Home » Uncategorized » Bank Deregulation Back in Vogue: It’s time to dance the last fandango!
            

Bank Deregulation Back in Vogue: It’s time to dance the last fandango!

tax burden of the beleaguered rich

The Great Recession was so great for the only people who matter that it is time to do it all again. Time to shed those bulky new regulations that are like clod-hoppers on our heals and dance the light fantastic with your friendly bankster. Shed the encumbrances and get ready for the new roaring twenties that are just around the corner.

The banks need to be able to entice more people into debt because potential borrowers with good credit and easy access to financing are showing no interest in taking the banks’ current enticements toward greater debt. That could indicate the average person is smarter than the banks and apparently recognizes they are at their peak comfort levels with debt. The banks, on the other hand, want to reduce capital-reserve requirements in order to leverage up more.

Thus, President Trump, blessed be he, is working (in consort with the Federal Reserve) on cutting bank stress tests in half to once every two years and working to significantly reduce the amount of reserve capital banks are required to keep. He also wants to make the stress tests a little easier to pass. Such are the plans of his Goldman Sachs economic overseers to whom Trump has given first chair in various illustrious White House departments.

That should all go well. Why maintain a high bar on matters of national economic security? After all, we know stress tests are needless regulations because Alan Greenspan told us prior to the Great Recession that banks are naturally self-regulating for the obvious reason that self-preservation is in their own best interest. (Just like sharks in a feeding frenzy are more concerned about careful self preservation than about simply getting the biggest chunk of meat the quickest.)

Banksters in all their brilliance are, of course, applauding the changes as something that will boost jobs and expand the economy. That’s the sales pitch for deregulation. The truth, of course, is that the banks want to leverage up more so they can invest more money in stocks now that the Fed has stopped QE and is even looking at rewinding QE. That is how banks make their money these days, since fewer people want to take on additional loans anyway. (Those they buy stocks from will also just reinvest in other stocks, continuing the cycle that has been going on since 2009.)

Not only are people sitting tight on loans, but with immigration tightening up there will be fewer new people to seek new housing and new loans down the road. Banks see this coming. That’s the real reason the federal government long maintained loose immigration policy: more people equals more customers and more GDP growth and cheaper labor due to more and tougher competition in the labor pool!

(Full disclosure note: I am one of the oddballs that thinks we have enough people, thanks — of any color or nationality, including my own. I love different colors and cultures (including my own); I just don’t want more people. I don’t agree with an economic foundation that is predicated on the unsustainable notion that you have to keep overpopulating and developing real estate forever in order to have a sustainable economy. Let’s all become Mexico City in order to succeed forever and improve our standard of living? There’s a worthy goal! And that IS where a real-estate-development, immigrant-sucking based economy has to wind up. Just keep squeezing in more and more people endlessly so you can keep the economy going.)

 

We need to deregulate banks so the money will trickle down

 

That’s the party line.

On the one hand, banks face a growing apathy in the general market toward taking on more debt, and they face a slower-growing marketplace (in terms of the growing number of clients). On the other hand, why should banks want to make loans that always have an element of risk anyway when the stock market remains virtually risk free under central bank guarantee? I mean, if you’re working with money given to you by the central bank, why not invest it all where that same central bank has your back, telegraphing to you that the stock market is where they want it invested? If you do it the way they want, they’ll keep printing new money for you.

Now that all the talk is about reversing the money presses, banks have to find other sources of money if they are to continuing investing in stocks. That’s why banksters are now touting the goal of improving wages in the job market. Evidence of their actual desire to boost jobs can be seen in Bank of America, the United States’ second-largest bank. It is in the process right now of expanding its layoffs in order to streamline operations and boost profits to shareholders. It is also replacing higher-paid employees with lower-paid ones.

Wasn’t the Fed’s goal of bringing the job market up to “full employment” supposed to translate into wage improvements for the middle class? Whatever happened to that central-bank objective? Who benefited more from the Fed’s efforts to create full employment than banks to whom all the Fed’s free money freely flowed? So, if you don’t see it happening in banks, you won’t see it happen anywhere. And it clearly ain’t happenin’.

Ah well, once again, money didn’t trickle down. It got caught in the banks’ multiple filters. The banksters, richer than they have EVER been, are actually working to reduce the amount they have to pay employees by getting rid of the more expensive ones (down in the lower tiers of course) so that the one percent who run the banks can be richer still.

Surprise! Money doesn’t even trickle down when you are an employee closest to all the free money that is supposed to trickle down. (And it never will!) The Federal Reserve talks a good game about wanting to see wage growth and about being concerned about growing income disparity, but its member banks don’t seem to be getting with the program. So, if the Fed cannot even persuade its member banks, after all these years of their recovery program, to improve wages in the lower tiers by giving them lots of free money to distribute, it certainly cannot persuade anyone else with less of a connection to the free money.

Obvious or what? Surely, you never really believed the upper crust would let wage inflation happen! It’s still the same trickle-down talk of deregulating the banksters at the pinnacle of the economy so that the economy can keep growing and wages can expand, but the real goal is simply reducing reserve requirements in order to free up more money during this tightening phase for the banks to continue to play with in the Wall Street Casino.

 

Another big move at deregulation happened in congress yesterday

 

Targeting government regulations, the Republican-led House on Tuesday voted to nullify a rule that would let consumers join together to sue their banks or credit card companies rather than use an arbitrator to resolve a dispute.

The repeal resolution passed by a vote of 231-190, almost entirely along party lines.

The Consumer Financial Protection Bureau finalized the rule just two weeks ago. It bans most type of mandatory arbitration clauses, which are often found in the fine print of contracts governing the terms of millions of credit card and checking accounts.

Republican lawmakers, cheered on by the banking sector and other leading business groups, wasted no time seeking to undo the rule before it goes into effect next year. (Newsmax)

 

God forbid you should ever be allowed your normal citizen’s right to your day in a real court against your favorite banksters if they stoop you in the middle of their bump-and-grind dance. It should always be illegal to deprive anyone of their constitutional rights to their day in court by means of a simple disclaimer, as if disclaimers can trump the constitution, especially in a world where all banksters automatically offer the same boilerplate legalese if you want to join their dance.

 

They saved the last dance for you

 

So, let’s deregulate the banks all over again in order to improve jobs and help the economy grow and make sure you cannot hurt your banksters if they first hurt you! Let’s buy into the same promise again … and again … and prove the masses are nothing but dumb oxen, always ready to shoulder the burdens of the infernally rich.

Now that the same banks are even more too big to fail, it’s certain to be the last fandango this time. So, grab your favorite fat bankster while you can, and let’s have us one big whoop-ass dance! Come on, Everyone! Of course, you will be expected to caddy all of his or her money on your back while you dance with him or her so he or she can enjoy the dance. You cannot expect a man or woman of such rotundity to carry a load when he or she’s so fat! And, who knows, maybe a single coin will spill out of that money bag this time and finally be yours! It could happen! Bet your life on it; bet your nation’s life on it. If you shoulder the entire money bag on your back, there may be a coin spill out for you … maybe. That’s the trickle-down guarantee:  maybe next time will be different and some of the money will become yours … maybe.

So, you’ll bear the burden because that’s what you’re supposed to do if the hope is ever to become true.

 

 

Some music to dance to with your favorite bankster:

(Enjoy the sample.)

 

The one coin that I hope will fall from their money bags:

(Enjoy the image)

 

And something to wear while you dance:

(Lightweight and breathes; makes it easier for you to carry more of their money on your back, and it’s their favorite color, making it more likely they’ll pick you to dance with.)

  • Don_in_Odessa

    “I don’t agree with an economic foundation that is predicated on the unsustainable notion that you have to keep overpopulating and developingreal estate forever in order to have a sustainable economy.”

    Setting aside what is “overpopulation” and the use of the exaggeration with the word “forever;” for the moment, not true if the retiring population is larger than the working, taxpaying population. True when the two populations become perpetually balanced. Is that possible? Not likely. And all this not to mention that to have the incentive to work one mus have the opportunity to increase personal wealth. Can’t do that in a stagnant economy. Economic growth requires growth of demand. Demand only grows with increased population. A comprehensive explanation is described in the free book “The Alpha Strategy” By John A. Pugsley

    http://web.archive.org/web/20110717110745/http://www.biorationalinstitute.com/zcontent/alpha_strategy.pdf

    Back to “overpopulation,” usually doesn’t happen to the degree that the species dies. Except for extinction level events, populations are self limiting. In the case of human populations, famine, war, disease and natural disasters occur at the most “coincidental” of times. Same is true in nature. It is actually a positive for weeding out the gene pool of the weak and the stupid.

    • “… not true if the retiring population is larger than the working, taxpaying population. True when the two populations become perpetually balanced. Is that possible? Not likely.”

      In many developed nations, natural population has stabilized. That happens when people procreate at the rate at which people die, which takes something like 2.2 babies per couple since not every two people produce children. In cultures like America, that’s about what people are averaging. Some produce lots more babies, but there are many who produce only one child or now children. So, the native population is stable or even declining.

      However, the United States CHOOSES to import lots of people. As a result its population is constantly growing. Most of the people it imports are of working age and/or are having babies at a rate that exceeds the natural balance point because they come from cultures where having huge families is the norm. As a result, we grow.

      The question is how long do you want to do that? Forever? Is there a point at which we have enough people? Not if expanding wealth is your primary objective in life. For many people, constantly growing their wealth is a primary goal; but it is not an essential goal. For that goal, a constantly growing population works better; hence, the argument that you lay out, which is the dominant way of thinking.

      You talk about my exaggeration with terms like forever, but we can shorten that up a lot. My point there was that clearly growth cannot continue forever; therefore, when do you want it to stop. That means the stopping point is arbitrary if we pick a point that is short of the extinction point you mention (when the decision to curb population growth takes care of itself).

      So, let’s look short of forever at Bangladesh or Mexico City. Is that a desirably population level. That’s a personal judgment call, but for me, NO. Is LA a desirable? People move their for the growth, but they don’t really like how. Those cities haven’t been around forever, but they are already outsized in the sense that they exceed their available water supplies so have to pipe water in from other states or areas. They have all kinds of problems due to overpopulation.

      Those problems are real, and they create poverty for more people than they create wealth for. Is that ideal? It might be for you. It’s a judgement call. It is not for me. So, I prefer and economic model that does not require endless expansion. Because not all people care about endless growth of their wealth. They care about wealth at a level that sustains them comfortably, and after that maintaining that lifestyle is all that is important to them. They know that if they keep crowding people in, that lifestyle rapidly deteriorates — more congestion and crime than they care for … so they deliberately (like me) move away from that.

      • Don_in_Odessa

        “Whats a matta whid joo?” Are joo betta dan da Bangladeshis or Mexicans?

        Just pulling your leg Dave. You are right of course. But the question remains; what justifies the creation of more dollars, other than by fiat in a stagnant population?

        Here is the problem greatly simplified and keeping in mind, the focus is only on the currency and it’s value, not the what ifs of the citizens: There is one dollar in circulation in a population of two. One widget maker and one who needs the widget. The widget maker sets the value of the widget at one dollar. Wealth is stagnant, it only changes hands. How do you grow it so everyone has the opportunity for economic advancement? Keep in mind, in the modern world we are talking about convertible currencies, not barter. Fiat lowers the value of the currency it does not increase wealth.

        Please don’t tell me you are a proponent of economic equality. This credo of the Socialist battle cry is what kills incentive to work, to create and to realize the seeming impossible. All of which is the engine that propels a culture forward rather than backwards.

        • No, not going for economic equality — as you’ll see believe — other than equal opportunity to participate.

          In a population of two, money has no value (a problem your equation hinted at) because it has no utility; so, I’d ditch money altogether. At that level, trading is easier. Money just wastes time creating it and arguing about what its worth actually is. Unfortunately, in our world of two, you weren’t able to get it through my thick skull that this idea of money was worth anything to me, and that left your money worth nothing because I’d rather hand you as many eggs from my chicken as your widget is worth to me.

          I figure, you’re the investor in this world, so you’re the clever widget factory guy in the world of two. I’m just a farmer (like I do as a pastime here). But in a world of two where you don’t like farm work and don’t have a green thumb, farming is a great profession because YOU still have to eat. So, being smarter than my fence posts, I always wait to come over to trade for widgets until I know you’re hungry. It increases the value of my food.

          In this world of two, our individual wealth exists in our accumulation of assets, which is really the only form of true wealth there is in any world anyway. Thus, the world of two gets us back to be able to see basics. Money is merely a convenient form of measuring and storing that wealth. I have a lot of food to store. You have widgets, and I only need ONE until that one breaks. So, when you’re not making widgets, you can come and help me work the farm, and I’ll let you take home just enough veggies to keep you alive and strong to do more work the next day because I still need you. Besides that, you’re good for conversation when the work day is done, so I need to keep you around, or I’ll have no one to talk to but myself and the dog. (We still have animals in the world of two.)

          –David

  • Auldenemy

    Credit card debt in the UK is up 10% in the past year. Add on car loans, mortgage/rent and no surprises personal debt in the UK is on the rise again (especially given stagnant incomes). It is like 2008 never happened which is quite incredible given that it never went away! Of course it is for us

    • “Something is very, very, very wrong when Jamie Dimon can be paid a salary of over $30 million a year when JP Morgan got the biggest bailout of any USA bank.”

      Back at the start of this crisis, I began writing my first economics articles for small papers like the Hudson Valley Business Journal, and one of those articles pondered what makes a man like Dimon who crashes a massive formerly very profitable corporation worth so much money. That article, now almost a decade old, was part of a series I’ve posted on this site called “Downtime.” (See left sidebar for link.) Titled “Things to Do with a Failed Bank,” the article offered the following observations about a CEO’s worth:

      “I was still feeling kind of swishy in my belly this week as I read about various CEOs who brought down fat bonuses by bringing down their banks. And I was thinking, what is it that a top-of-the-line CEO does to bring down one of the world’s largest banks that makes him or her worth a seven-quadrillion-dollar bonus? I mean what particular niche of genius makes these barely-street-legal CEOs better at bringing down their banks than those stock CEOs who only get profit-sharing plans because their little institutions keep humming right along in perfect health?

      “Naturally, I wondered why the woman who runs a mom-and-pop hardware company for thirty years and stays in business against the likes of Home Depot and Lowe’s is worth less than a man in Giorgio Armani who can crush a colossus bank is six months. That question set in motion certain sparks along my darker synaptic pathways that yielded a bright realization. The real question churning in my belly, as it turned out, needed to be reworded: “What is it that makes a failed bank so valuable that it’s worth paying someone a hefty bonus to get it there?”

      “With the right question crystalized in front of me, I realized that I was onto something really BIG. It occurred to me that there are some hidden things you can do with a failed major bank that you cannot do with anything else (except maybe a failing major brokerage firm), which make it particularly desirable for a board of directors to hire the man with enough heft to capsize their bank quickly. The core value is this: You can use a failed bank to apply for a $20,000,000,000 interest-free government loan. If you don’t have a failed major bank, you’re not even qualified to be an applicant to this kind of government program. Thus, the faster you can roll your bank over like a porpoise, the faster you can scoop twenty-Bil. off the government pavement.

      “That, right there, is an eye-opener that would tell any board of directors, we need to to put this institution on the rocks and get it there NOW before these government loans run out because they’re going fast. (A trillion dollar fund doesn’t last long these days.) I mean, where else can a bank get twenty-billion dollars on a weekend without even filling out a formal application? To pull off a maneuver of that size that quickly takes a CEO who can boldly turn an ocean liner on a dime (or a cork or whatever it is that an ocean liner turns on) and steer it straight into the cliffs of disaster before anyone sees what’s happening.

      “Let’s look at some of these amazing turn-arounds.

      “Do you see the pattern here? I sure do: If you are one of the unlucky few major bankers who is not failing, you can use all your available cash to buy other another failed major bank at great discounts with the government’s help. Then, after you absorb all their losses, you, too, will become a failing bank so you can qualify almost overnight to scoop up yet another ten or twenty billion extra bucks, maybe more if you’re failing big enough. So, the genius behind a CEO whose major bank is not failing is to find the biggest failure can and buy it! Buy it blind if possible. The more hidden problems that you did not know about, the better your position to argue for free government money. Thus, you don’t even need to spend time evaluating the risk, except to hope it is as big as possible….

      “So, clearly one has to be a major failing financial/investment institution to … proclaim its foundering and everyone will believe it…. So, herein lies the genius: to get … attention … you have to yell things like “we’re not going to make it!” Nobody expects that from a CEO, so it’s a bold move that grabs attention. And attention — on the order of the Titanic hitting an iceberg — gets governments to rush to indecision. The more they rush, the stupider they act; so, make ’em rush hard and fast….

      “The biggest money only goes to the biggest losers….”

      “I mean, who wants to invest that kind of taxpayer’s wealth into a bank that shows every sign of staying alive? Why make healthy banks healthier when you can sink forty-five billion into something and literally sink it altogether? I say the man who can accomplish all of that in one quarter and stay alive with a name like Vikram Pandit is deserving of any bonus he gets. But it gets even better: all Citigroup had to shell out for this return was $1.77 Million in lobbying fees last quarter all directed at the government’s bailout program. Where else can you find that kind of return on investment if you don’t have a major failed bank and the kind of blustery CEO who knows how to wield that power?

      So, now, you can see why it’s worth paying those big bonuses to get a CEO who can turn an institution the size of an ocean liner around from a course of success to an uncharted path of failure…. The buy-word in banking today is that you have to, first, be too big to fail, and then you have to do what you’re too big to do … spectacularly. Failure is its own reward. Any CEO with a notch like that on his belt will find he’s qualified … well, to become Treasurer of the entire United States of America….”

      etc. etc.

      http://thegreatrecession.info/blog/downtime-part-7-things-to-do-with-a-failed-bank/

      –David

  • Omar

    The key impact of Gramm-Leach-Bliley 1999 was that previously cautious partners in investment banks subject to essentially unlimited liability were now managers who could get all of the upside if they negotiated decent enough stock options and none of the downside if they ravaged the earth. Everything after that was history. And just as the Commodity Futures Modernization Act of 2000 (again Phil Gramm) led to Enron’s bankruptcy filing 2001, greater deregulation now, required as you correctly point out in order to keep the massive Ponzi scheme going, will lead to a massive Minsky Moment soon

    • Right on, Omar!

      • Auldenemy

        I like the coin illustration David. If you have time please look up Thomas Spence on the internet

        • Maybe we’re on to a business plan here, Auld, that could make good money in a downturn — pure gold and silver medallions that, instead of having the heads of state on their “heads” side, have the heads of banksters with pithy little mottos. Picture, for instance, Lloyd Blankfein with a noose around his neck and a motto, saying, “Doing God’s Work.” That way people could buy gold to protect themselves AND stick it to their most hated bankster at the same time. Sort of the feel-good way of prepping. The Bankster Mint.