This page has been archived and commenting is disabled.
Federal Reserve Bank of Dallas Calls for Immediate Break-Up of Giant, Insolvent Banks
For years, many high-level economists and financial experts have said that - unless we break up the giant banks - our economy will never recover, real reform will be blocked, and democracy and the rule of law will be corrupted.
The President of the Federal Reserve Bank of Dallas - Richard Fisher - has been one of those calling for the breakup of the giant, insolvent banks. But he has only done so in his private capacity ...
Until now.
This week, Fisher and the Dallas Fed's research director, executive vice president Harvey Rosneblum, sent out official communications from the Dallas Fed slamming the too big to fails, and calling for their immediate breakup.
Yves Smith points out:
Ordinarily, pointing out that long-standing critic of too big to fail banks is still unhappy about them would not count as news. But the commentary of Dick Fisher, the head of the Dallas Fed, and that of his research director, executive vice president Harvey Rosneblum, is noteworthy because it stands in contrast to the emerging conventional wisdom inside the Beltway. I was told last week that the prevailing and accurate view of last year, that Dodd Frank didn’t go far enough, is being supplanted by the Jamie Dimon view that’s it’s too intrusive. Note that those aren’t actually inconsistent: effective bank regulation IS intrusive. Banker unhappiness would ordinarily be a good sign, but the crisis perps have taken to howling at any intrusion on their imperial right to profit. And the worst is that third parties take their kvetching seriously.
Are there any counter-arguments by the giant banks?
No. Instead, the head of the bank lobbying group - the American Bankers Association - used high school playground logic, saying (1) Fisher must be "addled from the Texas heat" and (2) other cars were going faster than I was, officer (i.e. other countries have more big banks).
Fisher sent out the following letter in his official capacity:
Letter from the President
If you are running one of the “too-big-to-fail” (TBTF) banks—alternatively known as “systemically important financial institutions,” or SIFIs—I doubt you are going to like what you read in this annual report essay written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department, a highly regarded Federal Reserve veteran of 40 years and the former president of the National Association for Business Economics.
Memory fades with the passage of time. Yet it is important to recall that it was in recognition of the precarious position in which the TBTF banks and SIFIs placed our economy in 2008 that the U.S. Congress passed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). While the act established a number of new macroprudential features to help promote financial stability, its overarching purpose, as stated unambiguously in its preamble, is ending TBTF.
However, Dodd–Frank does not eradicate TBTF. Indeed, it is our view at the Dallas Fed that it may actually perpetuate an already dangerous trend of increasing banking industry concentration. More than half of banking industry assets are on the books of just five institutions. The top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago; their combined assets equate to half of our nation’s GDP. [See this for a visual, graphic illustration.] Further, as Rosenblum argues in his essay, there are signs that Dodd–Frank’s complexity and opaqueness may even be working against the economic recovery. In addition to remaining a lingering threat to financial stability, these mega banks significantly hamper the Federal Reserve’s ability to properly conduct monetary policy.
They were a primary culprit in magnifying the financial crisis, and their presence continues to play an important role in prolonging our economic malaise. There are good reasons why this recovery has remained frustratingly slow compared with periods following previous recessions, and I believe it has very little to do with the Federal Reserve. Since the onset of the Great Recession, we have undertaken a number of initiatives—some orthodox, some not—to revive and kick-start the economy. As I like to say, we’ve filled the tank with plenty of cheap, high-octane gasoline. But as any mechanic can tell you, it takes more than just gas to propel a car.
The lackluster nature of the recovery is certainly the byproduct of the debt-infused boom that preceded the Great Recession, as is the excessive uncertainty surrounding the actions—or rather, inactions—of our fiscal authorities in Washington. But to borrow an analogy Rosenblum crafted, if there is sludge on the crankshaft—in the form of losses and bad loans on the balance sheets of the TBTF banks—then the bank-capital linkage that greases the engine of monetary policy does not function properly to drive the real economy. No amount of liquidity provided by the Federal Reserve can change this.
Perhaps the most damaging effect of propagating TBTF is the erosion of faith in American capitalism. Diverse groups ranging from the Occupy Wall Street movement to the Tea Party argue that government-assisted bailouts of reckless financial institutions are sociologically and politically offensive. [We've repeatedly noted that the Occupy and Tea Party movements have common ground in ending the bailouts and breaking up the giant banks.] From an economic perspective, these bailouts are certainly harmful to the efficient workings of the market.
I encourage you to read the following essay. The TBTF institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism.
It is imperative that we end TBTF. In my view, downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Only then can the process of “creative destruction”— which America has perfected and practiced with such effectiveness that it led our country to unprecedented economic achievement— work its wonders in the financial sector, just as it does elsewhere in our economy. Only then will we have a financial system fit and proper for serving as the lubricant for an economy as dynamic as that of the United States.
In the accompanying report, the Dallas Fed details how it views the idea of "too big to fail" as a severe perversion of capitalism:
As a nation, we face a distinct choice. We can perpetuate too big to fail, with its inequities and dangers, or we can end it. Eliminating TBTF won’t be easy, but the vitality of our capitalist system and the long-term prosperity it produces hang in the balance.
***
Greed led innovative legal minds to push the boundaries of financial integrity with off-balance-sheet entities and other accounting expedients. Practices that weren’t necessarily illegal were certainly misleading—at least that’s the conclusion of many post crisis investigations. [And the government encouraged such behavior. And see this.]
***
Mammoth institutions were built on a foundation of leverage [which destabilizes the economy, but is still blessed by mainstream economists.]
***
Make no mistake about it: A bailout is a failure, just with a different label.
***
The machinery of monetary policy hasn’t worked well in the current recovery. The primary reason: TBTF financial institutions. Many of the biggest banks have sputtered, their balance sheets still clogged with toxic assets accumulated in the boom years.
In contrast, the nation’s smaller banks are in somewhat better shape by some measures. [And are therefore much better able to lend to small Main Street businesses.] Before the financial crisis, most didn’t make big bets on mortgage-backed securities, derivatives and other highly risky assets whose value imploded. [The big banks no longer do very much traditional banking. Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits. Instead, they are mainly engaged in financial speculation and derivatives. (and see this).] Coming out of the crisis, the surviving small banks had healthier balance sheets. However, smaller banks comprise only one sixth of the banking system’s capacity and can’t provide the financial clout needed for a strong economic rebound.
The rationale for providing public funds to TBTF banks was preserving the
financial system and staving off an even worse recession. The episode had its downside because most Americans came away from the financial crisis believing that
economic policy favors the big and well connected. They saw a topsy-turvy world
that rewarded many of the largest financial institutions, banks and nonbanks alike, that lost risky bets and drove the economy into a ditch.
These events left a residue of distrust for the government, the banking system, the Fed and capitalism itself .... These psychological side effects of TBTF can’t be measured, but they’re too important to ignore because they affect economic behavior.
People disillusioned with capitalism aren’t as eager to engage in productive activities.
They’re likely to approach economic decisions with suspicion and cynicism,
shying away from the risk taking that drives entrepreneurial capitalism. The ebbing of
faith has added friction to an economy trying to regain cruising speed. [As we have noted for years, the economy cannot recover until trust is restored.]
***
An unfortunate side effect of the government’s massive aid to TBTF banks has been an erosion of faith in American capitalism. Ordinary workers and consumers who might usually thank capitalism for their higher living standards have seen a perverse side of the system, where they see that normal rules of markets don’t apply to the rich, powerful and well-connected.
Here are some ways TBTF has violated basic tenets of a capitalist system:
Capitalism requires the freedom to succeed and the freedom to fail.
Hard work and good decisions should be rewarded. Perhaps more important, bad decisions should lead to failure—openly and publicly. Economist Allan Meltzer put it this way:“Capitalism without failure is like religion without sin.”
Capitalism requires government to enforce the rule of law. This requires maintaining a level playing field. The privatization of profits and socialization of losses is completely unacceptable. TBTF undermines equal treatment, reinforcing the perception of a system tilted in favor of the rich and powerful.
Capitalism requires businesses and individuals be held accountable for the consequences of their actions. Accountability is a key ingredient for maintaining public faith in the economic system.The perception—and the reality—is that virtually nobody has been punished or held account- able for their roles in the financial crisis.
The idea that some institutions are TBTF inexorably erodes the foundations of our market-based system of capitalism.
***
The TBTF survivors of the financial crisis look a lot like they did in 2008. They maintain corporate cultures based on the short-term incentives of fees and bonuses derived from increased oligopoly power. They remain difficult to control because they have the lawyers and the money to resist the pressures of federal regulation. Just as important, their significant presence in dozens of states confers enormous political clout in their quest to refocus banking statutes and regulatory enforcement to their
advantage. [Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City, Moody's chief economist and many others have all said that the United States is controlled by an "oligarchy" or "oligopoly", and directly or indirectly said that the big banks and giant financial institutions are key players in that oligarchy.]
***
A financial system composed of more banks, numerous enough to ensure
competition in funding businesses and households but none of them big enough
to put the overall economy in jeopardy, will give the United States a better chance
of navigating through future financial potholes and precipices. As this more
level playing field emerges, it will begin to restore our nation’s faith in the system of
market capitalism. [A study of 124 banking crises by the International Monetary Fund found that propping banks which are only pretending to be solvent hurts the economy, and that breaking up the giant banks speeds recovery].
»
- advertisements -
Break up the TGTF Banks? Absurd!
Doesn't Fisher know that these banks have to exist in this size so that they have the "Scale of Operations" to serve the mega corporations who are doing their part - fleecing society and imposing private taxes via the necessities of life (like energy, food and healthcare)? Perhaps the .01 of the 1% need the banks so that they can find a branch - regardless of continent/country.
Surely you know that it takes scale to assemble multi-billion-$-sure-to-fail-ABS/MBS that can then be pawned off on society for fun and profit. Surely you know that having a bank on the other side of your trades is beneficial to you.
Here is the basic question - did the citizens banking needs actually change? Is the current system actually serving them better? (Try calling your bank for help sometime...) What is certain is that the CEO's and such - make more if the bank is scaled up.
It's an "F'ing" joke.
If any of you "scumbags" out there are reading this - just know that I and some percentage of the citizens hold you in complete contempt. Money does not a man make. So, enjoy it now because someday your life and wealth will turn to ashes and dust.
HURRAY, for the Federal Reserve Bank of Dallas, Texas president Richard Fisher and research director, executive vice president Harvey Rosenblum, for understanding and articulating the continuing credit crisis challenges.
Institutions will have to get involved, like the Dallas, TX Fed, to get America on the right path to resolving the credit crisis. Breaking up the TBTF banks is just the start. Fraud in the financial system needs eradication, and 10,000 banksters should be in prison. The current political action of passing the JOBS Act is completely wrong, because it adds more fraud to the financial system and signals the criminals remain in charge.
Another example: Broker/Dealer institutions should be breaking down Congressional doors to get the looted funds taken from MF Global client’s segregated accounts returned. Jamie Dimon, at JPMorgan Chase, should be shamed into making reimbursements. The fact that this has not happened, signals that politicians and banksters controlling the financial system cannot be trusted.
“Trust is gone, it will now have to be earned.”
He doesn't want to hang with the rest of them when TSHTF. Simple. Make himself look like he doesn't approve of the theft taking place. Fighting for the little guy. SHTF, he swears he was fighting for us and attempts to save his own neck. Think it will work?
He doesn't want to hang with the rest of them when TSHTF. Simple. Make himself look like he doesn't approve of the theft taking place. Fighting for the little guy. SHTF, he swears he was fighting for us and attempts to save his own neck. Think it will work?
THanks GW! Now if we could jjust get Main street to force K street to do something about it,.
it truly is news when man bites dog and fisher has done just that.....the argument that tbtf should be broken up and dissolved is excellent so long as the outcome is not to divvy up the insolvents to the other tbtf banks creating ever more concentration....
the author of how we decide made a very germane comment in his book regarding failure: unless we feel the sting of defeat we cannot excel. and he provides fascinating research demonstrating the vital role of failure in our journey to achieve. and so the loser management teams must be busted along with their failed enterprises.....they are a cancer on the economy and nation....
Returning to real money is the best revenge against the TBTF Banksters.
The real reason you pay an income tax, is for the privilege of using a private currency.
Also known As A: Federal Reserve Note
Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.
http://www.21silver.com/?show=merrill&read=federal_reserve_act_remedy
http://stormthunder.com/federal-reserve-act/
Tax Exemption: http://stormthunder.com/federal-reserve-act/#ixzz1pOYzDgEm
Web search these three different phrases:
Redeemed in Lawful money or
Redeemed in Lawful money Pursuant to Title 12 USC §411 or
deposited for credit on account or exchanged for
non-negotiable federal reserve notes of face value
if Richard Fisher keep this up he might find himself dying from an unexpected heart attack
as he takes a midnight stroll around Dallas
Okay it is time for this asshat to take a ride through Dealy Plaza in a convertable.
Now where did I put the number to that sniper group?
Fu*k Democracy! If I want Democracy, I will move to Europe. Were a Republic.
Like I said 2 years ago, the want it narrowed down to 6 Big Banks.
"Competition is a sin."
-John D. Rockefeller
Interesting propoganda. Lets not forget the fed banks are owned by the commercial banks in their region. A little good cop vs. bad cop to make the public feel something might happen.
+1
Obviously he doesn't talk about the real FEDelephant in the room.
About fucking time!!!
breaking up these banks, making the financial fraudsters pay for their crimes and doing the right thing would require real leadership in the US government. We don't have any leadership in government.
strange.
http://expose2.wordpress.com
Watch what they do, not what they say. If the Fed wanted to end the TBTF banks they would only have to exert as much effort as one flicking a booger off of a finger and they would be gone.
They know they are losing the PR war in spite of the constant knob gobbling efforts by the likes of Erin Burnett, Cramer, and that tool of tools, Steve "the leatherman" Liesman.
Aside from it going on 5 years anyone with 6th grade (1960 version) math could have told them that doubling down on exponants was going to make it worse.
If he keeps this up consistently, I will stand up to the lynching mob and and defend him as long as the other banksters who belittle him are reserved the street lights that they deserve.
He may be a modern day Jeffersonian with clout too.
Richard Fisher for President. Or to dream Ron Paul's VP.
Re Dallas FED calls for immediate breakup of TBTF's
Yeah - that's a good idea: why don't we think about immediately closing the barn-door, now that the horse has long since bolted?
A conspiracy nut would get to thinkin': with the TBTFs having almost wrecked the economy, having dumped all their sh!t on Joe Public and with nothing left to steal - why don't we just call it a day and, of course, as part of the package, let bygones be bygones & let the perps walk off into the sunset with their ill-gotten gains?
Sounds like one helluva deal to me!
Well why do we need all these tbtf banks when we could have just one glorius world bank?
I don't trust any of these assholes. I don't see how they could have members that aren't fully supportive of the FED directive......crush kill and destroy.
Whatever happened to antitrust laws and provisions? These TBTF's are also basically primary dealers and profoundly control the flow of money.
I totally believe that the Federal Reserve is buying up our national debt with printed money until the moment arises when they decide to stop buying it in order to collapse our US government. I see that in just the last 2 months alone, our national debt went up by 350 billion dollars. The only thing I'm wondering now is just how high they are going to take it before they decide to pull the plug.
http://www.savingsbonds.gov/NP/NPGateway
http://www.savingsbonds.gov/NP/BPDLogin?application=np
TBTF or Too Crooked to Fail?
Matt Taibbi thinks it's the latter and nails it with BAC:
http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314
This ia a surprising and significant statement at a time when Chairman Bernanke is out being "the hero." Notice the deft statement that the Fed has done nothing wrong and gone as far as possible to help the TBTF and even beyond. He is also smart enough to issue this on a Friday when no one in the mainstream will pay attention. However cautious and exculpatory the manner, this does show that the problem, my TBTF friend, is not in the stars, it is in your selves.
Yes Ben is a Hero
But he is the Crook's Hero
not the 99%'s
Just a game being played by the Fed.
Good Cop and Bad Cop
Fisher if he is real should have resigned by now
So if they break up those big banks the looming public debt will just evaporate? Making money disappear seems to be the new trick, and money is debt...so...
Politicians are on their knees giving Blow Jobs to banksters and it will never end. Sheeples too stupid to understand what Ron Paul is saying. Only Hope is Ron Paul. F the Dumbo's and the Greedy Ole Pigs.
Great, the Fed is on the couch.
When does the psychoanalysis stop and the therapy start....
Keep the therapy. Let me know when the indictments start.
In the old days, no matter whether it was a day trade or back office error or a simple typo, there had to be a confirmation generated and on the errors a separate confirmation cancelling and/or correcting the first confirmation. If this is still the case, then why can't the CFTC do an audit to see whether each tick represents a trade and then match up the confirmations with the trades to be certain that these are not wash trades to launder money or hide the theft from the Fed by the banks?
It has been obvious since December that the game has really changed in gold or, at least what is represented by the tick activity on netdania. If I wanted to wash money or steal from the Fed---I would certainly take advantage of these HFT trades---they are dream to steal with because no one has to report the day trades and certainly not the nanosecond trades to the CFTC.
How does anyone know what is going on when the majority of the trades go unreported?
I'm just imagining how easy it might be to move money from gov't. agency to banks, individuals, big ben, little timmy, jomama,
or to my favorite--oldman, if one had access to such a beautiful machine om
I always enjoy hearing about a good 'back in my day.' Makes me wonder when it was that the fox literally started guarding the hen house?
Re. I always enjoy hearing about a good 'back in my day.'
Oh yeah? Well wrap your synapses around this one:
I can remember frolicking around under ye olde Buttonwood tree in lower New Amsterdam as a sprightly young slip of a lad (the slip being me, the lad being my father).
I dimly recall each trade - or order-of-purveyance-of-ownership as it was called then - was inked on dried racoon hide and hung out to dry (on the Buttonwood) in the midday sun - weather permitting, of course - and thus be recorded for posterity.
Interestingly enuf, the communal dump, latrine, cesspool from those days went on to become the present-day 85 Broad - at least some things never change!
Ahhh - them were the days!
Ah HA! You pulled the ol' "back in my day" with a "the more things change, the more they stay the same" reach around!
Only then can the process of “creative destruction”— which America has perfected and practiced with such effectiveness that it led our country to unprecedented economic achievement— work its wonders in the financial sector...
We're coming up on 100 years. Who among us thinks we can creatively destroy the Jekyll Island monstrosity with its nervous system tied directly to its puppet masters at the bis, imf, eu and the high priest with his minions all performing sacred duties for the god of this world?
The US has not perfected nor practiced this art he speaks of.
Not yet anyway.
Hope springs eternal.
imho.
that actually was not humble, with the bold and all
Why do you post this crap, who the fuck cares what you think about bold type.
The bold comment is about on par with others here. I've almost stopped reading them. They're either yapping about Jews, sinister global designs, praising Islam or getting all excited over an expectant violent end to the "system". (Obviously, those having wet dreams over the financial collapse of the US have never lived through such an event.)
That old maxim holds true. If you can't add to the conversation, don't. "Get them bitchez" is not something that has any meaning for me.
Thanks for contributing.
The regional FRB's are unwanted step children. They really don't matter. They were created ONLY to offset the (correct) perception that a FRB in NYC would be all powerful and represent only the existing banking interests.
Actually the Dallas FED has shown streaks of independence in the past. Just like the rest of that awesome state.
I am actually researching the Hunt brothers and there is some evidence that those boys and old John Conley where trying to round up enough silver for Texas to issue a silver backed currency, then bolt from the union.
Nixon had followed his orders and closed the gold window. The US began operating under a "let's send them paper for oil as long as they are willing to make that trade" strategy.
But Texas still has oil, and could be a net exporter of crude. The oil wells in the state were capped around this time. Why would they pump their product out of the ground and sell it for paper?
Plus the whole bussing issue, and commies everywhere. Shit.. let's just let the libs have the rest of the upper 47. We'll plant our own flag and be just fine.
Of course this was squashed at the direction of Rockefella... and the good ole' Bush clan began speaking "awe shucks" as a second language.
Shit they were so good at it, they even won the State house. All that succession talk has vanished in a 40 plus year soothing. No one will dare try to corner silver again, and we are now closer to a New World Order, rulled by the central banks.
DON'T FIGHT THE FED - ask the Hunts or JFK. They'll tell ya. But don't lose hope, because they will crash soon enough. The math doesn't work and the world is becoming more educated.
what's next? FED calling to end the FED?
U not taking this seriously?
FED is the ultimate TBTF and the mother of all corruption.
Jamie Dimon has a bullet for dis' guy for suuuuuure.
Not just Banks however - Cartels exist in so many sectors. Time to break up Kraft, HP, KKR, and a whole load of cartels which are price fixing and manipulating markets - need a deregulation era to create growth and stop corporations overriding the market and crushing dynamism
Don't forget the prescient evil......MONSANTO!!!
yes, at least I know when I'm eating dollar bills
ATTENTION DALLAS FED !!! I FIGURE YOU WILL BE MONITORING THIS ARTICLE, SINCE IT IS ABOUT YOU.
IF YOU HAVEN'T ALREADY READ THE BELOW ARTICLE, PLEASE TAKE THE TIME TO DO SO NOW.
http://www.zerohedge.com/news/observations-engineer
FIND A FEW ELECTRICAL ENGINEERS ON YOUR STAFF THAT HAVE WORKED WITH INPUTS AND OUTPUTS AND SMALL SIGNAL ANALYSIS. HAVE THEM REVIEW IT TOO, AS THEY WILL MORE EASILY SEE HOW AN INPUT OUTPUT MODEL WITH AN EXTERNAL ENERGY SOURCE BEHAVES AS THE ENERGY SOURCE IS GRADUALLY TURNED UP TO A PEAK VOLTAGE, THEN TURNED DOWN GRADUALLY TO A LOW VOLTAGE. YOUR OTHER ENGINEERS SHOULD MOSTLY "GET IT" TOO.
GOT ANY PHYSICISTS ON STAFF? GET THEM IN THERE TOO. AND SOMEONE WHO MAJORED IN THERMODYNAMICS AND ANOTHER IN CHEMISTRY.
ASSESS WHETHER AN ENERGY MIRACLE IS LIKELY, OR IF SOMETHING FUTURISTIC LIKE DILITHIUM CRYSTALS, OR WARP FIELDS HAVE ANY CHANCE OF PICKING UP THE SLACK.
PLEASE SHARE WITH THE REST OF THE FED.
Hallelujah,
His point about the Occupy and Tea Party movement is very salient.
Both movements have been painted with the dumb and bi-polar brush by the main stream media.
Both movements know that something is deeply wrong at the highest levels of government and industry.
OWS was just a deception front from Soros, far from really wanting an end to bailouts as he is the poster child. Soros has manipulated and profited from that scheme repeatedly and in many different ways, at the same time, he has plowed over $50 million each into corrupting the judicial and MSM systems to remove those threats.
...gone Fish(ing)er.....obviously when stupidity and whims of "grandeur" collide, the result is typical re-hashed nonesense! So wtf, is he supposed to be on our side now?
He's just covering himself for the blame that's sure to come. Nothingburger.