“Break ‘em Up!”

There are many reasons why we need to break up the behemoths of finance!

The taxpayers saved their affluent asses. The Big Banks, along with their highly compensated executives, were headed over the cliff with nothing to stop their fall, and we bailed them out!

Break ’em Up!

Congress, in a panic, saw fit to give taxpayer dollars to the self-destructive creators of the financial crisis to prevent a catastrophic meltdown of the U.S. economy, without even asking us.

We’re told over and over that TARP was successful, that Congress’ decisive actions saved the economy and that we should be eternally grateful. We’re reminded that the Big Banks are again stable. They’re back to making billions of dollars—and the economy is improving.

For whom?

Are they really stable or have they gone back to their old destructive practices of making risky bets and hiding losses in various secretive vehicles?

Quarterly profits for banks in the first quarter were again great, pointing to an improving economy. But a closer look at their balance sheets reveals that the bulk of their profit came from risk.

Clearly things have improved for the Big Banks, but not necessarily for the hard-working Americans that bailed them out.

Banks have also been helped through other unsustainable programs not available to retail investors or the struggling middle-class. The Fed has held the discount rate for banks at an unheard of 0% for well over a year allowing banks to take advantage of easy money, using it to buy our debt at higher rates—free money—while American’s whose savings are their safe source of income, have watched as their interest on that savings has fallen to unprecedented lows.

And probably the worst and least visible is the Fed’s purchase of the Big Bank’s toxic assets to make them whole. This is a Fed that not only failed to see the housing bubble but ignored their responsibility of protecting the consumer from usury interest rates that the banks continue charge. The Fed is an abject failure at managing Big Banks!

Despite all that help, we, the taxpayers, had to save the banks!

And how do they repay us?

By hoarding capital, charging high interest rates, adding criminal fees, paying huge bonuses to themselves, and continuing risky bets with our money. They obviously have huge cajones.

Should we allow them to continue down this destructive path and lead us into another crisis? Hell No!

Break ’em Up!

Congress is working on financial reform but threatens to pass a weakened, ineffective piece of legislation that does little to help the ‘real’ economy or the country.

Current proposed law in the Senate does not go far enough to control the excesses or shadowy practices of the colossal banks. Nor does it address the potential time bomb that their activities in derivatives creates.

But there’s hope!

Three amendments have been introduced that need to move to the top of the financial reform deliberation. They are all necessary to, if not entirely prevent, reduce the magnitude of a future financial crisis.

The first, and possibly most immediate, if not most important, is being introduced by Senator’s Sherrod Brown and Ted Kaufman. Their amendment would require the separation of commercial and investment banks. It would be a return to the protections of Glass-Steagall which protected us from predatory banks for 68 years. The SAFE Banking Act will limit the size of our largest banks.

The Senators need our help to restore the financial sector to a manageable and productive part of society instead of a mechanism for huge transfers of money from the taxpayers to the wealthy 1% of the people in the nation.

So where is the Tea Party on this life and death issue? They should be all over this. The banks are stealing right from under their noses and they don’t even know it.

Instead, they’re fighting non-existent windmills: increased taxes (that don’t exist), socialism (when there is minimum risk of that happening), drilling for oil offshore (how’s that drilly, spilly, killy thing working for ya?) avoiding the real issues, the ones that have an affect on everyday hard-working Americans—the eroding middle-class!

The Tea Party should also be vocally backing the amendment of Senator Bernie Sanders of Vermont requiring an audit of The Federal Reserve. It is an attempt to bring transparency to the transactions, borrowing, purchasing of toxic assets, etc., between the banks and The Fed. It is an effort to expose secret deals like the money laundering deal made for banks through the bailout of AIG.

Another important issue is the shadowy black box world of derivatives. What about transparency in the derivatives market?

Though less visible because of its secretiveness, derivatives could be a much greater threat to the global economy than any other financial area. It creates the risk of bringing down the Big Banks even if we break them up.

Bringing the shadowy derivatives market, estimated by some to be $600,000,000,000,000, that’s trillion with a T, out in the open could be signing the “death warrants” for the big banks as one of the unintended consequences.

If that happens, so be it. It needed to happen.

The secretive derivatives market is, more than likely, an over-leveraged market similar to the subprime crisis—only 600 times larger and  potentially more lethal.

Senator Lincoln, of Arkansas, has introduced an amendment that will regulate the derivatives market. She should insist on 100% transparency requiring all derivatives be traded through an exchange, no matter how much damage may ensue.

And the damage could be calamitous—killing most of those that have participated in this dark and secretive world of unrestrained gambling.

Brooksley Born tried to regulate the derivatives market as Chairman of the Commodity Futures Trading Commission back in 1996. But she was squashed by the “Three Amigos,” Greenspan, Rubin, and Summers with the unfortunate help of then SEC Chairman, Arthur Leavitt.

In, “The Warning,” an informative Frontline documentary about her quest to understand and regulate this dark market and the disgusting arrogance of those that set out to destroy her and  prevent Brooksley’s attempt to do her job—protecting investors. It also shows the damage an unregulated market nearly did a decade ago.

Multiply the potential damage that could have been done when LCTM imploded, had the banks involved not been forced to intervene, by a thousand times.

That’s the magnitude of the potential destruction of the financial markets if Senator Lincoln’s amendment does not pass and we allow the derivatives market to continue unabated. This amendment must be committed to covering as much derivative trading as possible.

There is palpable fear amongst bankers that their scam will be exposed.

Bear Stearns, Lehman Bros., Washington Mutual, and other big financial institutions have proven they cannot be trusted to regulate themselves.

The practices that brought them down, repurchase agreements (known as repo 105’s at Lehman), liquid funding, netting, and total-return swaps are still being employed by banks to manipulate their balance sheets as reported by Louise Story of the New York Times in, “Crisis Panel to Probe Window-Dressing at Banks.”

If the American economy is to survive it is imperative to take back control of the banks that continue to hide toxic assets and actions that are eroding our economy to the detriment of all hard-working unsuspecting Americans.

Bring the derivatives market out of the shadows and into the light of day!

Break ’em Up!

There could be a lot of pain, but at least we will know what demons we are facing and have a better chance to deal with them. We can then move forward in a healthier, more transparent financial world better able to identify the obstacles we may encounter.

It’s time to take a stand against the strangle hold of the Big Banks and put the control back in the hands of ‘the people.’

Free market capitalism had a 30 year run and, in the humble words of ‘the wizard,’ Alan Greenspan, “It was flawed.” His belief that the market would take care of itself was grossly flawed. Greenspan’s reference to the inability of the markets to police themselves was a little late.

Since it has been proven repeatedly that predatory banks are incapable of determining between right and wrong, fair and unfair, greed and compassion, they must be regulated before they cause irreversible damage.

It may be too late, but the only chance we have to survive a global meltdown is the swift passage of the three Senate amendments now before them. Senators must be made to understand that this may be our only hope. Failure to strengthen the reform bill with these amendments, making them as strong as possible, would be criminal, and another lost opportunity to do the right thing.

Call your Senators and demand ‘real’ reform.

Once again, our life depends on it!

Tags: , , , , , , , , , , , , , , , ,

Comments are closed.