If you want to be pissed at the big banks do it for this reason

Because having politicians making rules that pay off their favorite big banks in return for the big money and power they then help the politician get is the real reason to be pissed at these big banks that are in bed with the politicians.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Government likes them big and dependent, because that’s how you get your tit-for-tat going. I remember how we got told by the nanny staters back in the 80s that if they didn’t bail out the S&L banks that where going to go belly up we would get hammered and our economy would never recover. Reagan told them to go pound sand and let the banks that had done the stupid stuff which landed them in the trouble they were in go dead. A year later the economy was flying again, and the banks that had not engaged in the risky and stupid behavior took up the slack and earned the rewards for having done the right thing.

But not everyone took that lesson to heart. Less than a decade later we had government literally change the rules to make it a given that we would end up with these super banks that would then be too big to fail. Most of the impetus behind that was the whole home ownership lending industry, which necessitated an inordinate level of meddling by government in the whole market to force the economically disastrous socio-engineering steps government wanted all lenders to bow down to. Before you start arguing with me that the problem isn’t the incestuous relationship that allows politicians to reap huge benefits from tax payer subsidized big banks, check this section from this article out:

Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy. The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.

Note that the focus is on how the financial industry spends all that money lobbying for the tax payer subsidy, implying that the problem is the financial industry and lobbying. But the issue isn’t that they are doing this lobbying. It’s that our politicians have create a system that benefits them immensely because it all but necessitates these unviable entities buying favors from them.

I am now convinced TARP was a bad idea, even when it was half of what Pelosi and her clique eventually jacked it up to. We should have let these behemoths implode and the institutions that had not participated with government in the myriad of ludicrous socio-engineering schemes pick their carcasses clean. Of course, if the nanny state hyenas in government had allowed this to happen, they could kiss any and all attempts at coercing banks to go along with any existing and future socio-engineering schemes goodbye, and the socio-engineering politicians would rather throw away trillions of tax payer dollars and destroy the country than lose their power, influence, and money making schemes and scams.

Me, I say cut these big banks off. Let them die. And let the f-ing politicians that support them, in either party, die with them. No freebees from tax payers to line politician’s pockets.

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  1. Seattle Outcast

    These financial institution all operate due to various government charters; they need to be broken up under anti-trust regulations, and while they can fight it in the courts for years, eventually they will lose and get busted up.

    You need to ask yourself when the last time one of these behemoth institutions actually tried to compete for your business in a meaningfull way – having account with one is pretty much exactly the same as having an account with any of them. Same rates, same fees, same shitty customer service. Gutting them like Ma Bell was gutted will at least provide a couple decades of real competition and promote innovation.