Thursday, April 29, 2010

Bank On It!

I have a question.
If banks make money by loaning money why wouldn't they do so?

Doesn't it seem counter-intuitive that this group of 'smarter than the average bear' (or bull if you like) CEOs and their board members are afraid to turn on that engine of growth?

But the fact that they are not lending to small businesses should send a signal that our basic concept of how banks work in a post recession economy is all wrong.


When the economy visited the abyss a year and a half ago most of us were hurt.  We were hurt in the pocket and the future pocket known as our retirement funds. Many looked into the vault for their 'Roth' and instead found a moth.

Even the millionaires and billionaires were hurt although once you have more money than the proverbial Gods the hurt you feel is more like a paper cut.

But no matter where your financial starting point when the slide started you slipped along with everyone else.

In order to get back the money the banks or more importantly the bankers lost they could have loaned out more cash. They would then reap the benefit of the 'vig' or difference between what they hand out in interest to depositors and receive in payment from outstanding loans. Interest rates these days are noted in tenths while loans are still in the 3% to 5% neighborhood.

Bank charges for delinquencies and various credit card fees are still in the usury area.  In fact some of those rates are so high you feel you should get dinner and a movie beforehand.

So why are the big wheels not turning?

Why do the banks refuse to give out so they may pull in?


It could be they wish to have their spreadsheets look stronger.  A strong spreadsheet makes the bank look great.  Investors like strong companies.  Bank stocks were quite depressed, in fact Shitty, I'm sorry, Citibank was actually under $1 per share for a day or so.
So who cares if the stock prices go up?
The heads of the five families, that's who! (Don Bank of America - Don JP Morgan - Don 'Walk-over-you' - Don Wells Fargo - Don CITIBANK.  And we must throw in the Godfather himself - Don Goldman Sucks!)


The CEOs and board members of banks are always the largest shareholders.  When the stock price doubles or triples or more, as in the case of Citi they stand to make back all if not more than they lost in the first place!  And the fact that they are using tax payer bailout money to do so, for lack of a better term, SUCKS.

But the best part is after cleaning up the spreadsheets and keeping all the money we gave them, the banks not only didn't not loan anything out but took the line's share as bonuses for a job well done!


Our nation relies on the banking system to keep the economy going so we cannot just throw these hypocritical thieves into jail. But we cannot allow them to continue the practices that caused the meltdown in the first place.  At least not without imparting upon them the fear of personal loss.

The 'heads they win - Tails we lose' scenario must end.

Congress must close the door to the banking industry lobbyists and do the right thing - NOW!
If we cannot even learn from nearby history then we are surely doomed to repeat it forever.


Bank on it!

1 comment:

Cousin Bruce said...

Some shy readers e-mail their opinions to me rather than posting them as comments. One such sent the following relevant message:
America's four largest banks - Citibank, Bank of America, JPMorgan Chase, and WellsFargo - have assets of $7.4 trillion, equal to 52% of our entire GDP.

The collapse of any one would endanger the American economy, even the world economy. They are truly "too big to fail." They also have too much economic and political power because of their enormous size.

Senators Sherrod Brown (D-OH) and Ted Kaufman (D-DE) introduced a bold bill - the SAFE Banking Act (S. 3241) - to break up the big Wall Street banks. This may be the biggest reform of Wall Street and corporate power in 80 years.

According to the New York Times, "The [SAFE Banking Act] would reinforce a 1994 law that bars any single bank from holding more than 10% of the nation’s total deposits, or about $750 billion. In the years since then, large firms have obtained waivers or used loopholes in the law to exceed that ceiling." It would also limit total bank borrowing to 2% of GDP.

The bill has broad progressive support, including Dean Baker of the Center for Economic and Policy Research, Chris Hayes of The Nation, Prof. Lawrence Lessig, Heather Booth of Americans for Financial Reform, Adam Quinn of Credo, David Arkush of Public Citizen, and Jan Frel of Alternet.

In addition, three Federal Reserve bank presidents – James Bullard, president and chief executive of the Federal Reserve Bank of St. Louis’ Kansas City Fed President Thomas M. Hoenig, and Dallas Fed President Richard W. Fisher – all support breaking up too-big-to-fail banks.

Tell Congress: Break Up the Big Banks Now
http://www.democrats.com/break-up-the-banks-now


Thanks to Dan of East Meadow for that.