Published 2012.01.30 in CommPRO.biz

Too Big To Loan?

Earlier this month (2013.01.16) the president of the Dallas Federal Reserve Bank, Richard Fisher, delivered a speech worthy of a Texas straight shooter. It was followed up the next day by a 30+ page report supporting the need to deal with the danger a handful –about a dozen- Too Big To Fail (TBTF) banks present to our economy.

These are the same financial monsters whose reckless actions pulled the rug out from under the world economy and brought about the 2008 crash. The folks who put millions of people out of their homes, crippled small businesses and drove the unemployment numbers in America sky high. The same handful of reckless banksters, who rolled the dice, lost and left the rest of us with no alternative but to bail them out.

In an effort to avoid a repeat of this disaster the Congress passed the Dodd-Frank Act. In the end the TBTF banks’ lobbying efforts allowed them to stay focused on risky speculative (AKA gambling) deals, knowing full well that contrary to its intent, Dodd-Frank does nothing to protect against another taxpayer bailout. Mr. Fisher concedes there’s little chance that we can rein-in their reckless behavior in the short term. He does, however, offer an escape hatch to take the taxpayers off the hook to some degree.

If he had his druthers, Mr. Fisher would slice the monster banks into separate entities, none large enough to destabilize our economy. He would peel away all of their financial activities that fall outside the banks’ traditional role. While that remains the long-range goal laid out in the Dallas Fed’s report, their short-term goal seems to correct much of the problem.

Mr. Fisher points out that the insurance protection created in 1933 –The Federal Deposit Insurance Corporation (FDIC)– was intended to cover our hometown and regional banks. The 98.8% we ordinary folk are used to dealing with, not the 12 monster banks, the 0.2% who hog nearly 70% of all banking assets. Assets we furnish them with to make small business loans and create jobs. But that’s not what the use it for. Instead they use the free money we furnish to make wild bets, secure in the knowledge that if they lose, we pay.

Restricting FDIC protection to its intended role would roadblock moves like the one Bank of America made the first of this month (January 2013). They moved derivative contracts worth $15 trillion from their broker-dealer division to their insured depository institution. Guess who’s on the hook if those puppies go bad?

It’s past time that the low interest cash we provide the banks goes to the 98.8%, the regional and Community Banks who will provide small business loans. If the monster banks -the 0.2%- want to gamble, let them do it with their investors’ cash. And make sure those investors know that their funds will not insured by America’s taxpayers.

CEO Meltdown

What is it with these people? The banking class seems to forget how we got into this mess and who is primarily responsible. Wholesale stripping away of the rules of the road –read banking regulations–over the last few decades opened the doors to unbelievable levels of greed.

Now that the rather mild (after the lobbyists beat it down) Dodd-Frank Act is in place, they are whining about too much regulation. In truth that unregulated playground where greed-monger bankers frolicked, it’s still open. They are playing the same game with reckless abandon. While the law says we won’t bail them out again, they know we can not allow “too-big-to-fail” banks to fail.

The mere mention of restraint triggers an explosive response. Take the reports leaked from a meeting of the Financial Stability Forum in Washington. Mark Carney, Governor of the Bank of Canada, endured a hissy fit from JP Morgan Chase Honcho, Jamie Dimon. Dimon found suggested changes to the Basel III banking standards, “anti-American.”  

When banks like Chase were fighting for their lives and begging our taxpayers to bail them out, Canada’s banks were fine. Carney’s response to Dimon’s attack was measured: "If some institutions feel pressure today, it is because they have done too little for too long, rather than because they are being asked to do too much, too soon." Based on sixteen attributes worldwide, 42,000+ respondents to The Reputation Institute's 2011 annual study ranked Canada #1. Is it any wonder the US came in 23^rd – behind even Greece?

It’s not as though JP Morgan Chase is a “Poster Child.” They are mired in a smarmy Jefferson County, Alabama bribery mess where political types have been convicted of pocketing $8 million. Birmingham’s mayor went down for taking $235,000. As part of the settlement, Chase eats $647 million in fees, pays Jefferson County $50 million, plus a $25 million SEC penalty. This does the county little good; it is still drowning in over $3 billion in derivative based financial instruments.

The ethical no-man’s-land JP Morgan Chase seems to inhabit extends to our fighting men and women as well. The law is crystal clear when it comes to mortgage holders and the military. But, Chase may have missed that memo. In just one case, a Marine captain flying F-18 missions overseas suffered an ongoing nightmare. He and his wife did everything right. To their surprise Chase ignored their on-time mortgage payments, began foreclosure proceedings, and set collection agency dogs on them. The captain’s wife was raising their small children on her own, one with health issues, all the while the Chase collection goons are ringing her telephone around the clock.

When Chase finally recognized the string of goof-ups on the military that included the Marine Captain, a mid-level banker apologized. That – is – pathetic! JP Morgan Chase and its spoiled brat CEO, Jamie Dimon, that’s who is “anti-American” in this sad tale.