Friday, July 19, 2013

Time To Break Up the Banks

Way past time, of course.  The gigantic banks that have played such a major role in destroying our economy should have never been allowed to come into existence at all.  Here's part of an excellent column by Dean Baker on the subject:

"In the last few years, plans for breaking up the big banks have gained support from both ends of the political spectrum. Unfortunately, the more centrist figures in both political parties continually stand in the way. This is a clear case where the ability of banks to buy politicians is obstructing the will of the American people.

The basic point is straightforward. The large banks enjoy a massive taxpayer subsidy in the form of implicit insurance. Creditors believe that the government will bail them out if the banks get themselves in trouble, as was the case in the financial crisis. Because of this government guarantee, investors are willing to lend money to J.P. Morgan and Goldman Sachs at lower interest rates than they would demand from a smaller bank.

Bloomberg News estimated the size of this subsidy as $83 billion a year. To put this in perspective, the whole food stamp program costs $76 billion. That means taxpayers give more money to the big Wall Street banks each year than to the tens of millions of people getting food stamps."

And as Baker points out:

"The mega-banks that dominate finance are actually a relatively new creation. The merger wave of the last quarter century has resulted in banks that are more than five times as large relative to the size of the economy as the biggest banks were in the 1980s."

Let's see...25 years ago...that would be in the late eighties- right in the middle of the Reagan-Bush I presidencies.  And what happened then to set this disastrous change in motion?  That was the heyday of what I have repeatedly referred to as the greatest fraud ever perpetrated on the American public: deregulation.

Deregulation, one of the most sacred shibboleths of all Conservative/Republican dogma, in reality consisted in taking laws that protected the American people from the ravages of out of control capitalism, and doing away with them.  What did we get as a result?  We got two massive cycles of artificial boom and bust in real estate, a nearly disfunctional medical care system which replaced patient care with the goal of making a few hundred people as rich as possible, and a mini-depression, only moderated by a Democratic takeover of the government.

Now, protecting Wall Street speculators becomes more important than Social Security, Medical Care, even the basic needs for survival of the working poor.

I want to state the obvious:  The people who control our financial sector today are nothing but career criminals.  And like any other criminals, they are not going to stop until they are severely punished.  I believe that a first step would be to put about 20,000 of them in prison for long terms.  I am not kidding about this number.  Until these parasitic vampires are too afraid to drain the substance out of our economy, they are not going to stop.  And the price of their wealth will continue to be the impoverishment of all the rest of us.

6 comments:

joseph said...

Mr. Eagle,

The purpose of regulation is to protect citizens from exploitation. If the right wants to deregulate everything, I suggest we start with kidnapping for ransom. Nobody is going to kidnap me, I haven't the money to make it worthwhile. The Kochs, on the other hand, make perfect targets. What they want are laws that protect them from me, but not laws that protect me from them.

joseph said...

Mr. Eagle,

Another thing about regulation, it seems that while the goal of regulation should be to protect the public, too ofter the goal is to protect entrenched interests. For example, while one can argue for or against casinos, if they are to be allowed, why restrict craps tables to friends of the rich and powerful. As long as the game is honest and taxes are paid, why can't Joe the Barber have a game in his back room? Over and over we see government using licensing to restrict competition. It seems everybody favors competition, except as to their particular trade or occupation.

Magpie said...

Just to offer an answer your question, joseph...

I don’t gamble, personally, but my understanding is that a legal casino cannot ‘lend’ the money for bets that they know the gambler cannot cover, and they cannot send ungentle men around to encourage settlement with broken limbs.
Joe the Barber/Concreter could do those things from the back of a shop.

I know the difference between a poker game with friends and a game with friends-you-just-met-30-seconds-ago is problematic... but running a gambling 'operation' for perfect strangers without legal oversight is a recipe for terminal unhappiness.

joseph said...

Magpie,

I agree that regulation that protects citizens is good, but I believe that regulation or licensing that simply protects entrenched interests is bad. Have all the rules you want for casinos, but allow anybody to run one. The same thing for taxicabs. We shouldn't limit access so that large companies can take advantage of the drivers.

Green Eagle said...

Joseph:

I agree in general with what you said, but let me point out that the regulation of casinos and taxicabs takes place on a State (casinos) and local (taxicabs) level, and at least in the case of taxicabs mainly affects small businesses, which in reality the Republicans couldn't care less about.

I am talking of Federal regulation of very large businesses- megabanks, oil companies, pharmaceutical manufacurers and others. These are the people who are destroying our country, not a rogue taxi driver or a guy who runs a poker game out of the back of his bar.

Magpie said...

I agree with both of you, but I'm just saying "back room" implies a lack of regulation that none of us, I think, would be comfortable with.