Sunday, September 27, 2009

Too Big to Fail? Too Large to Exist.

A year after the fall of Lehman Brothers and the beginning of the
current Economic Crisis, we are still at square one with respect
to reforming the "Too Big To Fail" banks.

Thanks to forced mergers and acquisitions
( Bank of America /Merrill Lynch, Wells Fargo/ Wachovia,
and JP Morgan Chase/ Washington Mutual) the degree
of concentration of the nation's largest banks is
greater than before the crisis.

Neil Barofsky, the TARP administrator, has said that
due to concentration, " we may be in a far more
dangerous situation today than we were a year ago."

And Mark Zandi , the Chief Economist of Moody's , the
securities rating firm, says "There is an oligopoly of
banks - and the oligopoly has tightened".

And Thomas Hoening, the President of the Federal Reserve
Bank of Kansas City, has said:

" If we hesitate to make needed changes, we will
perpetuate an oligarchy of financial interests that will fail
to serve the best interests of business, the consumer, and
the U.S. economy .."

Oligopoly? Think monopoly control exercised by a few.
And Oligarchy? Think of a political monopoly exercised
by a few.

And when the oligopolists are also the oligarchs, that's
a recipe for disaster.

But all the signs are there. The Oligopolists have already
returned to business as usual - running the Casino as
if nothing happened, and getting ready to pay record

And with Oligarchic control of the political and regulatory
system, they have nothing to fear from new regulation.

No restrictions on pay. No restrictions on leverage.
And unlimited access to the discount window or
another bailout if things go wrong. And neither
the Obama Administration nor any other
government is willing to take them on.

The recent G-20 summit notwithstanding -
the oligarchs have almost nothing to fear.

After all, they own almost all of these governments.

But the people may have the last laugh. Because the
next time there's a Lehman Brothers situation, there
should be NO bailout.

Let them fail. Pay off the depositors and let the rest go.

In my opinion, only another disaster will force reform.

The lesson of Lehman Brothers has not been learned.


  1. Amen. A+ article.

    Thinking Nationalist 2012 political run?

  2. How the Federal Government came up with the "too big to fail" is beyond me. Did this all start with the New York city "bailout" in the 1960s? or Chrysler in the 1970s? If we are "asleep at the wheel" then the result of these financial fiascos will be multifarious in it's ramifications. Even if we are awake, the outlook remains grim. For decades the politicians need to explain that fiscal responsibility is painful for "the people". And even though people feel some pain, they expect the government to make that "go away". I love my country, but I know it's not always the best country.

  3. "Too Big to Fail" is always a political judgment, not necessarily an economic one.

    In the final analysis, it always depends more on
    political factors than on economic fundamentals.

    In purely economic terms, GM, Chrysler, Citibank,Bank of America, and Merrill Lynch should all have been allowed to fail.

    That they were not was purely a political decision - one that the taxpayer will be regretting for decades to come.

    In employment terms, can anyone TRUTHFULLY
    say we are better off because we bailed out
    these "Too Big To Fail" institutions?

    The question begs its own answer.

    The Thinking Nationalist