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Author Topic: 'Big Banks Are Worse Than You Think'  (Read 1319 times)
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WhiskeyGirl
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« on: December 08, 2010, 06:38:33 PM »

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In his recent op-ed in The Times, Thomas Hoenig warned that we must end the concept “too big to fail” if we wish to save our economy and democracy. I agree with Mr. Hoenig about the many dangers posed by the largest banks, which I call "systemically dangerous institutions," and here's why:

    Iceland and Ireland demonstrate that these bank executives have such absolute power that they can dictate national policies and turn regulators into cheerleaders.

• The Obama administration claims that any failure of these largest banks will lead to a global crisis.
• These banks drove the deregulation and desupervision that started the financial crisis and led to taxpayer bailouts (primarily through the Fed, not TARP).
• These institutions, which have grown since the crisis, used their political power to block the legislative reforms essential to prevent our recurrent, intensifying crises.
• They continue to cripple effective regulation and supervision.
• They distort the economy, making it inefficient and more prone to crisis.
• They pose a fatal risk to our democracy. The Citizens United decision protecting corporate political contributions has increased their political power.
• Shrinking these large banks would substantially increase their efficiency.
• The discredited rationale for these large banks is the international “competition in regulatory laxity” -- if Germany allows its “universal” banks to be self-destructive, we should do the same.

Is the Federal Reserve the biggest bank on the block?  How much money have they printed this past year?  Past 20 years?  40?

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I recently returned from visiting Iceland and Ireland at the request of economists in those nations who wished to discuss the national banking crises. Their situations show what happens when large banks are “control frauds” that become so big relative to their economies that they pose an existential threat to the nation.

How big should the Fed or any bank become?  Why does it always seem US taxpayers get stuck with the bill for bailing them out?  Nothing for Main Str. but big debt and high interest rates?

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Iceland’s banks were growing at an annual rate of 50 percent and had liabilities 10 times larger than gross domestic product. Ireland’s worst banks grew at 35 percent...

How much are big mega global banks in the US growing each year?

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Our largest banks in the U.S. can have trillions of dollars in liabilities. A single fraudulent bank would be large enough to hyper-inflate a bubble, cause “echo” epidemics of control fraud (e.g., appraisal fraud), lead to hundreds of billions of dollars in losses and result in a cascade of failures among other financial firms. It is inevitable that one of these banks would use its political power to fend off closure, so its collapse would also produce political scandals.

How many may have collapsed but used political power to hide their failure?

How big is too big?

read more here - http://www.nytimes.com/roomfordebate/2010/12/07/should-megabanks-be-broken-apart/big-banks-are-worse-than-you-think
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #1 on: December 08, 2010, 06:44:54 PM »

The original article is here - http://www.nytimes.com/2010/12/02/opinion/02hoenig.html?_r=1

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In spite of the public assistance required to sustain the industry, little has changed on Wall Street. Two years later, the largest firms are again operating with bonus and compensation schemes that reflect success, not the reality of recent failures. Contrast this with the hundreds of smaller banks and businesses that failed and the millions of people who lost their jobs during the Wall Street-fueled recession.

There is an old saying: lend a business $1,000 and you own it; lend it $1 million and it owns you. This latest crisis confirms that the economic influence of the largest financial institutions is so great that their chief executives cannot manage them, nor can their regulators provide adequate oversight.

Last summer, Congress passed a law to reform our financial system. It offers the promise that in the future there will be no taxpayer-financed bailouts of investors or creditors. However, after this round of bailouts, the five largest financial institutions are 20 percent larger than they were before the crisis. They control $8.6 trillion in financial assets — the equivalent of nearly 60 percent of gross domestic product. Like it or not, these firms remain too big to fail.

How is it possible that post-crisis legislation leaves large financial institutions still in control of our country’s economic destiny? One answer is that they have even greater political influence than they had before the crisis. During the past decade, the four largest financial firms spent tens of millions of dollars on lobbying. A member of Congress from the Midwest reluctantly confirmed for me that any candidate who runs for national office must go to New York City, home of the big banks, to raise money.

What does Main Street get?

Obamacare $$$ tax increase
Copenhagen $$$ tax increase
TARP, Stimulus 1, 2, 3... $$$ tax increase
EPA $$$ tax increase
Copenhagen/Obama $$$ tax increase (loss of GDP to UN for Climate Fraud)
Bush era tax cut expiry - $$$ tax increase
MO Nutrition $$$ tax increase
Dream Act $$$ tax increase
XYZ...never ending $$$ tax increases
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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