This started as a comment to another comment. It has grown into something more. So I will do my first new post in over a month.
I think I was not understood about the bailouts. It was likely me being obscure, and maybe a tad trite, that caused that misunderstanding. I didn't say let them fail. I alluded to that we should take them over and undo the too big to fail part. For the bailouts it has gotten to the point where it is pretty much just paying bonuses. Of the largest banks/financial institutions that received bailout money (and stroke of the pen multi-billion dollar tax breaks in the past year), the vast majority of those paid out more in executive bonuses than what they made in profit. Billions of dollar that they didn't make went into their top Executives pockets. Where did it come from? The US Govt. by way of the Fed printing money.
The Fed, whose current printing policy, is a single word. Infinite. That is the amount of money that the Fed is willing to produce to bailout
FUTURE risky investment practices of the largest banks is...
infinite. And the banks aren't doing risk management any different now than they were before they created a worldwide crisis that almost plunged the entire world into a global economic depression.
Now I do understand that there was and to an extent still is 10s if not 100s of dollars in fake assets called derivatives floating out there... and it was and maybe still is this ethereal financial game of hot potato. However the bailout money that was supposed to go to fix that hasn't. We still very much have the same problem. The banking answer however is to take real property and (getting to be almost fake) government money to bolster what is actual assets. Only by doing that they are devaluing everything that they touch. Fact of the matter is that if we had thrown money at the S&L crisis and hope the industry would fix itself then we would be in a depression today. In fact the S&L crisis and deregulation is what led us here in the first place because of the creation of derivatives to stop the financial collapse then. When they were created the creator warned that they needed to be heavily regulated which the paraphrased response was, 'The market will take care of itself and the people who will trade in derivatives will understand the complexities and do so responsibly. How did that work out? We are still in danger of massive collapse no matter what the Politicians espouse.
A we have massively failed with bailouts. Yes the system is slightly more stable. But at what cost? Well let us take just one of the money pits. AIG. Now they have received multiple times the amount we first gasped at when Hank Paulson held a gun to our head. AIG first started with saying they needed $75 billion not to fail, we gave them $86 billion to start, as of last month they had received at least $182 Billion of US Govt. money (not including tax breaks) and Geitner was working to get them more. Ok you can shake your head at the sad state of affairs. But there is a punchline, which side you want to believe is your choice.
Days before Geitner gave AIG everything they wanted and more, when we were into AIG for no money at all, the CEO of C.V. Starr (yes, Hank Greenberg) had a deep understand and said that AIG was not insolvent but simply had liquidity issues. He was of the opinion that the bridge loan would wipe out assets detrimentally and the Federal Govt. needn't get involved because AIG had $20b in assets they could use and there was investors that would invest $30b to make AIG liquid and get them past the temporary issues they were having. That is $50 billion and none of it our money. C.V. Starr, 12% stock holder of AIG and major share holder wasn't allowed in the room when Geitner made the deal with AIG. I guess C.V. Starr's solution didn't involve robbing our great nation so they didn't want to hear from them. Now AIG is devalued and they suck at the government corporate welfare tit in exclusion to fixing their issues.
What a different day this would be if the flood gates were not opened.
Now what is the solution? Well part of it is regulation pre-Reagan days and more to deal with the new financial world. I know the current thieves say that will bring the financial system to ruin. Well the CEO's and major players that made the strongest economic force the world has ever seen say regulation is what is needed. So the whom is right? The people that built the economy or those that think 'greed, for lack of a better term, is good' and destroyed the strongest economy the world has ever know? I think if you want to fix something you talk to a builder not a destroyer.
Also you break them up. Chase, BOA, Wells (Norwest owning the Wells Fargo name), Citi, and conspirators have actually managed to get bigger, yet still manage to fall out of the largest world banks at the same time. Break off 49 state bank (North Dakota already has a state bank) and put walls between their investment banking and the money we deposit with them. A dozen massive banks could easily be several hundred different companies and should be. Yes, their are many that say that breaking up corporations raise prices and make us less competitive as a nation. Really? Corporations always tend to stifle in the name of expediency, and small business tends to push innovation.
And for those that remember, AT&T forecast massive rate hikes declining technological advancement, and deteriorating infrastructure if their monopoly were to be broken up. How did that work? Infrastructure vastly improved with some help from regulation on the state level, technological advancement blew up, and frankly if I called how I do now under the AT&T monopoly I would see $500+ phone bills a month instead of the $100 total I do now.
Well that is where I am coming from. The only change in banking that has helped us is if we deposit money in one branch it doesn't take 4 days to make to the other branch anymore. Everything else has gotten worse in my opinion. To big to fail equals too big to exist. The revolution starts now.
What do you think?
