Too Big To Fail = Too Big To Jail

Our United States Attorney General, Eric Holder, the chief lawyer of the U.S. government  finally said it – some banks are too big to criminally prosecute. Kinda scary, actually really scary, truth be told. Our U.S. Attorney General, is too scared to prosecute criminals of the financial cartel, a financial coup d’ e’tat 30 years in the making. Finally, Eric Holder explains why no trials or prosecutions for financial crimes like HBSC money laundering for drug cartels, fraudulent mortgage practices by banks,  false ratings for mortgage-backed securities, that have taken place in the United States in the last 8 years.   The financial services industry is above the law. Actually they write laws.

Eric Holder’s confession ” I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”   His comment is complicit and explains the complacency of our government, just like Hank Paulson’s mantra in September 2008,  if we don’t bail out the banks the world economy is going to collapse. Why bother to have the illusion of laws governing financial markets, a U.S. Attorney General, a Justice Department or SEC?

Bloomberg News asks a very good question “Why Should Taxpayers Give Big Banks $83 Billion A year?”, after reviewing the comprehensive analysis two researchers from the International Monetary Fund (IMF) wrote in May, 2012.

Bloomberg News  reviewed the report of taxpayer-subsidies to the Wall Street Too Big To Fail,  Too Big To Jail Banks.  According to their analysis, the gift comes from subsidizing lower borrowing costs, about an 0.08 percentage point. The discount applies to ALL their liabilities, including bonds and customer deposits.  The banks that are the most dangerous can borrow at lower rates because creditors, Eric Holder and our Administration, perceive them as too big to fail. Investors are comforted knowing they will be bailed out by the American taxpayers again.

The subsidy amounts to giving big banks 3 cents of every tax dollar collected.  All the more alarming and shocking when Ben Bernanke announced yesterday  banks passed the contrived stress test. The Fed has been “very aggressive” in its efforts to revive the financial system and economy, Mr. Bernanke said. The Fed continues the dismantling of our regulations. Keep in mind what led to the Financial collapse in 2008: Glass Stegall repealed in 1999,  the Federal Reserve, under Alan Greenspan approved  a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent). This  was done without congressional or presidential input.  In 2004 Hank Paulson led the charge to change the net deposit rule for debt to equity ratios from 12 to 1, to 33 to 1.  Meaning for every dollar on deposit, banks can borrow 33.  The rule also allows them to value their securities at market prices and to apply to those values at a haircut (i.e., a discount) based on each security’s risk characteristics.  Allowing them to value their securities is another part of the problem. The financialization of the American economy  has allowed banks to become bigger, more complex, and seriously leveraged.  All of these pieces added fuel and gasoline to the crisis. The combination guaranteed disaster, deeper and more dangerous than it would have been otherwise. Glass Steagall’s repeal, after 25 years and $300 million worth of lobbying efforts, culminated decades of radical deregulation.

Back to the present….

Yesterday, Citigroup, so excited to learn they passed the “Stress Test”,  immediately asked for approval to buy back $1.2 Billion in stock. JP Morgan Chase is also expected to submit a $6 billion plan that includes dividend disbursement and share repurchases. Goldman Sachs is also planning a stock repurchase.  “Bank Payouts Expected” –  published  in January 5, 2013, clearly lays out the plan the banks wanted. The Fed gave the banks  what they wanted –  the ability to take, not make, more money and give it to CEO’s, upper management and shareholders.

The top five banks – JP Morgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – receive $64 billion of the $83 Billion total subsidy. This amount just so happens (!) to  roughly equal to their typical annual profits. JP Morgan Chase & Co. CEO Jamie Dimon “made the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance”.

Jamie Dimon’s comment that being bigger makes them more efficient with lower costs translates into we need government subsidies.  Talk about deadbeats, and wealth- fare  and entitlements. A  fail safe business plan to make sure they will never have to be responsible for their losses.

When profits are privatized and losses socialized, we have a  financial industry that is a result of corrupted influence by crony capitalism and radical deregulation by elected officials paid to vote for laws that benefit the people and businesses who have millions and billions to spend for legislation to benefit them. This is not Capitalism or free markets.

Is the United States an Oligarchy, Plutocracy, Greed-ocracy or Corporatocracy? “Gosh”, to quote my friend Mitt Romney, they all seem to fit.

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2 Responses to Too Big To Fail = Too Big To Jail

  1. torreybyles says:

    Hi Karla,
    Did you see David Stockman on Q&A yesterday? He was former director of budget for Reagan. He has a new book, The Great Deformation. It chronicles the rise of neo-liberalism and “supply side” economics. Really penetrating analysis and barbs e.g. “Bernanke is a serial bubble creator.”

  2. Larry Fritzlan says:


    Larry Fritzlan

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