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The Economy Cannot Recover Until the Big Banks Are Broken Up
- Bank of America
- Bank of America
- Bank of England
- CDS
- Central Banks
- Citigroup
- Credit Default Swaps
- Dean Baker
- default
- Fail
- Federal Deposit Insurance Corporation
- Federal Reserve
- Federal Reserve Bank
- Financial Regulation
- Fisher
- goldman sachs
- Goldman Sachs
- Great Depression
- Greece
- International Monetary Fund
- Japan
- Joseph Stiglitz
- Krugman
- Main Street
- Milton Friedman
- Morgan Stanley
- New York Fed
- Nouriel
- Paul Krugman
- Portugal
- program trading
- Program Trading
- Richard Alford
- Richard Fisher
- Risk Management
- Robert Reich
- Sheila Bair
- Simon Johnson
- Sovereign Debt
- Sovereigns
A lot of people still haven't heard that the economy cannot recover until the big banks are broken up.
In fact, virtually all independent economists and financial experts are calling for the big banks to be broken up, including:
- Nobel prize-winning economist, Joseph Stiglitz
- Nobel prize-winning economist, Ed Prescott
- Former chairman of the Federal Reserve, Alan Greenspan
- Former chairman of the Federal Reserve, Paul Volcker
- Former Secretary of Labor Robert Reich
- Dean
and professor of finance and economics at Columbia Business School,
and chairman of the Council of Economic Advisers under President George
W. Bush, R. Glenn Hubbard
- Former chief IMF economist and economics professor Simon Johnson (and see this)
- President of the Federal Reserve Bank of Kansas City, Thomas Hoenig (and see this)
- President of the Federal Reserve Bank of Dallas, Richard Fisher (and see this)
- President of the Federal Reserve Bank of St. Louis, Thomas Bullard
- Deputy Treasury Secretary, Neal S. Wolin
- The President of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members, Camden R. Fine
- The Congressional panel overseeing the bailout (and see this)
- The head of the FDIC, Sheila Bair
- The head of the Bank of England, Mervyn King
- The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
- Economics professor and senior regulator during the S & L crisis, William K. Black
- Economics professor, Nouriel Roubini
- Economics professor, James Galbraith
- Economist, Marc Faber
- Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
- Economics professor, Thomas F. Cooley
- Economist Dean Baker
- Economist Arnold Kling
- Former investment banker, Philip Augar
- Chairman of the Commons Treasury, John McFall
- Leading bank analyst, Chris Whalen
Why do these experts say the giant banks need to be broken up?
Well, small banks have been lending much more than the big boys. The giant banks which received taxpayer bailouts have been harming the economy by slashing lending, giving higher bonuses, and operating at higher costs than banks which didn't get bailed out.
As Fortune pointed out, the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition:
Growth
for the nation's smaller banks represents a reversal of trends from
the last twenty years, when the biggest banks got much bigger and many
of the smallest players were gobbled up or driven under...As
big banks struggle to find a way forward and rising loan losses
threaten to punish poorly run banks of all sizes, smaller but well
capitalized institutions have a long-awaited chance to expand.
So the very size of the giants squashes competition, and prevents the small and medium size banks to start lending to Main Street again.
And as I noted in December 2008, the big banks are the major reason why sovereign debt has become a crisis:
The
Bank for International Settlements (BIS) is often called the "central
banks' central bank", as it coordinates transactions between central
banks.
BIS points out in a new report
that the bank rescue packages have transferred significant risks onto
government balance sheets, which is reflected in the corresponding
widening of sovereign credit default swaps:The
scope and magnitude of the bank rescue packages also meant that
significant risks had been transferred onto government balance sheets.
This was particularly apparent in the market for CDS referencing
sovereigns involved either in large individual bank rescues or in
broad-based support packages for the financial sector, including the
United States. While such CDS were thinly traded prior to the announced
rescue packages, spreads widened suddenly on increased demand for
credit protection, while corresponding financial sector spreads
tightened.In other words, by assuming huge portions of
the risk from banks trading in toxic derivatives, and by spending
trillions that they don't have, central banks have put their countries
at risk from default.
Now, Greece, Portugal, Spain and many
other European countries - as well as the U.S. and Japan - are facing
serious debt crises. We are no longer wealthy enough to keep bailing out
the bloated banks. See this, this, this, this, this and this.
Indeed, the top independent experts say that the biggest banks are insolvent (see this, for example), as they have been many times before. By failing to break up the giant banks, the government will keep taking emergency measures (see this and this) to try to cover up their insolvency. But those measures drain the life blood out of the real economy.
And by failing to break them up, the government is guaranteeing that they will take crazily risky bets again and again, and the government will wrack up more and more debt bailing them out in the future. (Anyone Moreover, Richard Alford - former New York Fed economist, trading floor economist and strategist - recently showed that banks that get too big benefit from "information asymmetry" which disrupts the free market. Indeed, Nobel prize-winning economist Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market: "The Further, The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorts the markets Goldman also admitted Again, size matters. If a bunch of small banks did this, manipulation
who thinks that Congress will use the current financial regulation -
Dodd-Frank - to break up banks in the middle of an even bigger crisis is
dreaming. If the giant banks aren't broken up now - when they are threatening to take down the world economy - they won't be broken up next time they become insolvent either. And see this. In other words, there is no better time than today to break them up).
main problem that Goldman raises is a question of size: 'too big to
fail.' In some markets, they have a significant fraction of trades. Why
is that important? They trade both on their proprietary desk and on
behalf of customers. When you do that and you have a significant
fraction of all trades, you have a lot of information."
he says, "That raises the potential of conflicts of interest, problems
of front-running, using that inside information for your proprietary
desk. And that's why the Volcker report came out and said that we need
to restrict the kinds of activity that these large institutions have. If
you're going to trade on behalf of others, if you're going to be a
commercial bank, you can't engage in certain kinds of risk-taking
behavior."
- making up more than 70% of stock trades - but which also lets the
program trading giants take a sneak peak at what the real (that is,
human) traders are buying and selling, and then trade on the insider
information. See this, this, this, this and this. (This is frontrunning,
which is illegal; but it is a lot bigger than garden variety
frontrunning, because the program traders are not only trading based on
inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).
that its proprietary trading program can "manipulate the markets in
unfair ways". The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government's blessings.
by numerous small players would tend to cancel each other out. But
with a handful of giants doing it, it can manipulate the entire economy
in ways which are not good for the American citizen.
Moreover, JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country's derivatives risk, and 96% of the exposure to credit derivatives. Experts say that derivatives will never be reined in until the mega-banks are broken up, and yet unregulated derivatives are one of the main risks to the economy.
In addition, as everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators. So their very size is preventing the changes needed to fix the economy.
»
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True! all true by George!
Break them up and let the ones that should fail, fail.
What the hell ever happened to regional deposit-share limits anyway? Wasn't that still rule after Glass-Steagall died?
Also, NYT and GATA reportsing: 9 big banks holding secret meetings every 3rd wednesday of the month to keep control of the derivatives market. More of same as metals, mortgages.
The 9 Banks: JPM, Goldman Sachs, Morgan Stanley, Citi, BAC, Barclays, UBS, Credit Suisse, Deutsche Bank
And there in lies the problem. That problem being, every solution breeds new problems.
A break up of the big banks would give new meaning to the word "syndicated". That area would have to be addressed, if and when it ever happens, otherwise the banking cartel will live on via syndicated deals everywhere.
I feel zerohedge (and Tyler ofcourse) could be next in line after wikileaks for publishing such (truth revealing) articles which are against the (banker's) nation.
I hope "Tyler" you have never been to any place where you did some thing that can be used to issue an arrest warrant for you. Please keep consulting your lawyers in case you had. ;-)
'I hope "Tyler" you have never been to any place where you did some thing that can be used to issue an arrest warrant for you.'
No one's safe from Homeland Security... if they want you they'll drag you out and paint you with the media, then they'll slaughter you.
Yeah, Tyler, better wear a rubber over your undoubtedly-massive schlong and latex gloves on your hands when cavity-searching the truth about the various man-whores on Wall Street and BrainWashington. Remember what Hitler said when hearing that silver went to 500 FeRNs, they had to **ck Satan in the @$$ to get their jobs.
Rather than risking capital in any productive venture in a anti-competitive and confiscatory fascist/communist economic system under a political oligarchy, my wealthy clients and I are instead converting exess financial assets into bullion. Unfortunately, there ain't enough room in Salta for us all to move to Doug Casey's Estancia de la Cafayate...
Since Tyler Durden only exists inside Ben Bernanke's head, he's safe from arrest. What he does on his own time is what we see here. That's why you never see Tyler and Ben on your TV at the same time.
The economy cannot recover until we end the Fed.
this can never be repeated too much....i would also add that until the control fraud criminals are in jail, the banks cannot recover or operate safely....
the american people are fundamentally liars....i see it in every single aspect of life - at the grocery store, in restaurants, school - you name it....economics without truth is a downhill proposition....
the american system is built upon the peter principle where so many incompetent frauds are in charge of so much...mediocrity has been institutionalized especially now that the conveyor belt from the education factories (mediocrity) feeds both business and government....like with the emperor's new clothes, the royalty are convinced that they are prancing around in sartorial splendor....
what a crock...
Despite the Catch 22 nature of my statement, I think what you say is true. Not only is economics without truth a downhill proposition, civilization without truth is impossible.
When contracts are no longer honored by dishonorable people, sane people stop playing the business game and take their work ethic home with them. Which is where we are now.
People like me who really want to put their little bit of wealth to work growing a business have opted to put it into precious metals or other unencumbered investments.
This doesn't grow the economy, but it helps to keep the slime and filth of the "business community" from stealing our holdings and our entrepreneureal efforts.
Sitting back and watching the decline isn't as rewarding as making good things happen, but it's a lot safer when the social more says rules of fair play and honesty only apply to suckers.
There's a reason 'civil' is the foundation of 'civilization.' Without trust, there can be no business. And without business, we revert to hunter/gatherers.
Correct. And the media and predators-that-be do not realize how far this trend has already gotten, and how much further it will go. Everyone I know, and I do mean everyone I know who was formerly inclined to creative some kind of endeavor to develop new products or businesses... has stopped. Some still have their own personal projects (non-commercial), but they have all decided against any form of commercial endeavor. No start-ups. No new products. No nothing.
As you say, they mostly instead invest their savings in physical silver and gold. Some of them are still foolish enough to hold stocks, mostly in retirement funds, though many decided to take the tax hit and cash out these plans before they are confiscated by the predators-that-be (and probably forcibly invested in government loser-bonds).
To me, this almost assures a death spiral for civilization. Unfortunately, mankind cannot revert to hunter/gatherers because natural processes on earth do not generate anywhere near enough to support 7 billion humans (100-million at most). Thus, mankind shall descend into hunter/hunted, until population drops below 100-million. And this is, in fact, exactly what the predators-that-be have designed. They say so in their writings.
Honestann...
That's a rather absolute-sounding proposition... "No start-ups. No new products. No nothing".
cheer up! get out of your circle of interest and go back into your circle of influence (which is alway much smaller) and add value somewhere. Investor circles are mostly bitchy little girls who trade in cynicism and counter punching. Put some pants on.
If everyone pulls their heads and legs into their shells then there will be no one to buy your shiny commodity either.
Buck up, little camper!
I will not give bad advice to my friends and associates. I'm leaving the USSA in 4 months, and some other of my friends and associates have similar plans. Unfortunately, too many people have psychological blocks against steps like that. I continue to develop new technologies and invent new devices, but will have nothing to do with anything in the USSA, and not depend on anything in the USSA, and not be in a position where I need to comply with the predators-that-be in the USSA.
I was making a general point, though. If my experience is as I said, you need to understand what this means in the wider perspective. No sane human with their eyes open would risk their life savings in such a predator dominated environment like we have today. Which means, the USSA will certainly spiral down the toilet of history. It is too late for the USSA.
The list of stuff I genuinely fear used to be pretty short, but Ayn Rand added to it and you're moving her contribution up. What I am talking about is the fear of societal collapse from the everyman's perspective. There's been loads of discussions about the industrialists, the moochers, and the philosophy of the book. But I think the plight of regular people, who suffered food shortages and blackouts, couldn't get parts for their cars, and so on, is overlooked at best. What does Joe Sixpack do while this ridiculous hissy fit tears the country apart?
+1 to honestann. I am and have been in quite the same situation. I did leave the country (you will be amazed at how difficult it is to get out) and was happy as a peach. I had to come back for personal reasons, and I can not wait to leave again. Hopefully, this time it will be permanent. I will not devote my resources (labor, money, time, anything) to the USSA sucker game unless some grand magical miracle occurs and the rule of law reigns (not a chance). As a former small businessman and job creator, I can say I feel deeply sorry for anyone who owns a small business in the USSA these days, and I hope they can keep their heads above the water of the forthcoming inflation tsunami.
I have had 2 good friends approach me to help them each start up a business in the past year, and I advised both of them that their start up money would be better spent on therapy. I hold that anyone thinking about starting up a business in this environment is out of their minds. Neither of them has started a business to date. No jobs created.
This is the state of affairs the USSA is in. I and my other 2 friends are each in the prime of our lives, we have money, connections and know-how, and we have each worked for blue chip companies. By all means we should be creating jobs. None of us are. It would take an outright 1 million dollar grant, upfront, with no accountabilty, no strings attached and of course no repayment, for me to even consider starting a business in the USSA (hey maybe I could start up a bank, ha ha! -NOT!).
This country is fucked until the rule of law returns. Make plans to get out now.
As for ABC123 above, all I can say is "get back to work, sucker. It's a Sunday and you should be getting caught up at work you slacker. Work harder and work smarter - maybe you should go take a motivational time management seminar too. Buckle down, suck it up, keep your nose to the grindstone and keep making more money that can and will be taken from you....somebody has to feed the beast and it's best if it's a willing slave.....you total fool."
While I do love PMs, remember that diamonds do not go off in a metal detector, and are relatively easily transported and traded. You may take a loss on them, though....depends on how inflation goes. I have witnessed someone walk through airport security at London Heathrow with 250g of gold and it did not go off either....so maybe gold doesn't set off the metal detectors. Anybody able to comment on that?
Thanks for sharing your experiences. What did you find difficult about relocating outside the USSA? You said "difficult to get out"... not sure what that means.
I will not go through TSA under any circumstances whatsoever. So we will drive to Canada or Mexico (or all the way to South America if necessary) before we take a flight. Alternatively, we might catch a ride on some private flight, or on a private ship or ocean-worthy yacht. If that costs us $2K or $3K extra, so be it (actually, the yacht voyage would be freaking fun). Or I suppose we could catch one of those huge tourist boats (?"cruise ships"?) to South America. We might relocate to SouthAmerica, otherwise somewhere in the south pacific looks likely (already lived 17 years in Maui... love warm islands, snorkeling, etc).
I checked with FedEx, and they are happy to ship silver and gold bullion to locations outside the USSA, so that seems wise to me.
Like you, I have no sympathy for morons who support the predators, no matter how much they suffer. But I surely do have plenty of sympathy for the vast "clueless" in the middle, who just don't understand what's happening. I so wish they'd wake up, and see what's right in front of their eyes, but unfortunately endless exposure to public education/brainwashing and mainstream liar-media has rendered them terminally braindamaged and semi-functionally insane... as in "good slaves".
I believe it is far too late to save the USSA. Perhaps if RonPaul is elected in 2012, that would get my hopes up a bit... but I'm absolutely certain they'd kill him off (just like they did with Kennedy) if he was elected. In fact, I'm sure they make sure he had an accident before he was elected. The predators are not fools.
I just hope the international predators-that-be are not powerful enough to totally shut down every trace of liberty everyone on earth. Even if only one place remains, that's where I'll be, no matter how terrible other aspects of that location might be.
PS: What locations are you planning to relocate to? Where did you go the first time? I quite enjoyed the [extreme] boonies in Chile, Peru, Ecuador and Argentina on our research and prepare trip 1 year ago, obviously NZ looks good (but is likely too westernized), small islands scattered around the pacific (vanadau, cooke islands, many others). I have lots of experience with self-sufficient systems (solar and wind power, battery banks, water collection and purification, etc), so we very well might end up adopting one of the many totally empty islands in the south pacific [within ~20 degrees of equator]. We shall see.
The Economy Cannot Recover Until the Big Banks Are Put Into Bankruptcy, Dissolved, Put Out Of Business, Banksters Are In Prison, And Their Assets Confiscated
There, fixed it.
Since the incept of the U.S. *Industrial Economy* collapse that started in the 70s, the perp skool predators have been working OT to keep the *illusion* of *properity* alive.
A chicken/chiclet in every pot, a credit card in every pocket, a home loan for every collective of suckers (i.e. families).
Rule numero uno in mass herding (mind control = The Illusion) divide and conquer by keeping the sheeple angry and focused on self-preservation.
Moreover, once women were placed into positions of *leadership* it became easy -- Women ALWAYS place familia numero uno, their country a distant 2nd, 3rd, or worse...
The Founding Fathers placed the Nation numero uno, even above their own families.
The WISE understand there is no -0- way of keeping HUMAN NATURE in check without an ethical/moral RULE OF LAW.
No way in hell that could ever happen again with this immoral/debauched collective of huddled masses...they are so dumbed-down-to-sucumb they cheer the destruction of their own prosperity, and that of their progeny.
In 2008, the Fraud St./DoC kabal began looting the U.S. Treasury direct to deposit, and nary a .GOV regulator raised his parasitical head.
Tilting at windmills... Endless growth on a finite planet is the culprit, but the programmed masses just can't accept that... Edward Bernays rules our psyche from his grave...
Tilting at windmills? Hardly...
As a Son of the Revolution that FULLY embraces the concept of a Democratic Republic established under the Rule of Natural Law, I believe that things SHOULD be different in the USofA.
I could give two bits about the rest of the planet, but in MY Country we once had controls placed on human nature to prevent *predators* from conspiring to defraud - Now we see the perp skool bandits stealing from the freakin' US Treasury!
Although, I will agree with one aspect of your contention; *Endless growth* via uncontrolled immigration of *programmed masses* in the former USofA has directly led to the current state of Banana Republic Kleptocracy.
What has happened in this country should be beyond obvious to any rational PATRIOT, assuming that one has a full grip on history, and it should also be increasingly obvious that the *electorate* in 'MeriKa is no longer able to fulfill THEIR responsibilities for self-government.
EOM
+1000
I "misunderestimated" you George. You finally got something right. These vampires will suck all of the blood out of the economy until they are put out of our misery. Time to put them down.
Finally?!?!? Get a clue.
GW has been one of the few and most vocal voices of reason and truth for a long time now, wether it be the BP story or the banks.
Keep up the great work George.
+1
That was the BP spill that was going to poison all the planet's oceans, right?
Blizzards in parts of eight states, and it's not even winter yet. Thank Thor for global warming, otherwise the Kaiser would be freezing his royal arse off.
Even doom and gloom has limits. There is a comical amount of "the sky is falling" stuff on ZH. Remember Katla? I enjoy it as much as anyone, but the sun also rises.
If you think you have begin to see the fallout from the BP leak, you might be mistaken.
It can take a while for an ecosystem as big as the Gulf to start showing effects from this poisoning.
Rest assured, once we start seeing the effects there won't be much doubt.
What I fear: Nobody is really spending money and effort to track the aftermath, so when it starts to show up we will have no idea what we are in store for.
Your statement reminds me of this guy who was in pain and was given a bottle of demerol. He eats one and "nothing happens"... So he keeps chewing one after another, until he finally starts to feel the effects of the first pill, while he is chewing the last pill... Then he realizes... UhhhOhhh... I am going for a dirt nap.
Keep your eyes peeled, because the fallout from this has not even begun to show up.
The sun also rises..?
More Like:
"Its not the end of the world... Just the end of you"
Go GW! Bring us the facts as you find them!
Indeed. Some people are shortsighted.
.
.
Go, George, go!
Only Sweden, of the large industrialized nations, got this right. Only Sweden, in the early 90's, was faced with a choice of letting its big banks fail or spreading the pain to the general populace and chose the former. Not Japan, not the U.S., not the EU. Iceland's sort of the same thing but with significant differences. I wish the U.S. was more like Sweden and could have capitalism with both success and failure.
But, but, Sweden is SOCIALIST!!!
Yeah, funny that, socialist Sweden does what capitalist US cannot!
Any choice links or documentation on this assertion?
Here's one piece that talks about it while advocating it to Obama:
http://boundedrationality.wordpress.com/2009/03/10/obama-and-the-swedish-solution/
And here's another one:
http://www.eurointelligence.com/index.php?id=581&tx_ttnews%5Btt_news%5D=2381&tx_ttnews%5BbackPid%5D=752&cHash=c8765c67ef
Good points. I just cannot see the logic behind using funds contributed by ALL taxpayers to bail out some banks owned by just a few (if any!) that got into trouble because of the inability of a few other taxpayers to meet their repayment obligations!!
We don't even need to debate whether it was the lenders or the borrowers that were at fault - whether through fraud or over-optimism of either party to the loan agreements ... it just makes no sense to use public funds to bail either side out. Either bankrupt the bankstas or jubilee the debtors ... or both!
Pretty accomplished group of people on board there.
Now, who has the political will, and the stones to get it done?
Santa!
Go sit on his lap and tell him what you want for X-Mas...
Don't forget to ask for a winning lotto ticket too!
http://en.wikipedia.org/wiki/Stockholm_syndrome
One can also behold a classic case of Stockholm Syndrome in action by reading almost any of the posts on ZeroHedge by Leo Kolivakis, who appears to hold the belief that when it comes to the rampant fraud, corruption and abuse heaped on the average person by the sociopathic criminal elites, "too much is never enough".
Not the cipher in chief. Not Eric "Place" Holder.
As Dr Paul Craig Roberts points out in this interview with Max Keiser, both political parties are now so totally beholden to the vested interests (bankers, military-industrialists) that there is no way the current system will heal itself through the actions of one or more individuals within it. He also observes, as all we here know, that the Tea Party was also subverted and steered by the vested interests not long after inception ... mainly because it was a protest movement with every participant protesting something different (no common cause to unite them).
So it would be insane to expect either the current administration or the new congress to do anything that went against the vested interests that finance their multi-million dollar election campaigns (approaching a billion dollars to run a presidential campaign?).
As I see it, the only way forward is to apply pressure to the state legislatures to dismantle the federal government and start again. :)
38/50 states.
More states than that are insolvent.
End the Fed - the enabler of enablers.
38/50 states.
More states than that are insolvent.
End the Fed - the enabler of enablers.