Only Ten Years After The Last Financial Crisis the Banks Are At It Again

Via Jesse's Cafe Americain blog,

Apparently the Banks have been lobbying heavily, and expending significant amounts of money again, leaning on their Congressmen and pressuring regulators, saying that their capital standards need to be relaxed so that they can make more loans to stimulate economic growth.

But that, according to the FDIC Vice-Chairman, is utter nonsense.

Hoenig, who was a high-ranking Federal Reserve official during the crisis, cautioned Senate Banking Committee Chairman Mike Crapo and the committee's senior Democrat, Sherrod Brown, "against relaxing current capital requirements and allowing the largest banks to increase their already highly leveraged positions."


Using public data to analyze the 10 largest bank holding companies, Hoenig found they will distribute more than 100 percent of the current year's earnings to investors, which could have supported to $537 billion in new loans.


On an annualized basis they will distribute 99 percent of net income, he added.


He added that if banks kept their share buybacks, totaling $83 billion, then under current capital rules they could boost commercial and consumer loans by $741.5 billion.


'While distributing all of today’s income to shareholders may be received well in the short run, it can undermine their future returns and weaken the growth outlook for the larger economy,' he wrote."


- Reuters, Payouts, not capital requirements, to blame for fewer bank loans: FDIC vice chairman

The Banks are spending a substantial amount of their current income on dividends to shareholders and large stock buyback programs designed to increase their share prices.

The chart above shows in the first column the almost shocking Payout Ratios being maintained by some of the Banks.

In the second column there is an estimate of how many more loans the Banks could have made at current capital requirements if they had not spent their cash buying back their own shares.

Since Bank managers are personally heavily rewarded on the share price of the Banks through bonuses and share options, the cause of this is clear.

There has been insufficient reform in the Banks.  Lending and basic banking would better function like a utility, with much more efficient and effective levels of risk management.

Basic banking including loans and deposits ought not to be an adjunct or cover for the kinds of speculation and gambling with other people's money that led to the last financial crisis that brought the global economy to its knees.

This problem was addressed by Glass-Steagall and functioned very well, keeping the banking system essentially sound for almost seventy years, until it was repealed under the Clinton Administration in conjunction with a Congress all too willing to sacrifice the interests of their voters to Big Money.

*  *  *

"If at times his [Andrew Jackson's] passionate devotion to this cause of the average citizen lent an amazing zeal to his thoughts, to his speech and to his actions, the people loved him for it the more. They realized the intensity of the attacks made by his enemies, by those who, thrust from power and position, pursued him with relentless hatred. The beneficiaries of the abuses to which he put an end pursued him with all the violence that political passions can generate. But the people of his day were not deceived. They loved him for the enemies he had made.


Backed not only by his party but by thousands who had belonged to other parties or belonged to no party at all, Andrew Jackson was compelled to fight every inch of the way for the ideals and the policies of the Democratic Republic which was his ideal.


An overwhelming proportion of the material power of the Nation was arrayed against him. The great media for the dissemination of information and the molding of public opinion fought him. Haughty and sterile intellectualism opposed him. Musty reaction disapproved him. Hollow and outworn traditionalism shook a trembling finger at him. It seemed sometimes that all were against him—all but the people of the United States.


Because history so often repeats itself, let me analyze further. Andrew Jackson stands out in the century and a half of our independent history not merely because he was two-fisted, not merely because he fought for the people's rights, but because, through his career, he did as much as any man in our history to increase, on the part of the voters, knowledge of public problems and an interest in their solution. Following the fundamentals of Jefferson, he adhered to the broad philosophy that decisions made by the average of the voters would be more greatly enduring for, and helpful to, the Nation than decisions made by small segments of the electorate representing small or special classes endowed with great advantages of social or economic power.


He, like Jefferson, faced with the grave difficulty of disseminating facts to the electorate, to the voters as a whole, was compelled to combat epithets, generalities, misrepresentation and the suppression of facts by the process of asking his supporters, and indeed all citizens, to constitute themselves informal committees for the purpose of obtaining the facts and of spreading them abroad among their friends, their associates and their fellow workers."


Franklin D. Roosevelt, Jackson Day Dinner Address, Washington, D.C.
January 8, 1936

As an aside, I find it telling that the current crop of Democratic Party plutocrats want nothing to do with the policies of Jackson or Roosevelt.

I think the reasons are obvious. I would like to think that they are merely mistaken.  But it is clear that they are serving the masters that they love the most.  As for the Republicans, they have long ago betrayed their roots and become the servants of Big Business, and seem to be beyond all hope of reform.


Cognitive Dissonance Sat, 08/05/2017 - 19:41 Permalink

Surprise!<Not>"There has been insufficient reform in the Banks.  Lending and basic banking would better function like a utility, with much more efficient and effective levels of risk management."Essentially there has been NO reform.

Paul Kersey Cognitive Dissonance Sat, 08/05/2017 - 20:03 Permalink

Former Goldman Sachs President Gary Cohn, one of the masterminds of the subprime mortgage crash, is Trump's chief financial adviser. The Goldmanite Steven Mnuchin, who, along with his former partner, George soros, swindled the U.S. taxpayers in the IndyMac scam, was installed by Trump to control the US Treasury.  Wilbur Ross, who spent 24 years at the helm of the House of Rothschild, is who Trump chose as Secretary of Commerce. In addition to those "goniffs", there are six other Goldmanites, including Trump's son in law, hiding in plain sight within the Trump Administration. Had the "Mooch" not been thrown under the bus, there would have been nine Goldmanites in all.

Trump has given free reign (rein) to the world's most powerful bankers, so that they can extract and and all the possible wealth from what's left of America's middle class. Trump must hope, that as a reward, they will forgive him his debt of hundreds of millions dollars he owes them. What could possibly go wrong with rabid foxes guarding the chicken coop?

There will be never be a "new" Glass-Steagall Act to get in the way of the "Vampire Squid" keeping America's servants indentured.

In reply to by Cognitive Dissonance

two hoots ZeroPoint Sun, 08/06/2017 - 13:00 Permalink

The Federal Reserve has our back, Wells Fargo cannot mess up again for (Yellen's mission statemen)t:   promote a safe, sound, competitive, and accessible banking system . ... provide oversight of the Reserve Banks.    Not sure how they missed WFs previous unsound manipulations?So there you have it, well paid (taxpayers interest the Fed uses on national debt) inspectors and monitors of the banking system hard at work, we are in good hands.Hmmmm?  Has the Federal Reserve ever uncovered a banking error/scam/those things they are fined for doing? 

In reply to by ZeroPoint

earleflorida HowdyDoody Sun, 08/06/2017 - 14:39 Permalink

indeed,... and as far as FDR goes--- his presidency was given over Hoover to serve his Wall Street and Industrialist buddies.Hoover was pigeionholed by the Rockefeller press as a heartless capitalist,... whereas at the tyme (long after Jackson the indusrialist monopolist had an 'iron grip' on the congress whom btw selected US Senators with states still not born into the union) it was Taft that fucked up the country for T.Roosevelt (having previously been given TRs endorsment not wanting a 3rd term), thus got us Wilson whom fulfilled Aldrich Plan that was waiting only for a signature by Taft Adm.[but he lost   '*'] and Wilson was to become heir pawn)--- WWI needed global financing and the Federal Reserve Banking system of 1913 was the trick.       Note: again a split [3] party vote in the Clinton, Perot, Bush Sr. in 1992 POTUS election.        [*],_1912 Now[?],... how could they have anticipated WWI?                  Wilson gets reelected on the promise to keep ussa out of WWI, and 90 days later renegs.J.P. Morgan, Dupont, Rockefeller [Ohio ?] etal. have loaned the British billions, [and] French to a lesser extent, and,.... wait for it, 'Tsarist Russia'!ya still following ???the plan is going as schedule and after Wilson's physical mental health and body were exhausted... it was the usual change of party-lines and we got Harding whom dies????, giving us Coolidge whom brought us into the 'Great Depression' (Coolidge hangs himself at his home in Northampton,Mass.... in his closet after retirerment) .and now were back to Hoover, who was moar a poor-man's president than painted by historians--- his downfall or loss to FDR was once again done by the Rockefelle's, whom wanted a Wall Street and well established family in NYC being his wife, a 3rd cousin (Elenor Roosevelt ) well connected family as was his to run the country as a fucking socialist (yet Fascism was a unknown word in american lexicon to the people) and it was he that brought about the USSA going into WWII.America would never had escaped the great depression (until it had run its course in 20Years) if we stayed out of WWII...---FDR had so many wealthy industrialist, Banking, Wall Street critters in his Adm. it looked like 'Basel Switzerland' doing business with Russia, Germany, England, France, Italy, Austria, Hungary, Poland,...--- you name it FDR's Adm. had their hands in all sides finances (Central and Allied Forces).But 4`Terms [16 yrs +/+ with no term limits whats`so ever as POTUS was now scary--- as leaks/documents/ FOIA came out decades later,... and poor farmer Harry S Truman has to pick up the pieces (mess) as FDR dies just 6 months after Truman becomes VP (that's another story )! 

In reply to by HowdyDoody

truthalwayswinsout Sat, 08/05/2017 - 19:39 Permalink

The safest bank is cash. One day you will wake up and find that all the banks are closed just like Cyprus. Of course, many of the elite will get the nod at least a week before so they can get their money out.

Silver Savior Son of Captain Nemo Sat, 08/05/2017 - 21:29 Permalink

I actually did not want to go to the fair at all but wanted to do something for my girl and her kids. I had sticker shock all day. Good thing I was not buying $10 aluminum bottles of beer. I just walked around all day thinking how screwed our country is. And watching people carrying around plastic crap that they probably had to spend a fortune to get was making me sick. I let them have their fun I was in a daze. Nothing is right anymore.

In reply to by Son of Captain Nemo

Son of Captain Nemo Silver Savior Sat, 08/05/2017 - 21:34 Permalink

Well S S

if you have a choice between paying off the poor "flunkies" running a carnival struggling to get by with a 20th Century technology show... I'd rather support there cause then the pieces of shit baseball card heroes living in a $10 million house who's owners tax the State and local government(s) till they bleed out the ass for a ballpark that the fans can't even afford season tickets to!!!

In reply to by Silver Savior

Rebelrebel7 (not verified) Sat, 08/05/2017 - 20:57 Permalink

Jacob Coxey had proposed something similar to FDR's Keynsian New Deal, but with money coined and regumated by congress, debt free!Had FDR not been such a two faced politician, and listened to Coxey's Army, we may have had a far more peaceful and prosperous America!  

Mr T Sat, 08/05/2017 - 21:04 Permalink

MOAR!WE MUST% HAVE MOAR!Easy there beast, it is the Will of the American People that you have unfettered access to every single penny of their worthless existence however we must pass these laws slowly and fetter their every endeavor so you might maybe be satiated Go Jymie DimonGo Dark Lord BlanksteinLoot Pillage for it is the Will of the American People just like TARP

Let it Go Sat, 08/05/2017 - 21:25 Permalink

Both Wall Street bankers and the government, including the Federal Reserve, hold great sway over the economy. This is true with bankers and central banks across the world. When forced to ask which is the worse of these two evils the answer is very troubling. Government wins hand down. We elect politicians to lead, protect and guide us, we do not elect or appoint bankers.Years ago President Eisenhower warned the American people about the Industrial Military complex, but nobody warned us an even more evil alliance that of the "Financial-Political Complex." The article below explores this beast and how it came to be.

Mr T Let it Go Sat, 08/05/2017 - 21:59 Permalink

Hello, you wrote or pasted thisBoth Wall Street bankers and the government, including the Federal Reserve, hold great sway over the economy. This is true with bankers and central banks across the worldExcuse me is this kindergarten? Is this how you communicate with your readersSee Spot run.See Jane chase spot!Spot is a happy dog!Bruce your slippin

In reply to by Let it Go

83_vf_1100_c Sat, 08/05/2017 - 23:20 Permalink

The "Great Reset". Banks blow up, another mortgage crisis, the student loans collapse, EBT fails, ensuing riots, a one time huge economapocalypse. It will likely be worldwide. Wash, rinse, repeat. I am certain the Roman Emporers thought they could debase the Denarius forever. Til they couldn't.  I'll get sick of rice and beans but probably make do.

JailBanksters Sun, 08/06/2017 - 00:52 Permalink

Again ? hardlyThe Business Model of the Banks is FraudBut if you were one of these Banks, you wouldn't need to keep 1 dollar in the Bank, because you canjust create as much capital as you need or just take your customers money.

Batman11 Sun, 08/06/2017 - 08:58 Permalink

Where can you see it? 1929 and 2008 stick out like sore thumbs when you look in the right place.You can even see the sharp rise in non-productive lending in the 1980s as the S&L crisis takes hold.  The BIS use a similar measure and pop up at the last minute to say its going to crash.If you look here you can see it developing and nip these things in the bud. 

Batman11 Batman11 Sun, 08/06/2017 - 09:02 Permalink

The UK goes neo-liberal and loses its mind: are missing that critical distinction between “productive” lending and “unproductive” lending when it comes to bank credit.Productive lending goes into business and industry; it generates the money to make the repayments and gives a good return in GDP.Unproductive lending goes into real estate and financial speculation; it doesn’t generate the money to make the repayments and gives a poor return in GDP. Everything goes haywire with Thatcher, unproductive lending into real estate and financial speculation takes off.  

In reply to by Batman11

MrBoompi Sun, 08/06/2017 - 09:58 Permalink

There are more assets to acquire, so if lending and foreclosing doesn't accomplish it fast enough, you can always create more money out of thin air and purchase them directly.