Deja Vu And Topsy-Turvy
John Atwood
April 02, 2010
Keeping up with some of the financial and environmental issues of the day makes me feel like Rip Van Winkle sometimes. I wake up and hear the same old concerns with a new spin on them. All the rage today is the size of our banks. The big ones are the concern. They are only a concern because some in government decided they were too big to fail. That was a governmental decision, not an economic or financial decision that was made by the market place yet the market place (Wall Street) garners all the blame for the problems of today. If those smart gurus in Washington had taken a poll of the so-called Fat Cats on Wall Street they might have found that a majority of them would have felt just like Main Street and that if those banks made bad decisions they should be allowed to fail and go into receivership and their assets sold off to cover their debts as far as they could. The shareholders and big wigs with those banks would have been left with nothing which is the way the market is supposed to work. It rewards success and risk taking and punishes dumb moves and rashness. It also has always provided for those committing crimes to be convicted of same. That is nothing new. Those who commit a fraud have been sent to jail for a couple of centuries now without any help from the SEC or the Treasury.
It is hard to fathom that after eighteen plus months we are still having to discuss the too big to fail problem. If there is new financial regulation on the horizon it should clearly state that banks that become insolvent in either the equitable sense or the balance sheet sense will be liquidated, period. All the depositors in those banks will have their FDIC protection like they did throughout this financial crisis and the risk taking operations will be punished along with those who gambled with them including their executives and shareholders. If those 5 or 6 large banks had been allowed to go under we would already be past that problem and on a better road of recovery. Government, Inc. bailed them out and then raises hell about doing it and wants to punish everyone associated with the bailout. Geithner, Bernanke, and Paulson and those in Congress like to be perceived as the heros coming to the rescue of all of us, but they weren't heroes they were the villains in this play. The banks were just stupid and maybe even greedy but they would have gotten their comeuppance if left to swing from the gibbet alone.
It is hard to believe but only about 30 years ago the alleged problem was that the US banking system did not have enough big banks. Don't take my word for it go back and read some of the financial reporting of the late '70's and early '80's. All the big banks then were in Japan and Europe. Our larger banks were making loans to foreign countries as fast as they could because it was considered such a safe loan with a good return and required my less staff to process the loans. They could make one big loan rather than thousands of smaller loans with a much bigger employee base. The concern was that the big Japanese and European banks were coming to dominant the American market and the global market because they were the only ones able to finance the big deals occurring around the world. We were losing market share and influence because we didn't have enough big banks. Everyone wanted bigger banks in the US to compete in the global market. We were like China now. We were the lenders for much of the world with our bigger banks doling out money to Brazil, Mexico and such. A number of those big international loans went sour and our banks lost. A few of our big banks indeed went belly up at the time due to these bad foreign loans. At the same time the large foreign banks were making inroads in the US economy by lending here and even taking positions in US assets like Rockefeller Center and Peeble Beach. Just as many worry today about the Greek debt there was a time when we didn't have that concern for foreign debt for our banks. After all it was owed by a country and they wouldn't default, right? After some of that foreign debt did default and our banks went under there was a hue and cry about the banks being so careless by putting too many of their financial eggs in one basket; they were stupid was the mantra and highly criticized in hind sight. They were being greedy and not thinking about the needs of Main Street here at home was the headline position of most of the media.
Well we finally got our really big banks like everyone wanted, even demanded by some. Some of us are old enough to remember seeing this movie before. Only the characters in Washington have changed.
It matters who are the advisors in any administration, at least in the wisdom of the Proverbs--"take away the wicked from the presence of the King, and his throne will be established in righteousness". If the wicked are there then perdition is the more likely outcome. www.olcranky.wordpress.com
It is hard to fathom that after eighteen plus months we are still having to discuss the too big to fail problem. If there is new financial regulation on the horizon it should clearly state that banks that become insolvent in either the equitable sense or the balance sheet sense will be liquidated, period. All the depositors in those banks will have their FDIC protection like they did throughout this financial crisis and the risk taking operations will be punished along with those who gambled with them including their executives and shareholders. If those 5 or 6 large banks had been allowed to go under we would already be past that problem and on a better road of recovery. Government, Inc. bailed them out and then raises hell about doing it and wants to punish everyone associated with the bailout. Geithner, Bernanke, and Paulson and those in Congress like to be perceived as the heros coming to the rescue of all of us, but they weren't heroes they were the villains in this play. The banks were just stupid and maybe even greedy but they would have gotten their comeuppance if left to swing from the gibbet alone.
It is hard to believe but only about 30 years ago the alleged problem was that the US banking system did not have enough big banks. Don't take my word for it go back and read some of the financial reporting of the late '70's and early '80's. All the big banks then were in Japan and Europe. Our larger banks were making loans to foreign countries as fast as they could because it was considered such a safe loan with a good return and required my less staff to process the loans. They could make one big loan rather than thousands of smaller loans with a much bigger employee base. The concern was that the big Japanese and European banks were coming to dominant the American market and the global market because they were the only ones able to finance the big deals occurring around the world. We were losing market share and influence because we didn't have enough big banks. Everyone wanted bigger banks in the US to compete in the global market. We were like China now. We were the lenders for much of the world with our bigger banks doling out money to Brazil, Mexico and such. A number of those big international loans went sour and our banks lost. A few of our big banks indeed went belly up at the time due to these bad foreign loans. At the same time the large foreign banks were making inroads in the US economy by lending here and even taking positions in US assets like Rockefeller Center and Peeble Beach. Just as many worry today about the Greek debt there was a time when we didn't have that concern for foreign debt for our banks. After all it was owed by a country and they wouldn't default, right? After some of that foreign debt did default and our banks went under there was a hue and cry about the banks being so careless by putting too many of their financial eggs in one basket; they were stupid was the mantra and highly criticized in hind sight. They were being greedy and not thinking about the needs of Main Street here at home was the headline position of most of the media.
Well we finally got our really big banks like everyone wanted, even demanded by some. Some of us are old enough to remember seeing this movie before. Only the characters in Washington have changed.
It matters who are the advisors in any administration, at least in the wisdom of the Proverbs--"take away the wicked from the presence of the King, and his throne will be established in righteousness". If the wicked are there then perdition is the more likely outcome. www.olcranky.wordpress.com
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