What’s behind yesterday’s $30 billion private bailout, and the Swiss bailout of Credit Suisse?
The banking business reminds me of a "business" I'm more familiar with - Medicine. Banking fulfilled an important need, the provision of relatively small amounts of money to local homeowners and businesses. In aggregate, there was a very large amount of money in the system because there were so many businesses. This money, in turn, attracted predators who took over the banks and turned them into casinos. The result is chaos.
The same predators sensed money in Medicine and entered my business at about the same time, 40 years ago. The result is the same - chaos.
The solution is Glass-Steagall and Medicare for All who want it. Bring it, Bernie.
To me, the root cause of inflation is simple price gouging because the major players in monopoly capitalism hold all the trump cards. It’s a win-win; making absurd and unreasonable profits that automatically put huge pressure on Democrats in control of our government function.
Not only that, but inflation that is not tethered to the usual market forces provides a way to put Democrats on their back foot, despite all their successes in the first half of the Biden administration.
Greed is weaponized to further the GOP’s #RepubloFascist agenda. And if a few hundred banks have to pay the ultimate price, their donor’s money monopoly just gets stronger.
The only reason governments rely on interest rate changes to control inflation is that they don't want to use tax rate changes instead. They ignore that tax rate changes would be more effective and equitable, and would pay down government debt. They do this because tax rates have been so weaponised that it near impossible to change them. And interest rate rises distress leveraged assett holders, creating attractive buying opportunities for wealthy donors. They are a way to rob the poor.
Raising interest rates to quell inflation is crazy. It only makes things worse for everyone. Historically, presidents could put "social" pressure on corporations to lower prices (and astronomical profits) via the use of SHAME. This technique must be revived.
The 1929 Crash Mr. Reich mentioned, aka Black Tuesday, was a major American stock market crash that occurred in the autumn of 1929.
The "Roaring Twenties", the decade following World War I that led to the crash, was a time of WEALTH AND EXCESS!!
By now it should be obvious for all that stricter regulations, though important, won't solve anything. For decades they have tryied to put the monster in a cage, to put chains around it, to create fences upon fences. All in vain. It always manages to slip under the table and intensify the continuous assault on our livings. There's one only way, I think. Put the banking system, all of it, under public control, rendering it a public service like medicine or education in most civilized countries. Why should banksters and wild speculators be allowed to assault our pockets?
The roots of this are in the greed of the banks, which have resented being regulated ever since the Glass-Steagall Act of 1933. They managed to get the Gramm-Leach-Bliley Act of 1999 passed, with the enthusiastic support of Alan Greenspan, Larry Summers, Robert Rubin, and Bill Clinton, who said "The banks don't need to be regulated, they can regulate themselves!" - Makes me wonder how much they all got paid, one way and another, for taking the leash off of the banks that prevented them from combining commercial and investment banking., which is what Glass-Steagal specifically prevented since it was part of the Crash of 1929, Black Friday.
This loosening of the regulation led to the 2008 financial meltdown that greeted Obama when he took office. Bottom lines, the banks don't care what happens to anyone who puts their trust in them, because they hold all the cards and even after the 2008 disaster, not one single banker went to jail. Not one. Not one bank was taken over by the U.S. government in spite of the very good example in Sweden in similar circumstances. I saw one brief report that Obama had early on directed Timothy Geithner, his Treasury Secretary (who had previously been head of the New York Federal Reserve) to investigate CitiGroup, but that Geithner had ignored his directive. I never saw any confirmation of it, but then again, not one banker went to jail, and no banks got taken over, either.
This is what happens when the levers of power are given freely to the uber-wealthy .01% and there are no legal remedies readily available, while Citizens United has made the money buying political influence untouchable. To be clear, this is not just the Republicans whose only interest is in tax breaks to feed the fantasy that 'trickle-down economics' actually works for anyone but the very wealthy and corporations, no matter what diversions they use to distract the masses. The Democrats also surreptitiously are bought and paid for by the same big money donors, and have protection of their money sources as a first priority. Both parties lie about their full agendas, and the corridors of power are set in stone in the Capital Building.
The worst part of this whole mess is that so many ordinary citizens believe in the lies and half-truths told by politicians in both parties, including Trump but not limited to him. It is all a distraction from the truths of who's behind the curtain. It ain't the Wizard of Oz.
Regulation has become a dirty word for the greedy. When it comes to safe guarding customer's money, health, property, our country has slowly stripped away the protections needed for the last 40 years. The average American working hard to save for retirement are at the mercy of unscrupulous CEOs, boards, that are making money off of their losses. This crap has to stop NOW.
Looks like a con game to me, where guardrails have been removed and quick fixes applied like band aids, while criminal activity continues, and regulations are avoided.
Bankers seek to make 'bank' no matter the circumstance, no matter the ethic, no matter the morals, Bankers make 'bank.' I remember when 'derivative' instruments started showing up in mainstream retirement funds. I had a financial advisor, she was very young in comparison to other advisors in banks, informed me that derivatives are basically placing a bet on the future asset, I would actually not hold anything, not like owning a few shares of mutual fund. This seemed to me like the stock market wed the casino, and I know the 'bank' wins. 2008 proved to America that their homes were tokens in the game, it did not matter if you lost your home, some financial phenom would make out buying your home together with others in a package, flipping them to the rental market and jacking up rents in the area. Money makers do what money makers do. Regulation is just a game of whack a mole, and regulators are behind.
Let them fail, enough with the bailouts for the rich. I have my own personal bank failure monthly, about the third week after my social security check comes. Do I get a bailout, no. The wealth class has taken complete control of our economy and have driven it over a cliff. I know a couple of fat rich bankers I will be having for lunch if this continues, not as a guest mind you.
Quite right. Banking is a confidence trick. Deregulation has surely been a disaster, the thin end if the wedge, the start of the slippery slope to global financial meltdown. In the UK, the idiotic Truss budget showed how weak the pension funds were, depending on gilts for survival.
What is clearly known and understood about the unfolding crisis: NOTHING.
Part of today's problem is that Central Banks left interest rates too low for a longer time than was necessary. The crisis of 2008 os now 15 years old; there were many bailouts. There was no need to leave interest rates well lower than equilibrium rates for so long. It was the most foolish decision. It led to "search for yields" and bad investments, which suffer as interest rates rise. The dramatic rise of interest rates compares to 1980-81 [Volcker]; the rapidity of movement in the rates did not allow for investors to balance their portfolio quick enough. So, I would blame a lot the Central Bank for creating this mess. One does not need to be a go-go bank, with sub-prime mortgages to be hurt. A bank with simple bank deposits invested in Longer term government bonds with little credit risk is still vulnerable when rates move up rapidly --as the Govt Bonds lose market value and if liquidated will lead to loss. So, this is not a result of Glass Steagall etc discussed the last few days in these columns -- today's crisis was home made by Central Bankers who have not understood the markets or the balance sheet of the small regional banks -- it is the latter who suffer, not the big banks (unless confidence is eroded in the Banking System)
You are wrong.
GS does not stop banks from keeping their excess deposits in US Treasury -- in fact, that is how reserves are meant to be kept in boring banking. US Treasury is the IOU of the US Government.
Investment Banking is managing the Buy Side of Corporate issues, like helping a General Motors to issue a Bond or Equity and the Sell Side of Corporate issues, ie placing such Bond/equity of corporates for a Fee. Many Investment Banks make a "market" on these Bonds and Equity -- and these trading activities and the issuance under their own name the securitisation of Corporate Bonds -- is what has made Investment Banking risky.
Boring commercial bakers -- when they have excess deposits compared to loans like mortgages -- keep their deposits invested in the safest IOU or loan they can get -- the IOU of the US Government. That is not Investment Banking! You can open an account with the Fed NY and yourself buy primary issues of the US Government Bonds -- as many do. They send you regular quarterly statements. You are not becoming an Investment Banker by doing this.
Inflation vs Havoc? Is that our only choice? Tampering down our own need to greedily hoard permeates our culture. More more more. How can we reset to want less? Can we stop glorifying the billionaires of the world? The world of advertising has done so much damage, selling the concept of acquiring material goods the ideal, not the problem it actually is. Greed is the most prevalent sin in our culture. How do we change that? I so appreciate the education RR provides and the intelligent comments his articles spark. The subject of how can America reset it's greedy "the business of America is business" philosophy is one I am most interested in.