Posted on 11/13/2015 7:12:23 AM PST by Kaslin
At the Republican Presidential debate earlier this week, Texas Senator Ted Cruz did something unusual for a politician -- he gave a straightforward answer to a question. Yes, Cruz made clear, if the Bank of America was on the brink, he would let it fail.
That answer made perfect sense to millions of Americans who are tired of politicians doing special favors for their well-connected friends on Wall Street. But doing such favors is what Washington politics is all about.
That reality was highlighted by Neil Barofsky, who served as the Special Inspector General for the TARP bailouts. His book "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street." The title says it all. A lifelong Democrat, appointed by President Bush, Barofsky was stunned that the change from the Bush Administration to the Obama Administration made no difference. No matter which party controlled the White House, the Treasury Department saw its goal as insuring the financial success of the big banks.
Perhaps the moderator, Neil Cavuto, was startled by the candor of Cruz's response. In seeking to make sure that the Senator really meant he would let the bank fail, Cavuto made one of the few moderator's mistakes that evening. He claimed that "Millions of depositors would be on the line with that decision." That's simply not true.
In fact, only the wealthiest of depositors would be at risk. The Federal Deposit Insurance Corporation (FDIC) guarantees deposits up to the $250,000 level. So, if a President Cruz let Bank of America fail, the stockholders in the company would lose their investment. The management team that drove the bank to ruin would lose their jobs. But the depositors would be protected. That's the way it's supposed to work in a competitive free market system.
The bailouts of big banks are not about protecting the little guy. They are about protecting the wealthy and well connected. According to the Cato Institute's Dan Mitchell, "the bailouts were fundamentally corrupt, featuring special favors for the well-heeled." There's no reason to believe they will be any different in the future. Mitchell added, "It is downright nauseating and disgusting when upper-income people use the coercive power of government to steal money from lower-income people."
Why does government work this way? The current Treasury Secretary came to his role after leading Citigroup, one of the bailed out banks. That's the norm. One day Henry Paulson was Chairman of Goldman Sachs, the next he was Treasury Secretary. One day Robert Rubin was Treasury Secretary, the next he was running Citibank.
It is only natural that they want to use the power of government to help their friends. But that doesn't make it right.
Ideally, of course, we'd like our government to reduce the risks of big bank failures before the next crisis arrives. As some of the debaters suggested, we do need to higher capital reserve requirements and other reforms. We should also break up the biggest banks so that they pose less of a threat to the economy at large.
But the single more important reform of all is to make sure the leadership of the mega-banks gets the message that there will be no more bailouts. If they run their bank into the ground, they lose their job.
This was extortion. Goldman Sachs isn’t even a bank and they were bailed out, along with GE Capital. Replacing the banks with new ones, with new owners would have been the best course.
When failure is caused by the government, i.e. make loans to the unqualified.
We’ve got a government that’s too big to fail but it is certainly going to if we stay the path.
This is why we need to decentralize government. If one of 50 states fail, the nation can rebound. If all the power is in the federal government and it fails, we’re in deep @#$^.
We need to remove the power from a few large financial institutions that are too big to fail.
Replacing the banks with new ones, with new owners would have been the best course.
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Smaller more local banks would create more jobs too. BOA only has one CEO and one CFO. Each of the smaller banks would need CEOs and CFOs, etc.
We would be a lot safer too if the power was decentralized.
If you have money at Wells Fargo, Chase, Bank of America or Citibank you are only aiding and abetting the criminals, who use that money to make risky bets..jmo
I got a list of the TARP banks and closed my accounts with all of hem (yes, I had accounts with multiple institutions). I no longer deal with them in any way. A couple claimed they were compelled to take TARP money, but I do not care. It’s like the POW posing for a picture - if you don’t at the very least flash a “coercion” sign, then you are complicit.
Neither Kasich nor Bush knew about FDIC
So I agree with the premise but I am wondering, TARP was something like 9 point something billion (let’s round to a trillion since we’re among friends). I wonder what letting the banks fail would’ve cost the tax payers if the FDIC had to pony up the money to depositors that would’ve lost their money? Then what would have been the costs to the market and housing had the banks not been bailed out? Wondering if anyone saw any articles about the costs had we not gone down that path? AGAIN, just wondering and the Cruzster is at the top of my list for pres so don’t climb all over me. :)
The point is to not allow the banks to get too big in the first place.
The moral hazard is now eating away at the very foundations of capitalism.
When you have a low-info electorate that sees taxpayer money being used to bail out big banks, and to create one soley to finance business for Boeing and GE, it becomes very, very hard to explain to them why taxpayer money should not be used to give them “free” health care or pay off their student loans.
That Kasich or Bush did not mention FDIC was very telling.
First off they don’t let the banks just fail. They get another bank/banks to take over the deposits which John Kasich knows very well. Then they sell off the assets and loan portfolio to other investors.
I saw a point to the AIG bailout — their insurance division was worth keeping running because it was the only company that wrote certain types of insurance (including issuing some wrongly-vilified types of derivatives) — though it should have been handled very differently, basically a bankruptchy receivership with someone outside put in control of keeping the operations up and running, divestment of all non-core functions (esp. the money-losing hedge fund division), and infusion of only enough cash to keep the operations going. No money that could be siphoned off by the managers who led the company to ruin should have been involved — in particular no bonuses for anyone — and a lot of AIG top managers who hung on an profited from the bailout should have been sacked.
After that, they all should have been let fail, big banks, GM, the lot.
Cavuto, like cnbc stooge Maria are water carriers for the big banking RINO establishment. I remember Cavuto denying there was a housing bubble in 2007.
I am still upset about TARP, the Bailout, Cash for Clunkers, Obamacare, and the rest of the crony-capitalist looting of our country’s wealth. That money belongs to those who created the wealth and has no business in the hands of those with political connections. “Too big to fail” businesses should fail if they cannot stand on their own, and the consequences would be far milder than the results of that massive insider corruption.
So true, since retail banking alone earns 19% profit for just allowing ones and zeros to park on IBMs out of the rain.
When you ask someone what they do and they say they own a bank, they should be grimacing with the admission as if they owned a 24/7 washateria and is constantly on call for that kind of profit.
If you have money at Wells Fargo, Chase, Bank of America or Citibank you are only aiding and abetting the criminals, who use that money to make risky bets..jmo
I certainly don’t. I wouldn’t trust the thieves with my money.
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