Did you know that we, the taxpayers, send 64 billion a year to the 5 biggest US banks? Let me write that out for you. $64,000,000,000 is delivered in to the coffers of JP Morgan, Bank of America, Citigroup, Wells Fargo, & Goldman Sachs. According to Bloomberg these 5 would fold without it. They won't be able to stay in business without our tax dollars, so why not let them fold and better banks will rise up to take their place?
Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy. The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.
We send 3 cents from every tax dollar raised to keep the superbanks afloat because some politican's apparently have a sweet tooth for cash. Other's fear that if the banks fold, America folds with it. Back in 2008 we learned the phrase "too big to fail" while talking about these very banks. It almost united all American's, but the Occupy Wall Street message got a little convoluted with a lot of pot smoke and free love, so the conservatives stayed away.
photo: Getty images
But the essence of their message, if you could understand them between coughs and bong hits, was simple. The banks have too much power and hurting our country. Let's forget the bribes I mean campaign donations these banks make. Let's go with the best possible case that we supplement banks out of fear of what will become of our economy if they collapsed. Which means we are slaves to the big banks, even if you personally don't do business with them! To show how much of a slave we are we learned a new term last year. Too big to jail. HSBC of London admits that their top executives were involved in laundering money for drug lords and terrorists around the globe.
Prosecutors had to carefully weigh the impact a conviction might have on the world’s third largest bank. A criminal conviction would have dealt a serious -- if not fatal -- blow to one of the critical nodes in the global capital network while Europe’s banking system is on shaky ground. That would have had serious repercussions on the US economy and in fact the entire world economy!
So instead prosecutors worked out a deal where the bank paid a fine of 1.9 billion dollars and if they keep their noses clean for 5 years the record will be wiped clean. Again these are executives whose crimes led to the deaths of innocent people at the hands of terrorists and drug lords. But US and European officials will not allow any of them to go to jail or even lose their jobs!
Whether it's greed or fear that has allowed the situation to get to where it is, we need our politician's to stand up to the banks. Democrat Senator Sherrod Brown of Ohio and Republican Senator David Vitter of Louisanna have begun the process of standing up. They have asked the Government Accountability Office to study whether banks with more than $500 billion in assets acquire an "economic benefit" because of their dangerous scale. Is their debt priced favorably because, being TBTF, they are considered especially creditworthy? In other words it sure looks like we are hooking these unworthy banks up just because of their size. Let's stop doing that. Of course if enough people believe...and they may be right in this belief, that if one or all of these banks go down then we'll do irreparable harm to our economy, we'd just end up giving the banks more money in subsides.
That's why I say break them up. 'But that goes against capitalism'?!? So does bailing out failing companies. America broke up Standard Oil,and AT&T with the Sherman Antitrust Act. Sherman's co author of the bill George Hoar explained the act to the NY Times like this. "If gains are made merely by superior skill and intelligence...got the whole business because nobody could do it as well as he could, well then he was not a monopolist..(but if) it involved something like the use of means which made it impossible for other persons to engage in fair competition then that need's to be remedied".
photo: public domain.
Does ol George look like he's afraid to break up a bank? The only thing he wouldn't break was a smile. These banks have set up a system which makes it impossible for other banks to compete with them. We need to remedy the situation! And legally we could set a limit on bank size according to Richard Fisher of the Federal Bank of Dallas. He suggests a flat rate of 100 billion in assets. Others suggest making it a percentage of GDP like 2 or 3 percent. Either way we stop wasting billions of dollars propping up banks that are run poorly, and more importantly we don't harbor executives who assist in terrorism. What do you think? Let us know on our facebook page. You can also vote on our poll question to the left of this blog or call us after 3 today.