfully ignorant to the crime in progress.
Its worse than that ! Many of those who voted for Obama, especially those who swoon when he text messages them are still sending him money to support his NO WALL STREET BANKER LEFT BEHIND Program. Now he is enlisting their support for his NO INSURANCE COMPANY LEFT BEHIND and NO DRUG MAKER LEFT BEHIND programs that he is framing as "health care reform".
I wonder what would happen if every single currently insured person simply canceled their health insurance.
No need to worry, that's being done! Every time an American loses their job, and at an accelerating rate, this is being done. The key is that they are looking to make it mandatory to contribute to health insurance, much like car insurance now. When that happens, and people do not have jobs, we will be carted off to debtors jails.
Bravo!
For anyone who wants proof of the "trojan horsing" of Obama, read the book by Paul Street about Obama: "Barack Obama and the Future of American Politics." Street makes the case in great detail that Obama is what you say he is.
Earthian, thanks for the advice on Street's book about the phony Obama.
Here's the latest critique on this important revelation in Z Net:
http://www.zmag.org/znet/viewArticle/21664
Alan MacDonald
Yes, a brilliant article:
"For the last century it has been the Democrats' special assignment to play "the role of shock absorber, trying to head off and co-opt restive [and potentially Left, P.S.] segments of the electorate" by posing as "the party of the people." The Democrats performed this critical system-preserving, change-maintaining function in relation to the agrarian populist insurgency of the 1890s, the working-class rebellion of the 1930s and 1940s, and the antiwar, civil rights, anti-poverty, ecology, and feminist movements during and since the 1960s and early 1970s (including the gay rights movement today). Besides preventing social movements from undertaking independent political activity to their left, the Democrats have been adept at killing social movements altogether."
The Dems are a sponge usurping voters' mandate. They are the wet fuse preventing ignition....for the time being.
oh, baloney
Break the Banks, for the Good of the People
Or, Break The People For The Good Of The Banks, which is more likely.
Too moderate a sound, not any fury. Signifying nothing. Mr. Stiglitz, it is apparent to many of us this is exactly shaking out the way THEY designed it to. I'm not willing to carry the pickforks and torches without the critical mass shoulder to shoulder YET... I think voices like yours murmuring are lulling the masses, "see it's just a difference of approach" instead of calling the criminal acts the criminal acts and demanding accountability and utilizing peoples' natural outrage about what has been perpetrated on them.
I will stand by my recommended solution again:
People need to take their money from checking, saving, IRA, 401k and other accounts and put them in local "mom and pop" banks or credit unions. Let these mega-banks collapse. It will roil the economy, but it also is the appropriate corrective action needed to make these mega-banks pay for all of the fraud, corruption, and theft they have committed on their clients over the past several decades. It is one weapon the public has to take down the bankster empire.
If you want a clear presentation of just exactly what happened to bring about our present economic crisis and exactly where we're heading (VERY IMPORTANT!), check out this video made by "A New Way Forward." You won't hear this on the news!
I've put a copy of it online on my own domain. It has several parts to it and lasts for about a half hour. It's WELL WORTH WATCHING! From this website, if you care to, you can embed it on your own website by clicking the "embed link" or e-mail it by clicking on the "e-mail" link on the bottom panel. Let's all help to get this important piece out to as many people as possible.
Here's where you can view it:
http://www.fritzva.com/sherrick/Banks.htm
Thanks!
Thank you, FrankS--finally, an explanation that anyone can understand. And you're right, it is important to get it out there.
Given that Joe Stiglitz is a prominent, Nobel laureate economist on the faculty of Columbia with several books to his credit, is it just coincidence that this particular commentary, candidly critical of both the US banking industry and the Obama administration, appears to be enjoying its initial publishing debut in an Australian newspaper?
Bill from Saginaw
The US newspapers contrive all kinds of reasons they are losing business.
They fail to mention the primary reason: Who wants to pay to read corporate propaganda ?
You need to read foreign newspapers to get news that is not corporate-sanctioned.
"is it just coincidence that this particular commentary, candidly critical of both the US banking industry and the Obama administration,..... (Bill)
LOL..Yes indeed Bill....Just a coincidence......
Break the banks ? Keep dreaming. They're not the ones at fault. The fault lies with stupid consumers who can't sit down, shut up, and read a contract before signing it. I'm doing great as a customer of a big bank and I'm enjoying watching my stocks in a couple other banks grow. Obama and Bush are doing the right thing by bailing out the banks because without them, the people can't store their money safely. Banks beat the shit out of credit unions any day ! LOL !
"without them, the people can't store their money safely." Wow, someone is punch-drunk off the kool aid! Are you a paid schill for the big banks? LOL!!
No, it is a lil poopy soiled baby trolly. Isn't his fat lil backside cute, despite the soiled lacy panties, as he scuries away on lil piggy hooves?
EncinoM trolls here often.
Sioux Rose
ENCINO: Is that you Nebraska Nathan or do you just both sound alike? Genetic mutation?
Encino is a carry over from Alternet. Same ol Encino, same ol posts.
Oh boy, I've had plenty of tough debates with that troll on Alternet. He can be pretty tough to reason with given his stubborn thinking. He hasn't changed over the years. I was surprised though to see him voting for Obama despite his staunch Republican talking points all along but now that it's clear that Obama's as good as a Republican, I can't be too surprised. And he claimed that he doesn't post on CD even when I brought up his trolling behavior there. EncinoM is generally in favor of status quo and often argues against changing it since he thinks it leads to "anarchy". He has made plenty of enemies there as well as here.
And has your home value gone up as well ? Chances are you are making mortgage payments on an asset that has lost half its value.
And how's you 401(k) ? Chances are Wall Street has managed to cut that in half over the past 10 years.
And you better sell your bank stocks now before hyperinflation sets in. Sell tham for dollars you can keep in the bank (which will be worthless against the Chinese Yuan)
And given your limited understanding of the economy - perhaps yu should become a banker - joining others that have a limited understanding of the economy.
Bailing out bankers is like sending your children to play in traffic.
Why do you love inflation in home prices so much. I thought inflation was "bad". Oh, it's only bad when YOU are trying to buy something. Why shouldn't your old used house go down in value? Get real...
both dr stiglitz and william greider here on common dreams on the same day warning about these bank bailouts yet again
we all have the increasing feeling that this crisis is still off the tracks, so to speak
ben bernanke was on the hill the other day saying that - now the money is gone - what the government needs to do is cut back on social spending and supports
this means that single moms, persons with disabilities and seniors are going to bear the brunt of the debt along with us, the working class
what a scam
in short, ladies and germs, we have been had
we are finding out the hard way that the chump club has a few more members than we might have thought not so long ago
Only stupid and corrupt legislators would approve bailing out monopolies.
Right--this IS the US we are talking about....
they are pretty stupid in economics... etc.. what do you want ... their degrees are in law, not economics.
btw the worst place to put your money is in mutual funds... got to watch the manager which is just about as difficult as learning about a stock...
Sioux Rose
MA G: According to Naomi Klein's tireless research, these dots were already drawn up like a roadmap and used on numerous nations before coming home to roost. A toxic leak AT the Chicago School would be a fitting karmic metaphor.
And one more Bank of A story. I was down to my final payment on one of those low interest credit cards, and owed $160. Opened the bill to see $39 late fee. Why? Because the May bill arrived on May 29 rather than May 27, the end of their "billing cycle." They have done this to me before... this time the rep worked with me to remove that fee when I said I was paying it off now. He tried to sell me on a new card and I listened to the whole LONG legal message about all the "do's" and "don'ts." When the sales rep put me through their credit check (keep in mind they were PUSHING this on me), he began to ask me, and I kid you not, where I spend my money each month, how much is left each month, then proceeded to tell me that based on my credit report (which he had before me), he didn't feel I could afford a credit card. I was waiting for him to ask how many times I flush the toilet each day. He wanted to even know the name of my family's stock broker! I mentioned I had never had questions like this asked of me before in obtaining credit, and had a high credit rating, etc. He said it was due to the times! I mentioned that thanks to taxpayers like me his bank had capital and he said "I'm sorry you feel that way," as if it was merely my political sensibilities being announced, as opposed to the TRUTH of the matter.
The way that Obama's "team" have handled this mirage (it reminds me so much of how Enron did "business") allows them to cherry pick all the good assets and leave the taxypayers holding the bag. These mega banks will end up with LOTS of good houses that they can later resell at a huge profit, and they used the taxpayers' money to buy these at pennies on the dollar. When the taxpayer needs a few thousand (in my case for dental work), the interrogation process (that's what it feels like) is ruthless, as are the terms, particularly when it's not enough to make a payment each month, but that payment must arrive within extremely strict time parameters... not too early and not too late THAT month, or one is charged late fees and all promotional rates go out of effect. Imagine when the Pony Express is late! The whole thing is insane and sickening. One of so many trespasses against decency that now are becoming automatic operating procedures.
SiouxRose -
And here's yet another Bank of America story, this time coming from someone who sought to avail themselves of all the consumer leverage and regulatory oversight tools I learned about in law school.
Once upon a time, BOA issued me a credit card with a $6,000 upper limit. As a prudent consumer, I never came anywhere close to that limit, much less exceeding it.
Out of the blue and abruptly, I was notified that my credit limit was being dropped to precisely the balance then due (about $2,200.00), effectively rendering the card in my wallet useless until reissued, creating simply a lump sum immediately due to renew and carry on, but henceforth with an upper credit limit now about a third of what was contracted for.
Silly goose me. I paid off the demanded balance, and took my meager business using plastic elsewhere - just let the old invisible hand of the marketplace do its thing, in terms of reforming the heartless banksters' business practices. My next monthly statement came, reflecting BOA had actually received $2.17 too much from me, due to some sort of calculation error on their part when I paid the card off.
I waited patiently for about six more months for my $2.17 refund check from BOA, receiving a regular monthly payment each and every month showing the bank still owed me the cost of coffee and a croissant at the cafe of my choice. Finally, I got sufficiently pissed off that I filed a formal complaint with the Office of the Comptroller of the Currency, the federal entity which has regulatory oversight over national banks such as BOA, including their credit card policies.
Several weeks later, I received a letter from the powers-that-be at BOA assuring me this oversight was most regrettable, and their $2.17 check was in the mail. The correspondence then directed me to language supposedly incorporated into my credit card account which read (I shit thee not):
"We may suspend or close your account or otherwise terminate your right to use your account. We may do this at any time or for any reason. Your Obligations under this Agreement continue even after we have done this."
I did ultimately get my $2.17 check and celebrated with a latte. Several weeks later, the Comptroller of the Currency wrote me back. No, I was not entitled to tax a $39 per month late fee against Bank of America (although the comptroller did not squarely address my request for this particular mirror image remedy). I was politely informed that from the Comptroller of the Currency's standpoint, the matter was now closed because under the relevant federal statutes including Regulation Z:
"Your dispute involves provisions of your contract with the bank. We cannot intercede in a private party situation regarding the interpretation or enforcement of your contract."
In the further interest of consumer education, please note that paying off one's existing credit card balance in the fashion that I did - taking my future credit business elsewhere - is itself a choice that can be entered as a negative scoring factor into your credit history file. It sure seems to me there's a lot of leeway here for meaningful Congressional action regarding credit card practices, if the political will to do something actually existed.
Until then, I guess it's still best to just keep gazing up at the heavens for guidance, and carrying on.
Best always, Sioux.
Bill from Saginaw
Sioux Rose
Bill: Thanks for sharing your tale. I see it the same way with other gigantic corporations. I had been using a calling card to avoid paying for a long distance plan because years ago when I lived in Gainesville, A T & T (without my ever endorsing this) DECIDED to be my long distance company and started billing me! It took me MANY phone calls up and down the ranks of representatives to get the matter cleared up. A decade later since the phone card is now under the auspices of A T & T, when I call and purchase 400 minutes for about $17.00 the 400 minutes are NOT 400 in-state minutes. In fact, each call takes 5 units or is about 30 cents a minute! So I just decided to try a long distance (that includes in-state calls) plan, but I fully expect all kinds of unauthorized charges.
These companies cannot be taken at their word. I have been fortunate to have owned good health (diet & exercise help), although the dental thing is another matter; but I can only imagine how energy-consuming it must be to fight with a medical insurance company over their add-on charges. They all do this routinely now. They invent every reason they can to add charges that are equivalent to new forms of usury. By the way, I hope the coffee and croissant were REALLY tasty. When the interest rate was still around 4% I managed to extract several hundred from Bank of A on a C.D. That has been recently placed in a credit union, albeit at just over 2%. Makes you want to vomit when you see our "representatives" unable to tack even a 20% ceiling on credit card usurers. The land of the free, if you can PAY to play. If you have enough money, any and every law becomes a free for all... I HATE what's happened to this nation, and I grieve daily for this passage into darkness.
Hmmm. I was about to pay off, this month, the final $937 I owe on my Visa card and close it out. Maybe I should leave it open and just not use it in an attempt to keep my current high credit rating?
pretty ridiculous on both sides... how silly...
"I'm sorry you feel that way."
Sioux Rose--When I, twenty years ago, announced to a viciously misogynistic, bullying husband that I was divorcing him for those reasons, that was his reply. Had I been capable of reconsidering my decision, that remark would have ended it right there. As you say, it transferred responsibility for his bad conduct onto my, by implication misguided, "feelings." I'm astonished it's still around.