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Guest Post: Good Banker, Bad Banker

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

It's important to draw a line between two very different flavors of banker: "restrained" (Dr. Jekyll) and "unrestrained" (Mr. Hyde).

Those who read The Proper Use of Credit (April 4, 2013) know that I see a vital role for credit and yes, banks, in a sustainable economy. But as many observers have pointed out, banks must be controlled lest the predatory, parasitic Mr. Hyde replaces the proper Dr. Jekyll role of providing capital to worthy enterprises and households.

In response to Debt = Serfdom (April 2, 2013), longtime correspondent Jeff W. delineated the difference between Good Banker (restrained) and Bad Banker (unrestrained). Unfortunately, as Jeff explains, it is Mr. Hyde (unrestrained banker) who has captured the political and regulatory machinery of governance.

Here is Jeff's commentary:

"I distinguish in my mind two different kinds of bankers: I'll call them "restrained" and "unrestrained."

The restrained banker loads up the debt serfs with debt up to their Plimsoll Lines or credit limits. Then he stops. He knows that if he keeps loading more debt onto them, they may go bankrupt, and he wants to avoid the mess and losses that come with that.

The unrestrained banker has a completely different skill set. He will make high-interest loans (Payday Loans) to insolvent borrowers. He is not afraid of bankruptcies; bankruptcies are part of his business model. He knows how to take advantage of borrowers who are desperate, ignorant, or impulsive (or all three). He knows all about asset stripping. He knows how to unload bad loan paper on suckers. He thrives in an environment of chaos and desperation, where his customers are often at the end of their ropes.

In the old days, the restrained bankers and community-minded Americans used to put controls on the unrestrained bankers. There were usury laws that made it illegal to charge interest above a certain rate, such as 15%. Unrestrained bankers were not welcomed into polite society, and people were warned against doing business with them.

Which of the two kinds of bankers operate the Federal Reserve and have seized control of the Federal government? I say it is the unrestrained variety. I say that the securitization of mortgages was, all along, a scheme to unload bad mortgage paper on suckers, such as pension funds and the U.S. taxpayer.

Obama's stimulus was the work of unrestrained bankers. The Obama deficits have been the work of unrestrained bankers. The Simpson-Bowles Commission was an effort by the restrained bankers to keep the U.S. debt below its Plimsoll Line, which Reinhart and Rogoff have put at 80% of GDP. But the unrestrained bankers have not hesitated to blow right past that.

If my observation is correct that the U.S. government has now been subverted by unrestrained bankers, it means that:

- Our nation's fiscal policy is being dictated by people who are not afraid of the chaos of bankruptcy, but who thrive in that environment.

- Federal policies are being dictated by people who like to deal with debtors who are desperate and at the end of their ropes.

- Federal policies are being dictated with a view of future asset stripping.

- With this group in power it means that In a future bankruptcy scenario, everyone is going to come out a loser except the unrestrained bankers.

Where restrained bankers might be compared with bloodsucking fleas or lice, who are parasites on healthy bodies, the unrestrained bankers can be more aptly compared with maggots, who feast on the bodies of the dead.

So I say it is important to know what kind of bankers you are dealing with. If you are dealing with unrestrained bankers, it can bring nothing but bad luck."

Thank you, Jeff. As correspondent Lew G. noted, the key feature of a sustainable, non-parasitic banking sector is that banks and bankers have "skin in the game," i.e. they personally suffer losses when their loans and bets go bad.

This is the essence of moral hazard: the separation of risk from consequence. Put another way, those who are insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government: this is known as "privatizing profits and socializing losses."

As Lew G. also observed, if players (in this case, bankers, legislators and regulators) "have a choice of games, they will play the one with the best payoff," i.e. the one in which they have no skin in the game and the Central State/bank will backstop/ socialize their losses to the Tax Donkeys (taxpayers) while they keep the ill-gotten gains.

The Federal Reserve, the Obama Administration, the housing agencies and the U.S. Treasury are all offering bankers and financiers high-payoff tables that require no skin in the game. No wonder our system is dominated by the unrestrained bankers, sociopathological Mr. Hydes who offer a few coins in compensation for running down the nation.

For more on these topics, please read:

Inevitable Catastrophe: The Fruits of Moral Hazard on a Global Scale (June 24, 2011)

Feedback, Unintended Consequences and Global Markets (May 21, 2012)

The Dangerous Blindspots of Clueless Keynesians (January 2, 2013)

The Great Reset (July 7, 2011)


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Tue, 04/09/2013 - 14:56 | Link to Comment Say What Again
Say What Again's picture

Where is anonymous when you really need them?

Tue, 04/09/2013 - 15:09 | Link to Comment MillionDollarBonus_
MillionDollarBonus_'s picture


10 reasons why I hate goldbugs:

  1. They cry about ‘manipulation’ every time they lose money
  2. They hoard gold instead of investing in the economy, denying millions of people jobs and income growth
  3. They undermine our national currency and national interests
  4. They selfishly pursue profit at the expense of others
  5. They keep ‘stacking’, even when they’ve already lost half of their family’s retirement
  6. They have no understanding of basic economic principles
  7. They snobbishly reject all other investments
  8. They have a lemming-like mentality, and buy in panic
  9. They have an inability to see the other side of the gold argument
  10. They rush to one another’s defence in pro-gold arguments, even if they have not understanding of the argument at hand


Tue, 04/09/2013 - 15:11 | Link to Comment WayBehind
WayBehind's picture

Good banker? Who knew there was one ...

Tue, 04/09/2013 - 15:12 | Link to Comment Ignatius
Ignatius's picture

"The Federal Reserve, the Obama Administration, the housing agencies and the U.S. Treasury are all offering bankers and financiers high-payoff tables that require no skin in the game."

It's called 'stealing', if anybody asks.

Tue, 04/09/2013 - 19:34 | Link to Comment The Alarmist
The Alarmist's picture

Where is Al Quaeda when you need them?

Tue, 04/09/2013 - 20:12 | Link to Comment Ignatius
Ignatius's picture

In that same back office at the CIA, locked and loaded.

Tue, 04/09/2013 - 15:19 | Link to Comment francis_sawyer
francis_sawyer's picture

Where is LongSoupLine when you really need him?

Tue, 04/09/2013 - 15:48 | Link to Comment azzhatter
azzhatter's picture

You mean to tell me that Jamie doesn't have skin in the game?

Tue, 04/09/2013 - 16:41 | Link to Comment pods
pods's picture

There ain't no such thing as no fucking good banker who deals in credit.

Fuck them and their progeny.  I long for the day when banker is a dirty word like it should be.

A good man realizes that he should not be in the business of making money off a fucking scam.

Fractional reserve banking=Theft.

So all fractional reserve bankers=Thieves.

Best fucking thief I ever knew.  Still a fucking thief though.


Tue, 04/09/2013 - 15:12 | Link to Comment duo
duo's picture

going for -100 today, MDB?

Tue, 04/09/2013 - 15:18 | Link to Comment McMolotov
McMolotov's picture

As I've said in the past, we're all impressed that you continue to post comments despite your mental handicap.

Tue, 04/09/2013 - 15:23 | Link to Comment Ghordius
Ghordius's picture

11. they have... gold

Tue, 04/09/2013 - 15:28 | Link to Comment moonman
moonman's picture

12. They do not believe in unicorns that shit skittles


Tue, 04/09/2013 - 19:38 | Link to Comment The Alarmist
The Alarmist's picture

Crap.  You mean I need to re-think my sources of skittles?

Tue, 04/09/2013 - 16:07 | Link to Comment Mototard at Large
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MDB:  Do not worry about all the mean comments. I love you just like I love my step brother!

Tue, 04/09/2013 - 19:38 | Link to Comment The Alarmist
The Alarmist's picture

Sounds kind of Caine & Able, doesn't it?

Tue, 04/09/2013 - 16:35 | Link to Comment Ckierst1
Ckierst1's picture

You profoundly fail to understand.  You seriously need a deprogramming at the von Mises Institute.

Tue, 04/09/2013 - 16:37 | Link to Comment tango
tango's picture

Thank you Million for again straying off topic at the first opportunity and expressing your "hatred:.  Just what folks come to this site for. 

Tue, 04/09/2013 - 17:17 | Link to Comment markovchainey
markovchainey's picture

2.) They hoard gold instead of investing in the economy, denying millions of people jobs and income growth

Come on now, all those boating accidents generate jobs!

Tue, 04/09/2013 - 14:57 | Link to Comment PUD
PUD's picture

NO...There are no good bankers. All banking has as its mission statement is to get as many as possible in as much debt as possible for as long as possible at as high a price as possible. That is their product. All banking is about debt and usury. Banking is the parent of fractional reserve fraud, debt as money and unbridled consumption via perpetual credit expansion. It is evil by nature. There are no good banks. There are no moral bankers.

Tue, 04/09/2013 - 15:06 | Link to Comment resurger
resurger's picture

I can't agree 100%, but back in the days there were good bankers...

For example if you have shipment from China to the US with a company that you are dealing with for the first time, the bank could have helped you on establishing the "trust"

For example, they can create a Letter of Credit LC for you, and see your specifications and making sure that you get your shipment intact and as you wanted for a fee. I guess a lot of business men who do business understand what am talking about.

Alas, these days theleverage X100 , X1000 and free money is killing all of us.

Tue, 04/09/2013 - 15:09 | Link to Comment PUD
PUD's picture

A bank as a utility has a function. They are anything but utilities now

Tue, 04/09/2013 - 15:15 | Link to Comment resurger
resurger's picture

Fuck all banks Pud, especially the TBTF .. i hope they go bust with all their leverage.

Tue, 04/09/2013 - 16:41 | Link to Comment tango
tango's picture

I'm not sure if you're joking or not since the demise of all banks would lead to instant starvation as no food trucks would run (fuel, salary, distribution all gone).  Not to mention that few businesses would be started, fewer businesses would invest and folks wouldn't be buying homes.  Anybody who confuses local, community banks with investment (quote unquote) banks needs to get out in the real world.   In that world, salaries are floated through the banking system constantly.  

Tue, 04/09/2013 - 16:34 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture


A bank as a utility has a function.

until the hofjuden take control of the good banks and turn it into a hofjuden run fractional reserve banking scam that defrauds working stiffs of the fruits of their labor

Tue, 04/09/2013 - 16:49 | Link to Comment Poetic injustice
Poetic injustice's picture

Does acting as money pump from taxpayer's pocket counts as utility?

Tue, 04/09/2013 - 15:22 | Link to Comment Urban Redneck
Urban Redneck's picture

Without credit Big Companies cannot be displaced, innovation is stifled, and YOU are poorer.  Don't believe me, wait a few years...

The perverse labryth of innefective credit regulation that only fosters corruption, is no better than the gun-toting thug credit that existed in the former USSR a few years ago.

So when TSHTF we'll have no credit again.  Then when enough people have died, we'll have unregulated gangster credit again, and when enough people tire of sucking banker dick and getting ripped off, then we'll have regulated credit again.  If no one learns anything about the proper role and functioning of credit between now and then, we will wind up right back where we are now- eventually.   

Rinse, repeat.

Tue, 04/09/2013 - 16:47 | Link to Comment tango
tango's picture

People - especially those who only read ZH - are unaware that in the last crisis we were days from starvation.  Without credit, fuel does not move, distribution chains are broken and groceries do not receive their thrice-daily loads.  Credit, used properly, weeds out those who try to live beyond their means.   Federal "aid", the new attitude about fairness and economic equality and political trends reverses this action, letting tens of millions enjoy a lifesytle they cannot afford. 

Tue, 04/09/2013 - 15:00 | Link to Comment observer007
observer007's picture

All Banks Are Bankrupt


I think this could be the spark that ignites the keg of dynamite under the current financial system. All banks, all around the world, are bankrupt, and have been for years. That's because all the world's banks run on a fractional reserve basis.

Interview with Doug Casey:

Tue, 04/09/2013 - 15:02 | Link to Comment Monkeyfister
Monkeyfister's picture

There is only ONE kind of good Bankster-- and that is a DEAD Bankster.

There is no such thing as this "Dr. Jeckyll" variety.

They may have existed sometime in unrecorded history, but all signs indicate they are long extinct.

The rest will be driven there, one way or another.

Driven-- certainly not frogmarched.

Tue, 04/09/2013 - 15:01 | Link to Comment css1971
css1971's picture

I put it to you that "restrained" and "unrestrained" bankers are one and the same. I would make a different distinction between them...

"Early stage" and "late stage" bankers.


Tue, 04/09/2013 - 15:02 | Link to Comment pndr4495
pndr4495's picture

Didn't Napolean talk about the international financiers owing allegiance only to gain , not to any country ? Where will they be able to reside when the SHTF ?

Tue, 04/09/2013 - 15:25 | Link to Comment de3de8
de3de8's picture

There's been no good banker since George Bailey. Heck, Henry Potter would be a good banker today.

Tue, 04/09/2013 - 15:09 | Link to Comment Inthemix96
Inthemix96's picture

The only good 'Top' banker,

Is a dead one.  And boys and girls, we are not that far away from this being irrevocably true.

Bank on it.

Tue, 04/09/2013 - 15:14 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Beat me to it.  Roll the motherfucking guillotines already.  

Tue, 04/09/2013 - 15:19 | Link to Comment Inthemix96
Inthemix96's picture

Game on laws,

Lets give these cunts war.  Not everyone will sit idely by NSA GCHQ, some of will come to you.

You fucked me, you should have my kids out of it.  Pick sides boys, its coming, and there is some well pissed off cunts not happy about it.

Hang them yourselfs, or you hang with them, that simple.

Tue, 04/09/2013 - 15:17 | Link to Comment Steve in Greensboro
Steve in Greensboro's picture

Ah, yes.  It is those eeeevil bankers that have "captured" the regulatory apparatus.  When in the history of regulation have the regulators not been captured by the industry they regulate?  The answer is never.

The source of the evil in banking is that the progressive-controlled government stands ready to bail out compliant bankers (meaning those who make campaign contributions to the progressives).  No bail-outs, no evil bankers.  Only competent bankers (who make loans to credit-worthy customers) and ex-bankers (who have made bad loans and driven their banks into bankruptcy).

The problem isn't evil bankers.  The problem is that the government is too big, too powerful and interferes in the operations of the free market.  Downsize the Executive branch by 80% (including ending the Fed) and watch the economy grow.

Tue, 04/09/2013 - 15:50 | Link to Comment Monkeyfister
Monkeyfister's picture

You can use the Bath Salts, or use the Internets... It is totally ill-advised to try both at the same time.

Tue, 04/09/2013 - 16:15 | Link to Comment SheepDog-One
SheepDog-One's picture

'The gubmint''s all just a total illusion anyway there is no gubment at all, here's a slightly oldie but real goodie I re-uploaded.

United States was the Virginia Company before it became 'US Inc.' and is Owned by the British Crown - YouTube

Tue, 04/09/2013 - 16:20 | Link to Comment PeaceLover
PeaceLover's picture

You have the down sizing part right.

The goverment spends like a hooker with a stolen ATM card, neve has time to ask for a discount.

I like that "spends like a hooker with someone elses credit card.

I think I got it here.

but bankers.. could replace all of them with a high powered computer.. and a few It guys.

Think about it.. the create nothing and steal from everyone.

Think Think.. what do they produce?

Did they produce anything they take?



Tue, 04/09/2013 - 16:44 | Link to Comment SheepDog-One
SheepDog-One's picture

Consult video linked above.

Tue, 04/09/2013 - 15:23 | Link to Comment Bearwagon
Bearwagon's picture

Banksters! That's ridiculous. As if the problems were to be solved, if a few hundred banksters would be hanged. There seems to be a little more to do ... much more ...

Tue, 04/09/2013 - 15:24 | Link to Comment longwind
longwind's picture

Moar moral hazard! Where do I invest?

Tue, 04/09/2013 - 15:57 | Link to Comment venturen
venturen's picture


Tue, 04/09/2013 - 16:11 | Link to Comment Mototard at Large
Mototard at Large's picture

We are going to have an all Goldman Sachs MMA cage match between Mark “Brutal Reckoning” Carney and Mario “Whatever it Takes” Draghi as different ideas emerge on how to deal with fragile and fragmented economies.   Mario says whatever it takes, Mark says "the bond market is there until it is not."  Should be interesting when Carney get to the Bank of England this summer.


Tue, 04/09/2013 - 16:11 | Link to Comment SheepDog-One
SheepDog-One's picture

Unfortunately for any 'good bankers', if there is a segment of your group that is very bad, then all get that label pinned to them.

'Good biker, bad biker'....sure a lot of Harley riders are weekend warriors only and probably dentists and lawyers, but with the Hells Angels and Mongols out there, any group on Harleys are considered suspicious.

Tue, 04/09/2013 - 16:46 | Link to Comment frenchie
frenchie's picture

all money changers are circumsized...

Tue, 04/09/2013 - 18:48 | Link to Comment honestann
honestann's picture

As long as bankers operate in a world of fiat and fractional-reserve, they are all evil scumbags to one degree or other.  Therefore, today, there are no "good bankers".

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