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Giant Banks Now 30% Bigger than When Dodd-Frank Financial “Reform” Law Was Passed

George Washington's picture




 

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.

So how did the government respond to the financial crisis which started in 2007?

Let the giant banks get even bigger.

As Bloomberg notes, the five banks that held assets equal to 43% of the US economy in 2007 before the financial crisis and the bank bailout now control assets that equal 56% of the US economy:

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

 

Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

 

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

 

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

 

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The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

 

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

 

***

 

Regulatory burden could promote further industry consolidation, according to Wilbur Ross, chairman of WL Ross & Co., a private-equity firm.

 

“We think the little tiny banks, the 90-odd percent of banks that are under $1.5 billion in deposits, are pretty much an obsolete phenomenon,” he told Bloomberg Television on March 14. “We think they’ll all have to merge with each other, be acquired by bigger banks or something.”

 

***

 

In 2011, funding costs for banks with more than $10 billion in assets were about one-third less than for the smallest banks, according to the FDIC.

Some presidents of regional Federal Reserve banks have lambasted too big to fail. As Bloomberg notes:

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

But the most powerful Fed bank – the New York Fed – and Bernanke’s Federal Open Market Committee, as well as Tim Geithner’s Treasury Department, have done everything possible to ensure that the the giant banks become too bigger to fail.

 

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Tue, 04/17/2012 - 15:29 | 2352441 chunga
chunga's picture

Martians hate the fucking bankers too.

THE MEN FROM MERS

WARNING! THIS IS NOT A TEST. PLANET EARTH HAS BEEN INVADED. DO NOT RESIST.

I am sorry to inform you Klaatu; We are entirely capable of destroying ourselves. In fact, we are well on our way. Progress is ahead of schedule. We are ignoring this message and returning to our regularly scheduled distractions...thanks for coming.

Tue, 04/17/2012 - 15:18 | 2352400 battle axe
battle axe's picture

I hear Thailand is nice, and the women incredible. 

Tue, 04/17/2012 - 15:58 | 2352538 irie1029
irie1029's picture

columbians are better... :)

Tue, 04/17/2012 - 16:59 | 2352694 falak pema
falak pema's picture

nothing better than an american slouch who betrays his own women; the womb he was born in. To generalise racial/state superiority of a breed of women over another means the home crop has been totally corrupted by the men whom they bore; the same shills who run around looking for what they can't get at home because they prefer the fantasy of smart, fast action guns, easy money to intelligent women! 

BRAVE NEW WORLD...

but I stay tongue un cheek, as I don't want to individualise a generality; to each his own adventure at the individual level.

Tue, 04/17/2012 - 17:20 | 2352759 LowProfile
LowProfile's picture

Hey, I don't begrudge any guy who wants to fornicate around the world...

That's multiculturalism EVERY guy can get behind!

Tue, 04/17/2012 - 18:58 | 2352975 nmewn
nmewn's picture

Bwaney Fwank interview...some real nuggets in here...

But it seems like someone with a short attention span would not be authoring Dodd-Frank.

But Dodd-Frank, there’s a lot of pieces of it. Yes, I had to do some studying, but I rarely had more than an hour to spend on any one thing, or two. I can get focused on really important things, but I can’t sit and ponder for a week about one topic.

lol...one of our best & brightest.

///////////////////////////////////////////

 

Dodd-Frank gets kicked around a lot by both liberals and conservatives. Are you happy with the way it turned out?

Oh, absolutely. The conservative critics are just right-wingers who don’t want any regulation. And if you listen to the liberals, much of the criticism is uninformed, and I believe among the people who know what we’ve done there’s great support.

Of course you would Bwaney, the bank lobbyists on your and Dodd's "staff" wrote it.

////////////////////////////////////////////////////

 

No legislation can be perfect, but is there an ideal version of the bill that exists in your head?

The biggest thing I would have changed was how you paid for it that $20 billion that’s now on the taxpayers, not the banks. But we needed those Republican votes. I would also have toughened up the derivatives stuff a little bit. If I could just wave a magic wand, I would have merged the Securities and Exchange Commission and the Commodity Futures Trading Commission. But there’s just never any chance of doing that, because they represent the farmers versus the financial markets.

//////////////////////////////////////////////////////////////

 

Looking back to Freddie and Fannie, in 2003 you famously said that they were ?not facing any kind of financial crisis.? Do you accept the criticism that you were wrong about them?

 
No! Yes, I was wrong in 2003, but I wasn’t in charge. This is the most intellectually dishonest argument from Republicans. Remember, I was in the minority from 1995 to 2006. They were in charge. Their argument appears to be that I stopped Tom Delay from doing something. But this is all on their watch. Now, in 2005, I tried to work with Mike Oxley to get some reform. It became an internal Republican fight. Oxley said the problem was that George Bush gave him the one-finger salute, and that’s what killed it.

 

I became chairman of the committee in 2007. The first thing we did was pass tough legislation restricting Fannie and Freddie. It’s as a result of that legislation that they were put into a conservatorship and haven’t lost any money [on new business] since 2008. Now, the Republicans have been in power in the House since January of 2011. They have not even moved a bill to a full committee decision. They talk about Fannie and Freddie when they’re out of power. When they’re in power, they do nothing.

Lying sack of shit...Roll the YouTube tape. Armando Falcon was ripped to shreds by your peers...dirt bag...

http://www.youtube.com/watch?v=Yga7TlsA-1A&feature=related

//////////////////////////////////////////////////////////////////

 

But whether or not your opinion was consequential in 2003, did you learn anything from being wrong?

Here’s the deal. The lesson we learned and not just from Fannie and Freddie was about what economists call tail risk: the idea that something terrible can happen that’s very unlikely. My mistake was not to see that this could happen. Just because you think something is highly unlikely doesn’t mean you shouldn’t deal with it. All right?

Thanks for the sour persimmons Bwaney...I'd tell you to jam a few up your ass but you'd probably enjoy it.

At what point in time did it dawn on you that forcing people to loan money, under threat of government sanction, to other people who had slim chance of ever paying it back, might not be such a good idea? And after this revelation sank into your thick skull, did you not think they would hedge their risk or divest themselves of it entirely?

Oh yeah...thats right, you...

"Yes, I had to do some studying, but I rarely had more than an hour to spend on any one thing, or two. I can get focused on really important things, but I can’t sit and ponder for a week about one topic."

http://nymag.com/print/?/news/features/barney-frank-2012-4/

Tue, 04/17/2012 - 19:40 | 2353061 Bollixed
Bollixed's picture

Legislation is generally written by lobbyists. Polititions only have time for raising campaign money and rubberstamping the legislation paid for by their donors.

Tue, 04/17/2012 - 20:57 | 2353204 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Obama had direct and meaningfull input into the writing and passing of ObamaCare. His administration spent an entire year passing that POS so to say some lobbyist was responsible is to deny him the credit that is his. Obama is responsible for ObamCare and it is wrong and untruthfull to not give him the credit he deserves.

When the IRS comes to your business to help you make decisions concerning you and your workers heath care, remember it is Obama standing behind them and their guns.

Tue, 04/17/2012 - 21:53 | 2353319 Careless Whisper
Careless Whisper's picture

Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve

correction; Four banks and one government backstopped hedge fund -

 

Tue, 04/17/2012 - 19:49 | 2353079 nmewn
nmewn's picture

Exactly.

Tue, 04/17/2012 - 16:35 | 2352643 LowProfile
LowProfile's picture

Just as good as Thailand, the pasty fat white fuckers will stand out there as well.

Tue, 04/17/2012 - 15:30 | 2352434 LowProfile
LowProfile's picture

That would be nice.  Seeing as they are mostly fat, pasty, white fuckers, It will be easier to spot them if they "jump ship" there.

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