DEMOLISHING the Justifications for the Too Big Banks

George Washington's picture

When Internationally-Accepted Accounting Methods Are Used, American Banks Are the World’s Largest

We have extensively documented that failing to break up the big banks is destroying America because:

In the face of such overwhelming criticism, apologists for America’s largest banks say that they are smaller than their European and Asian competitors … and that they have to be big to compete.

Current Vice Chair and director of the Federal Deposit Insurance Corporation – and former 20-year President of the Federal Reserve Bank of Kansas City – Thomas Hoenig destroyed that argument earlier this month.

Specifically, Bloomberg reports:

Warning: Banks in the U.S. are bigger than they appear.


That label, like a similar one on automobile side-view mirrors, might be required of the four largest U.S. lenders if Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., has his way. Applying stricter accounting standards for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are — or about the size of the U.S. economy — according to data compiled by Bloomberg.


“Derivatives, like loans, carry risk,” Hoenig said in an interview. “To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there.”


U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books.




Using international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co. (JPM), Bank of America Corp. and Wells Fargo & Co. would double in assets, while Citigroup Inc. (C) would jump 60 percent, third- quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion.

World’s Largest

JPMorgan, Bank of America and Citigroup would become the world’s three largest banks and Wells Fargo the sixth-biggest. Their combined assets of $14.7 trillion would equal 93 percent of U.S. gross domestic product last year, the data show.




U.S. accounting rules for netting derivatives allow banks to erase about $4 trillion in assets, the data show. The lenders also can remove from their books most mortgages they package into securities, trimming an additional $3 trillion.


Off-balance-sheet assets and derivatives were at the root of the 2008 financial crisis. Mortgage securitizations kept off the books came back to haunt banks forced to repurchase home loans sold to special investment vehicles.




The U.S. Financial Accounting Standards Board and the International Accounting Standards Board pledged a decade ago to converge the two bookkeeping systems. After six years of meetings, they remain divided. Proposed rules for how much money banks need to set aside for loan losses may make European and U.S. lenders even less comparable.




“Having no uniform standard is challenging for issuers and users,” said John Hitchins, head of U.K. banking and capital markets at PricewaterhouseCoopers in London. “Analysts and investors can’t compare companies’ financials across borders. Banks have to prepare multiple versions of their financial statements in different countries where they have units.”




If the banks used international standards for derivatives and consolidated mortgage securitizations, the ratio for JPMorgan and Bank of America, the two largest U.S. lenders, would fall below 4 percent. It would be just above 4 percent for Citigroup and Wells Fargo.


That would make the biggest U.S. banks look no better capitalized, or worse, than European peers such as HSBC at 5.6 percent or France’s BNP Paribas SA at 3.9 percent at the end of last year. It also could require them to raise more capital. Spokesmen for all four banks declined to comment.




“The U.S. leverage ratio doesn’t capture off-balance-sheet risks,” said [former FDIC boss] Bair, now chairman of the Systemic Risk Council, a private regulatory watchdog. “Once U.S. banks start publishing the new Basel-mandated ratios, more off-balance-sheet assets will become obvious.”




Bair said she favors raising the simple capital ratio as high as 8 percent. Hoenig, the FDIC vice chairman, has called for 10 percent. U.S. regulators are still debating how to implement the rules. Because Basel isn’t an international treaty, each country needs to adopt its own version.




Progress on common standards slowed after Mary Schapiro became SEC chairman in 2009 and faced lobbying by companies opposed to what they said would be costly accounting changes, according to four people with knowledge of the discussions who asked not to be identified because the talks were private.




After failing to agree on common standards for derivatives netting and consolidation of securitizations, rule-setters are now heading in different directions as they debate how to account for loan-loss reserves.


Stunning List of Economists, Financial Experts and Bankers Say We Need to Break Up the Big Banks

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

  • Current Vice Chair and director of the Federal Deposit Insurance Corporation – and former 20-year President of the Federal Reserve Bank of Kansas City – Thomas Hoenig (and see this)
  • Former Federal Reserve Bank of New York economist and Salomon Brothers vice chairman, Henry Kaufman
  • 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 economist for the International Monetary Fund, Simon Johnson (and see this)
  • 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
  • Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
  • The Director of Research at the Federal Reserve Bank of Dallas, Harvey Rosenblum
  • Director, Max Planck Institute for Research on Collective Goods, Bonn, and Professor of Economics, University of Bonn, Martin Hellwig

Even current Fed chairman Ben Bernanke says that the big banks should be downsized

And the head of the New York Federal Reserve Bank – and former Goldman Sachs chief economist – William Dudley – says that we should not tolerate a financial system in which certain financial institutions are deemed to be too big to fail.

Federal Reserve Board governor Daniel Tarullo also backs  a cap on the size of banks, and Former Treasury secretary under Reagan and George H.W. Bush, Nicolas Brady, says that we need to put a cap on leverage.

Top Bankers Call for Big Banks to Be Broken Up

While you might assume that bankers themselves don’t want the giant banks to be broken up, many are in fact calling for a break up, including:

  • Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London- Nomi Prins
  • Numerous other bankers within the mega-banks (see this, for example)
  • Founder and chairman of Signature Bank, Scott Shay
  • Former Natwest and Schroders investment banker, Philip Augar
  • The President of the Independent Community Bankers of America, Camden Fine

Bipartisan Consensus Formed: We Must Break Up the Giant Banks

Liberal congressman Sherrod Brown and conservative congressman David Vitter are pushing to break up the big banks:



Huffington Post reports:

Sen. Sherrod Brown (D-Ohio), along with unlikely ally Sen. David Vitter (R-La.), is launching an effort to break up the taxpayer-funded party on Wall Street.


“The best example is that 18 years ago, the largest six banks’ combined assets were 16 percent of GDP. Today they’re 64-65 percent of GDP,” Brown said. “So the large banks are getting bigger and bigger, partly because of the financial crisis, partly because of the advantages they have.” [Indeed, they're 30% bigger than they were when the big "financial" reform bill was passed.]




“The system is such that the big banks have far too many advantages, bestowed in part by the marketplace, because investors understand and the market understands that government might in fact bail them out, so there is lower risk for investors, and that means that they can borrow money at a lower cost than anybody else can,” Brown said, explaining why small- and mid-sized banks are at a disadvantage.


Brown and Vitter announced on Thursday that they were working together on bipartisan legislation to address this problem.


“I think the fact that Sen. Brown and I are both here on the floor echoing each other’s concerns, virtually repeating each other’s arguments, is pretty significant,” Vitter said Thursday in his Senate floor remarks. “I don’t know if we quite define the political spectrum of the United States Senate, but we come pretty darned close. And yet, we absolutely agree about this threat.”


In his floor remarks, Brown underscored the urgency — and the challenge — in breaking up the biggest banks.


“Just about the only people who will not benefit from reining in the megabanks are a few Wall Street executives,” he said.




Brown’s push received a conservative boost this month from pundit George Will, who wrote that the senator’s efforts deserve support from the right.


“By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together,” he wrote. “Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail.”


“When the Will column came out, it was pretty interesting,” said Brown. “People I’ve known over the years who have my email address — I got several emails from people who kind of surprised me that they supported the idea.”


Conservative Wall Street Journal columnist Peggy Noonan has urged Republicans to break up the big banks, as has former GOP presidential candidate Jon Huntsman. [So has James Pethokoukis, a columnist for the American Enterprise Institute, who writes in the pages of the Weekly Standard.]




In 2010, Brown and then-Sen. Ted Kaufman (D-Del.) also offered an amendment to break up the big banks.




“I’m not going to mention names, but some who voted [against the 2010 amendment] have come up and said they’re going to vote for it. And we just have a different Senate now from 2010,” he said, adding, “More and more senators have come to me and said they are looking at this differently now.”

Raw Story notes:

Today, our economy is being threatened by multi-trillion dollar financial institutions,” Brown said on the Senate floor. “Wall Street megabanks that are so large that, should they fail, they would take the rest of the economy with them. Instead of failure, however, taxpayers are likely to be asked to cover their losses, to bail them out as we did five years ago.”


“This is a disastrous outcome because it transfers wealth from the rest of the economy into these megabanks and it suspends the rules of capitalism, perpetuating the moral hazard that comes from saving risk-takers from the consequences of their behavior,” the progressive Democrat added.

They are totally correct.

And they understand that – while liberals and conservatives might have different starting places – they both reach the same conclusion.

Huffington Post writes:

Brown noted that conservatives and progressives use slightly different arguments and talking points to get to the same conclusion, with conservatives condemning “crony capitalism” and progressives worrying about the corrupting influence of major financial institutions.

We’ve pointed out:

Conservatives hate big unfettered government and liberals hate big unchecked corporations, so both hate legislation which encourages the federal government to reward big corporations at the expense of small businesses.


Both liberals and conservatives are angry that the feds are propping up the giant banks – while letting small banks fail by the hundreds – even though that is horrible for the economy and Main Street.


The Dodd-Frank financial legislation wasn’t a compromise where things landed somewhere in the middle between liberal and conservatives ideas. Instead, it enshrines big government propping up the big banks … more or less permanently.


Many liberals and conservatives look at the government’s approach to the financial crisis as socialism for the rich and free market capitalism for the little guy. No wonder both liberals and conservatives hate it.




The corrupt, giant banks would never have gotten so big and powerful on their own. In a free market, the leaner banks with sounder business models would be growing, while the giants who made reckless speculative gambles would have gone bust. See this, this and this.


It is the Federal Reserve, Treasury and Congress who have repeatedly bailed out the big banks, ensured they make money at taxpayer expense, exempted them from standard accounting practices and the criminal and fraud laws which govern the little guy, encouraged insane amounts of leverage, and enabled the too big to fail banks – through “moral hazard” – to become even more reckless.


Indeed, the government made them big in the first place. A




As MIT economics professor and former IMF chief economist Simon Johnson points out … the official White House position is that:

(1) The government created the mega-giants, and they are not the product of free market competition


(3) Giant banks are good for the economy

And given that the 12 Federal Reserve banks are private – see this, this, this and this- the giant banks have a huge amount of influence on what the Fed does. Indeed, the money-center banks in New York control the New York Fed, the most powerful Fed bank. Indeed, Jamie Dimon – the head of JP Morgan Chase – is a Director of the New York Fed.


Any attempt by the left to say that the free market is all bad and the government is all good is naive and counter-productive.


And any attempt by the right to say that we should leave the giant banks alone because that’s the free market are wrong.


The [corrupt, captured government "regulators"] and the giant banks are part of a single malignant, symbiotic relationship.

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Pondmaster's picture

Ever wonder why these guys are preaching to an empty room full of empty chairs . Sherrod Brown / David Vitter . Same in Brittain with Nigel Farage .

Are members of congress on 24/7/ 365 vacation ?

Matter is they don't give a S...!!

Big Banks to Big to bust .. as  a person coined . ONE BANK TO RULE THEM ALL , AND IN SERFDOM BIND THEM .

Thats our nations and the worlds direction


Wonder what Goldmans fiat currency will look like . Only one that you can use .

Ghordius's picture

Pondmaster, in the case of Nigel Farage you are talking about someone that in the US would be called a megabank lobbyist

let me see, who could I take as example of a megabank lobbyist cum politician in the US... how about Corzine?

I'm not saying he did the unpunished crimes Corzine did at all - just explaining his role

further he is not - unlike the unprosecutable Corzine - the conduit of immense electoral funds

nevertheless he is first for the interests of the City of London and second all the rest - including the BriXit proposal

fine, he makes good rants against Barrelloso and Gollum and that lobbyism sewage system that the EU can be at time

nevertheless don't expect him to be on your side, if you aren't a megabank

Element's picture

Nigel Farage's 'role' among several has been to warn Eurozone member states of the dangers of such a central currency (same one in your avatar - funny that), in that it prevents states that join that single currency from devaluing and debasing their money to a competitive level to afford the essentials of life and be responsible for their own economies, affairs and sovereignty. And ever since the peripheral states joined it has been an endless succession of doing none of that, hence the mess they are now in.

It has also been to warn of the danger of creeping centralism and the incompetence and duplicity of officials of such a system, and how it has been implemented, or rather imposed, via fundamentally anti-democratic acts and unaccountability, in order to favor the interests of bankers making claims of public assets, at the behest of corrupt governments, who were mostly stealing from the till all along, and the bankers did all they could to enable it. 

It has also been to make sure his own country does not make the same fundamental mistakes and to provide an alternative and much needed voice to that of the Jose Manuel Barrosos of this world.

For you to say he's analogous to Corzine is ridiculous and stupid ... actually, no ... it's really a smear.

Ghordius's picture

is it really a smear? is he not at the interface position between lobbyism (for megabanks) and politics? this is all what I wanted to point out, not that he is doing criminal acts in this role - like Corzine

I see it like saying they are both policemen - and one of them is clearly corrupt and criminal - hope this clarification is enough, otherwise please excuse me for the wrong delivery of the message

yes, I have a different opinion than his on the role of the EUR - a concept which I support since studying the moral crisis of 1968 and particularly since August 15th, 1971, the day we stopped having the Golden Dollar and embarked on this journey

Nigel makes many good rants, but he never points citizens to the role of national governments in the EU. never. in this, I accuse him of disingenuos propaganda - he never points to the confederative structures it has, only to cheap populist shots at them

and don't even try to explain to me he does not understand how the EU and it's council function

and this includes the fact that UKIP MEPs refuse to vote on EU laws and refuse to point out that Cameron's voice and vote and sometimes veto is vastly more important than theirs, in the EU

he is part of those propagandists that paint the UK as powerless towards the EU and blissfully forget the UK's official diplomacy acts, motions and positions - because it would somehow make the whole thing look quite silly

but all in all, imho he is a representative of what I want to get rid of, or restructured

Element's picture

I can't remember who it was (Bill Black I suspect) in 2009 who pointed out that the TBTF banks did not know and could not determine the state of their balance sheet at any moment.  That they and their counter-parties had no idea whatsoever if they were solvent. And that this reason alone was sufficient for all such banks to be immediately closed, until their true financial condition and positions are determined, and then those banks broken-up into more manageable organizations that know how to track their balance sheet.

But how the hell to you plan to manage other people's investments when you don't even know where your own bank's bottom line is?

Obfuscating via saying other banks in Asia and Europe are the same, or worse, kind of misses the point, and is totally unacceptable as an excuse.

Ghordius's picture

+1 though I hear voices that not all megabanks are in this dismal state - and that those who refuse Basel III are among them because their computer systems can't - the first reason why they have no serious idea on their financial state

ebworthen's picture

The most powerful bank in the world would be one that asked for 20% down on a loan and held the loan for life.

Of course, this would have to happen without a central bank providing "liquidity" (free money on the backs of the people) and sound money (backed by tangibles - such as Gold and the property you didn't securitize or bundle into deriviatives).


q99x2's picture

Fuck Bernanke. Let Iran start with Jamie Dimon's new island.

sansnobel's picture

Hey George It's Da JOOOOOOOOOOOOOOOOOOZ!!!!!!!!!!!!!!!!!!!!!!

Ghordius's picture

that's only a visible minority that happens to be overrepresented, particularly in NY - if you really want to make the religious view than nevertheless it's Christians allowing them to gangsterize the financial/banking systems and financialize/lobby-tomize the US political system

central banks represent public money - our national credit systems - our current banking systems are facilities for the supply of this public credit - our financial systems are private systems of private investment

in this, the reason why megabanks were forbidden

why the private investment banks where separated from the semi-public and regulated business banks supplying corporations and the semi-public and regulated retail banks supplying private needs

a financial cruiser hedge fund is built in it's components by the magic of assembling with derivatives a vehicle where only a minimum but controlling fraction is private investment - and most of it supplied with the derivatives by a financial dreadnought megabank, who channels the major part of the cruiser's muscle in form of public credit from it's national bank

citizen, it's your credit at risk - though you only find out if the cruiser hits rocks it failed to chart while dashingly manouvering to exploit weak targets

yes, cheer the captain muttering how foolish those mostly foreign (but increasingly more American) weak targets are soon helpless, but remember that you might be a target too, soon

Lordflin's picture

Well, in Iran it appears that they execute bankers for fraud. If we did the same thing here we could down size banks in a hurry...

Ghordius's picture

"execute" their bonuses & profits - this hurts them more than cutting their heads

if you are systemically relevant, you stop having the right of making private profits until you are subject to the same risk of failing as the other partecipants of the economy, be them people or smaller corps

WE gave them PRIVILEGES - they are ABUSING them

This is not the first time this problem has cropped up - see how anti-trust laws have worked in the past, for example with the Baby Bells

TBTF? Are you? Fine, NO bonus for you, come back when you are a fair economy partecipant again

And no, you should not be above the law, Corzine - perhaps your's and other's lobbying and campaign money should be taxed... By 95%

Pseudo Anonym's picture

unfucking believable;  what's it gonna take to cut these parasites to manageable size.  anything?

Ghordius's picture

their gangster hierarchy "does it" for money - make it unprofitable and you starve them to move to other pastures

Element's picture

Get real ghordi, the crooks control the money-supply and media by design and can buy any level of systemic protections and legislators cover their activities. They do it all the time, it's well documented and you know it. You're living in a concerted dreamland state of mind if you are even half-serious about such a non-solution and non-starter to entrenched global-scale organized crime and the CB banking syndicate.

Most of the time within these banking dysfunction/corruption zh threads you seem to be doing your very best to put a happy-face of spin on the documented organized criminality, while hinting that they can't really be considered responsible for their antisocial thieving actions with malice of forethought.

Ghordius's picture

you suppose I present a very naive point of view and you suppose I'm spinning for a happy face? you are not alone in this and it might well be my fault

imho it's because I partially defend the actions of certain national banks (or federations of them)

might be I'm going against this hallowed tradition and trend seen in ZH of seeing the source of the desease in certain setups of public nature

I'm for truth (alas as I see it) and I see legal and constitutional public facilities like national banks and banking systems as the hijacked powering source of overprivileged corporations populated by various criminal gangs of for-personal-profit persons that represent the corruption in the system, and feed it back with immense electoral money streams to further corrupt the political systems at both the base and the top - best seen in the untouchable Corzine

for me, it's all about healing the body, not cutting pieces off, randomly, in rage

specifically, I want our banking systems to be cleansed from corruption, not dismantled, and this specific EU bonus law is a kind of "letter of intent", a starter and a warning shot

Element's picture

Yup, you're completely dreaming and ultra-naive (at best). The banking system is impossible to clean up, it is implicitly corrupt by its' very nature and practices. Inventing money that is loaned out at 9:1 ratios, that sort of thing. Debt that is created as 'money', and its imaginary transfer to a debtor as 'credit', that's immaterial and entirely imaginary, merely presumed to exist, then collateral signed up to cover the imaginary 'money', called credit, thus debt-money is created. And you want to do what again?

"... specifically, I want our banking systems to be cleansed from corruption, ..."

OK, you've convinced me, you totally miss the forest for the trees. I can't help but see you as some sort of banking apologist, of what variety I don't know, perhaps just an innocuous useful-idiot.

If you want growth you have to bankrupt unreplayable debtors to destroy their debts, and associated counter-parties who should have known better and acted more conservatively (and who can now fend for themselves or go under also, as they should).

All other options will not work for us kido. Nor will another option produce a surge of real-economic growth, a real recovery. I've shown graphs here and elsewhere (several times) of what happened when the banks died after the 1929 crash, but I guess you must have not seen them, or just ignored them, but basically there was sharp GDP growth and employment growth that began just as the worst phase of the bank collapse approached its crescendo.


All talk of reining in mere personal bonus's is tiddlywinks, completely peripheral nonsense that will solve none of the fundamental problems that continue this steady decay of everything. You claim to give a shit about the EU, and maybe elsewhere? And yet your solutions and propositions are toothless, feeble and inconsequential non-answers, to the fundamental causes of the economic decay. Yeah, you so give a shit that such non-starting non-changes you would tinker with will do zero to reverse the monumental explosion in EU unemployment, and flatten and reverse its trajectory. You have nothing.

I suggest you have a good look at what happened in the US in 1925-33 to banks collapses, GDP, and unemployment, the faster the bankruptcies and bank closures occurred, the faster the growth and employment took-off, just 3 years after the 1929 crash. The failure to clear the debts in bad banks was the stranglehold on the Great Depression-era economies. In the USA and Europe today you're 4.5 years on from the great crash, and the toxic zombies have been preserved, consequently the debt has not been cleared. And because the criminal infested banks have not closed, the corruption has not ceased and the recovery has not occurred.

And now it appears the entire globe is steadily running out of economic puff from the stranglehold of bad debts and bad banks, and the failure to bankrupt and mark to market to clear assets at prices the market will bear. So what if that kills the real market prices will kill giant banks, that's exactly what needs to happen! Stop bailing them out, Lehman's was the right call, don't bail them out, make them conform to reality.

But because all of that was 'avoided' in 2008-09 (no, sorry, not really), we're sliding into a more painful depression (that was widely predicted) which money printing can not stop from deepening, but only delay it and will make it all the more lingering, damaging and destabilizing to business and employment.

While people like you would protect the bankers and banks instead ... because you care so much about the EU, right? That you're all about truth? Come off it! You don't want to face the truth at all, you want to do the dumb thing, and pretend reality can be avoided or bought-off with imaginary fiat printing and tokenisms that will do nothing. The solution to all of that is to bankrupt them to get economic activity back, else the US is going the way of Europe, and then there really will be no way out without much, muuuuccchhh longer-term damage to the entire world. But you care, right? You want to tinker with soft-hands, and hopey the situation into general nicerness.

All talk of gearing-up for currency-war is just a useless avoidance of the need for bankruptcies to write-down bad debts.

This is what really needs to occur to get economic movement return for real:

No bank bail-outs or recapitalizations of bad-banks, they go, big or small - they go. If banks are broke they go bankrupt. No more lumping taxpayers with debts that never should have been lumped on them, for any reason. It is not their debt, and they should and must refuse to pay taxes until govts admit this is an injustice that can not be allowed to stand, and the debts are passed back to the original parties responsible, for due process, and orderly bankruptcy and writing down of bad bank debts applied.

Governments and central banks have no moral place or right to offer guarantees for private losses on bad loans, using public cover or liabilities to taxpayers income for collateral. All such arrangements have to be unwound immediately. These are all grand mistakes and terrific immoralities that must now be corrected.

Assets must have a price that reflects market conditions, mark to make-believe must cease, it was a tremendously destructive error the prevented markets to clear and debts to be written down, and has destroyed markets. Any further fantasy-accounting must then be prosecuted and the facetious activity of imposing fines banned - hard prison time must be mandatory. All assets of financial crime must be foregone.

Bad private companies should not be nationalized, they should fail. If they provide fundamental essential services to the public, and we once privately owned, then why the hell were they ever privatized, so that they now need to be re-nationalised? All such bad choices and deals need to be unwound, using emergency powers, and nullified, and the sale of vital public assets and infrastructure made illegal in future. Tax-payers own these, and they are not for sale, not a marketable good to be traded, any more than the community is.

Banks and stock exchanges are there for one reason, for the needs of a community and its economic activity. They have no other reason to exist, and when they damage the community and bleed it out, it is absolutely clear that they must go, immediately. There is no reason whatsoever to go soft and cuddly with them, the sector is such an organized rort, a controlled rip-off, and a massive extractive profit center, that as soon as you crush a bad banks, a new bank will immediately emerge to fill any resulting competitive niche, and will continue to service the community, but free of the economic strangle-hold of bad debts and corruption within the books and admin of the bank that was closed. And the corrupt go to prison, no 'regulatory' fines under any circumstances! It scarcely needs to be said that fines mean nothing to the super rich organized-crime. It's clear the fucking regulators are in on the whole scam, they are as systemically dangerous and toxic as the banks! There is a reason why the terms of various govt official roles are limited in term, its because if they are not constantly overturned corruption and dysfunction sets in.

Same for banking system, root and branch change is the healthiest thing you can do for them, and especially for the community. It will keep them in their place, and focused on their actual role and responsibilities, but they should also know that if they fail, just as in any other business, there will be no mercy, no safety-net and no exemption from penalties.

Let me clue you in on something; bankers destroy community-businesses via bankruptcy all day, every day pal, there is zero mercy for under-performing businesses, and those employed by those businesses, or their families. ZIP!

But a useful-idiot like you thinks we should go soft on them?

Hence you are just a time-wasting apologist, arguing for double- and tripple-standards of unfair treatment, which is innately unjust and supremely divisive and inciting, and will solve none of what you claim to 'care' about, in all 'truthiness', but will prolong the decay of all such affected communities.

What is good for the goose is good for the gander.

Ghordius's picture

just a few misunderstandings to be cleared: "While people like you would protect the bankers and banks instead" no. neither bankers nor banks. I don't know why you got this impression

my take is preserve the banking systems in their function - not the individual parts

"But a ... like you thinks we should go soft on them?" where did I ever said something "soft" about them?

Ghordius's picture

Element - thank you for this awesome comment

How can I explain that I agree on most of your views but differ in how the whole thing can be handled versus how ought to be handled?

to put it bluntly:

can eurozoners change the way the UK and the US want to handle their central banks and their banking systems? not much

can eurozoners change the way the BRICS and Japan are approaching this crisis? not much

what can we do? what we are doing, thorough alliances like the EU and EZ, those easily corruptable mechanisms that give us at the very least a size proctection versus the currents of this storm

go again through your list of things that ought to do be done and tell me: aren't there a myriad of similar reforms that could be done and get similar results? they all need political will, though, and this is one of the scarcests resources of the world

meanwhile ask yourself: with most of the EU cabinets behind this EU law (otherwise you could forget a vote in the EU parliament) starting with this little feeble warning shot meant to have a psychological effect on the banking crowd - which currency zone do you think is more poised in starting to think about serious reform? Those who coddle the bankers and make them immune from prosecution or those who start with capping their bonuses?

I maintain that every country exiting the eurozone will automatically enter the dollarzone - with all it's consequences

Abrick's picture

People don't even know what big is anymore.

newengland's picture

Your point of view depends on where you are standing. Choose friends carefully. On this point of banks, I believe in this:


  • The BIS
  • Anna Schwartz
  • No more easy money, and no more something for nothing two faced lying thieving political class, and bureaucrats.
  • Pay up or shut up - and that goes for you too JPMorgue. One law. Jail 'em. Don't bail 'em. Dimon is a gangsta different than Corzine.

The new kids on the block like Greenspan, Bernanke and their media shill Krugman have had their time, and failed.

Enough, already.

exartizo's picture

ummm... you're just NOW coming to these conclusions? Where the fuck have you been the last 5 years?

Yen Cross's picture

 Welcome to reality. If you consider CapEX, and Balance sheets.  Are you ready?     I purposely left forward earnings off the table.

WmMcK's picture

A fifth of gin -- oops.

George Washington's picture

Deep thinking, sir ...  I can't find any flaw in your argument, although the vodka-drinkers haven't yet weighed in.

falak pema's picture

thank you for confirming here at ZH something that I, amongst others, have repeatedly pointed out; and which needs to be highlighted

American banks are cheating by not including their OTC and shadow banking activities in their BS...

So when Ben Bernanke says  : US banks are more atuned to Basel III criteria than Euro banks, HE IS LYING.

He did it two days ago in front of the Senate Comittee; so its a lie that has been perpetuated since 2008 upto Today...

It is at the core of the world financial crisis; at the core, not in the periphery; as the shadow banking US world that plays mayhem with Euro sovereign bonds would have us believe; ON THE BACK OF THESE VERY TBTF FUNDED ZIRP LEVERAGED PLAYS.  This market distortion having been used to disseminate and spread like the plague the derivative funded ponzi worldwide in so called bond vigilante moves, totally skewed to beat into pulp the smaller countries all the while protecting the Anglo ponzi financial markets.  So much for due market diligence, for arms length regulatory third party evaluation, for continuous lauding the invisible hand of HF market plays and what have you, that libertarians jabber on about; all hokus pokus. ZH is known to beat inordinately on this euro bashing drum, saying that Kyle of Bass and other piggy backing sharks are scions of capitalism pure as spring water,  and its incomprehensible, given the underlying, overall US banksta reality.

Its rigged and its biased in favour of TBTF Anglo oligarchy banks who rule WS/City hubs; of which the bigger Euro banks like Deutsch, UBS, BNP, Son GEn are part and parcel. Its one big predatory HFT family with its shoal of HF surrogate sharks as shadow banking partners all around them. 

If attrition hits this UPPER ECHELON Oligarchy world it could cause bigger mayhem than smaller pebbles like Greece or Spain sovereigns. 

Just saying, the Oligarchy private banking led Ponzi is TOP HEAVY, and a fish ALWAYS rots from the HEAD DOWN. The nation states heads of state are at best dumb statist incompetents, like Hollande, hijacked into submission, at worst corrupt, crony, cynical shysters feeding the ponzi bonfire for thirty talents of silver like  first world Tycoons (Cameron et al) or a plate of lentils like cheap greek/third world feudals. (The last list is too long). 

Ghordius's picture

Best comment ever seen on ZH, imho

Interestingly, in some circles there is the feeling that dismantling those Financial Dreadnoughts and their flottillas of hedge funds cruisers, shadow banking stealth/wealth destroyers, HTF superdrones and rating agencies carriers (as Jesse's Cafe's calls them) is something akin to the XXthC naval disarmement talks - we keep 'em until you don't

Hedge Funds like Kyle Bass's are hyperleveraged thanks to this setup (no derivatives=no hedge funds or shadow banking) - when he wins, he is a worthy capitalist and hero. If he loses - it was taxpayer's money. Citizens of many nations fund him and partecipate to his... losses only

Banking systems like we have now are national facilities highjacked by a caste of "meritocracy priests" that behave like gangsters - all visible but increasingly untouchable - the result of legal privileges (above and beyond the rights of the individual citizen) visible in lesser form in the second tier of the armies of the megacorporations with their legions of lobbyists and flanked by the cavalry of the think-tanks

funnily, this EU law about banker bonus limitation could have a stronger effect than expected, with a repatriation of high-flyer bankstas to the national legislatures that are least skeptical of them and still think they are worth their bonuses. After all, that's the reason Jamie Dimon makes more money, and we are just closing the EU for him and his ilk, with that

BigDuke6's picture

Then its 'same as it ever was'.

Default or hyperinflation.

slightlyskeptical's picture

We don't need to break them up we just need to break them.

1. Have the treasury print what the government needs to operate. No debt based money. Pay off current Treasuries with this cash. Make it law that money supply can only be expanded a certian amount each year. Taxes would be levied to make up the difference. I.E. fight a big would have to be paid for with a special tax levy approved by Congress.

2. Eliminate fractional reserve banking. Have the government buy and refinance all current mortgages, credit cards, consumer debt and refinance on terms that assures they get paid back. Same with anything else the banks couldn't keep on books and maintain the no leverage requirements. WAfter that let the derivatives fall where they may.

3. Have social security fund the primary home mortgage business. Whatever they can't carry put onto the government pension system.  Mortgage profits would no longer flow to bankers but instead would serve to pay for the cost of these programs.

Banks could continue to do the same lines of business. They could still originate primary housing loans for SS and could service said loans. However, without the leverage, they could no longer dominate our economy.



Ghordius's picture

for GW's request all that is needed is to reverse the newest legislation back to it's let say 1980's level or before

for your's... well, the US would lose it's global reserve currency credit (card)

I'd be content with his - first

Pemaquid's picture

I don't want Social Security dollars in our bubble-ridden housing market.

slightlyskeptical's picture

You would rather they are invested in bubble treasury bonds instead, funded with taxpayer dollars with no collateral except government promises? By letting social security fund mortgages you actually have hard assets backing up the SS fund and a stream of income that doesn't come directly from taxes. Nothing will secure the loans better than a future stream of social security payments teh mortgagee will be in line to recieve. Without the incentive to package up and sell the loans, the chances of bubbles are much reduced. It should be obvious that underwriting would have to be much better than it was in the 2000's. It can be structured to work if there is  a will to really fix things.

swissaustrian's picture

In our globalized world, it doesn't matter where the headquarters of a bank are. Most of the fraud / theft is beeing orchestrated through the City of London. All the major financial scandals of recent years originated there. Whether it's American banks or not doesn't make a difference. On the other hand, the bailouts where mainly paid for by American taxpayers and through loans by the FED. That's the curse of having the World's reserve currency. Privatization / offshoring of gains, socialisation / onshoring of losses

Ghordius's picture

SA, where the US leads in regulation, the world follows, as in 1999

swissaustrian's picture

GW, I think the Gramm Leach Bliley Act of 1999 was just the final step. The deregulation move started with Thatchers "Big Bang" in 1986.

Ghordius's picture

you could say moral hazard increased exponentially with the Savings & Loans crisis

but yes, you are pointing to an important component: before the Big Bank, the City of London merchant/investment banks were small, often family-led affairs, with traditions and a long-term view - and after they became shortsighted fiefdoms inside of the managerial megabanks

DaveyJones's picture


and nice discussion with max keiser and Antal Fekete on the latest Keiser report (at 12:00)

tony bonn's picture

george - your first 5 bullet points were symphonic played in a perfect acoustical setting.....the rest of the essay was pure gold....

now for the work - how to make this happen? it's not good enough to pat good commentators on the back - we need action.

Conax's picture


How to make it happen?  I for one, am going to type in a vigorous manner all over the internet until they cry uncle.

Kiddin' aside, our so-called representatives are supposed to regulate all this, but the lobbyists are just too persuasive.  Their arguments are so compelling nobody has a chance to refute them.

(it would cost a fortune and cost millions of lives)

DaveyJones's picture

just too purseswaysive

Nikao7's picture

Brilliant play on letters Davey Jones :)

DaveyJones's picture

...nor are their egos

George Washington's picture

For some reason, Bernanke video appearing at the very bottom of the page...

Ghordius's picture

excellent article for a wothy cause, GW - I don't agree with you on many things but I can't find any fault, here. my compliments

falak pema's picture


GW rocks most of the time; when he isn't supporting the gun lobby in the name of "freedom of the individual", but I'm splitting very intimately embedded hairs, as its so deeply ingrained in the 2nd amendment US I'll shut my trap on that one! 

nmewn's picture

"...when he isn't supporting the gun lobby in the name of "freedom of the individual", but I'm splitting very intimately embedded hairs, as its so deeply ingrained in the 2nd amendment US mindset..."


One man's "gun lobby" is another man's civil rights organization.

falak pema's picture

...I believe in responsble voting for civil rights organisation; that's your's and mine's greatest legacy from "When in the course of human events" moment....just my opinion.

Going back to guns is not the right road, as long as you can vote and as long as rule of law is upheld to allow the vote to be meaningful...Its the two party system that is inefficient; something the PEOPLE can cure if they want to.

No need to take to the barricades just yet! Its wake up time not shoot to kill time. Whats stopping the USA from having a Beppe Grillo type moment? Him or another true patriot. 

nmewn's picture

If voting responsibly and the upholding of the Rule of Law were all that was required to impede/counteract tyranical governments, there wouldn't be tyranny as free people prefer not to live under it.

In truth, it is the people themselves who elect their representatives.

You or I could be elected tomorrow if we dropped our aversion to deception and lying and just told them, elect me/you and you'll get everything freeeeee!™...a freeeeee!™ flat screen and freeeeee!™ health insurance and freeeeee!™ food and lock up every crooked bastard on Wall Street...see?...very easy to fool the masses.

Its incumbent on the people to choose which ones are not lying everytime they open their mouth, not the ones lying the most just because its what the people want to ten times out of ten those will also be the candidates who violate the Rule of Law. Afterall, they lied to get in office, so changing laws once there (to comport to a lying thiefs unethical agenda) will be seen as an act of "good governace" by those who voted for them in the first place.

Which is certainly better (psychologically for the voter) than admitting they've been had or that they themselves are greedy little pricks asking government to stick its gun in someone elses face, take their stuff and then give it to that particular voter in return for another pass at the voting booth. its all the same to you, I'll be keeping my gun and my right to defend myself against some very stupid people ;-)

Ghordius's picture

nmewn, this is UTTERLY OTHER THEME - I'm very sorry to see that this could become just another 2nd amendment slugfest - there are enough of them in the rest of ZH

there are many comments here that are very much to the point of GW's article, below, and some of them I'd give them one trillion greens, like this one

imho the last season of gun shopping cum propaganda party resulted in the great economic feat of wonderful sales for personal assault weapons

imho for 2nd amendment reasons it would have been smarter to invest less in them and learn something from the Afghani, Lybians et al experience and shop more encrypted communication devices, drone and aircraft downing capabilities, crew-served weapons and all the other stuff that real people facing real "evil" government troops - like at this moment in Syria - ask for

they say "gimme a Stinger rocket" and before that "gimme communication devices", and the very last item of the long list is a kalashnikov

but it would be akin to asking to give up your strong and admirable American individualism, in a certain way

for me, the NRA is just a lobby of a weapon industry that works toward profit, not the 2nd Amendment

mnewn, your political system is imo comparably way more corrupt - this is the nexus source and the earlier you admit it the sooner your country can clean up

See as an example how one blog created an anti-corruption movement (not a party) in Italy that took in 25% of the vote

in the US it would have been swamped by the endless streams of untraceable campaign money from Corzine et al, and so impossible