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The phrase "too big to fail" has now become part of the political lingo. It originated when the largest banks and insurance companies in the country brought us to the brink of financial ruin.....and then were bailed out by government with huge loans of tax payer dollars. The talking point, or alleged consensus, was that if these irresponsible money shufflers were made to go through the same bankruptcy and dismantlement process as all other, you know, smaller banks,...the result would be a financial catastrophe, both nationally and internationally.
The consensus might well have been right....and, after all, who, really, wants to be known for not doing anything to prevent America's greatest Depression, right?
But none of that excuses the once-bitten, twice-stupid, that's now apparent in the Democrats' plan to "reign in the big banks"......
The House bill does limit leverage and impose some greater costs on bigger banks, but it has no mechanism to require the biggest banks to downsize. The Dodd bill includes a version of the so-called Volcker rule, which would cap bank size, but it requires a six-month study before implementation, allowing the banks an opportunity to subvert the new regulations. So as things stand now, neither bill is likely to downsize the largest banks significantly. But Senator Sherrod Brown is planning an amendment that would cap banks' total outstanding nondeposit liabilities at 3 percent of GDP, or, in current terms, about $426 billion. Consider that Bank of America's outstanding nondeposit liabilities are currently $1 trillion, and you get a sense of just how much this would alter the landscape--and how much the banks will fight it.
By the way...good on Senator Sherrod Brown.
So, the "too big to fail" banks are still going to be "too big", which, excuse the hell out of me, I thought was the original source of the problem.
Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, State Street and the Bank of New York Mellon. As of June 2008, these nine banks accounted for around 75 percent of all assets held by U.S. banks.
I know I'm dense on occasion, however, isn't it a fact that these 9 banks couldn't be allowed to fail, even though they did, because the entire nation would fail as a result? Isn't that about it? It was a matter of economic national security.
Why, then, would Democrats want to keep this small group of Really Big Banks..... Really Big, setting the stage for yet another national economic security event in the future?
If being Really Big in the first place threatened economic security nationally, how is staying Really Big after new regulatory reform is finished supposed to prevent a similar future disaster?
Yes, the Dodd bill gives the feds the power to seize and dismantle banks and clean out investors, even of Really Big Banks, but what if all those same Big Banks keep on doing what they've been doing and Voila!....the same stuff happens again.....won't the seizure, dismantlement and cleaning out of investors still cause a severe national economic security catastrophe.....because of how Really Big these banks still are?
That brings me to what I heard Ron Paul (R-TX), say recently. When asked if Obama was a socialist, the Doc responded, "I think he's a corporatist." I think the Doc is on to something. It's not that Obama loves what corporations do to the population and our way of life, he is not blind to their negative impact....he simply accepts the basic status quo: Big Powerful Corporations are in control. Nothing big or good for the people can be accomplished unless and until Big Corporations dictate the terms first.
Contrary to the foolish notion that the health care reform that just passed was, somehow, a liberal government takeover....Obama and his corporate Democrats purposely kept the bill market-based, profit-based. The Democrats kept a progressive public option out of the final product. A public option is progressive. Single payer is liberal. American liberals and progressives got neither. But Big Corporations were handed 30 million new customers.
And so it is with the Obama and Corporate Democrats plan to regulate the banksters.....banksters whose banks were..."too big to fail" in October 2008.....because if they failed, we all failed....are still going to be Really Big Banks whose collective future economic failure will still be each and every citizen's economic failure.
So everything is cool.