Too Big To Fail

That is the term for financial firms whose liabilities are implicitly guaranteed by all of us, free of charge.

It is a great arrangement, for them. They get to borrow from the Federal Reserve at zero percent and make whatever bets they like. They get to keep the profits and saddle taxpayers with the losses. Through cognitive capture and campaign donations, they effectively control our regulatory apparatus and our Congress.

If you are like most people, you are attached to some political ideology, and you think all of the world’s problems are caused by the “other side”. I want to try to convince you that this issue is special. I want to ask you, just this once, to join with people on all sides to declare this situation intolerable. (Scroll to the end to find out what you can do.)

If you are a fiscal conservative, then I say to you: We are bankrupting our nation. By guaranteeing the liabilities of large financial firms, we are effectively allowing them to gamble with taxpayer money. Eventually, their bets will go bad. The result will be crisis after crisis, where the losses from the bad bets are transferred to the public balance sheet, just as they have been for the last two years. This will continue until we destroy the creditworthiness of the U.S. itself.

If you are a social conservative, then I say to you: Oligarchy is not a family value. These banks care only about money, and through their capture of the state, they have the power to extract it from society. They have created, nurtured, and imposed a culture where wealth is the only virtue.

If you are a liberal, then I say to you: Breaking them up is the only answer. No amount of regulation can contain the threat posed by these firms, because their sheer power allows them to control our public institutions. (Where do our Treasury officials come from? Where are they going next?) They will inevitably manage to avoid or simply to repeal any regulation, just as they did for the past twenty years. Their political power cuts across party lines; look up the history of the repeal of Glass-Steagall for just one example.

If you are a “moderate”, then I say to you: The status quo is a disaster waiting to happen. You may think that large firms bring some kind of benefit, possibly due to economies of scale. I believe that argument is dubious, but even if it were true, any benefits pale beside trillions of dollars in contingent public liabilities. Moreover, breaking up these firms is not so radical; it is similar to the anti-trust actions our government has been taking for a century now. And the resulting smaller financial sector would be the same as the one that served us well for decades.

If you are a populist, then I do not need to say anything; you are probably already sharpening your pitchfork. Goldman Sachs is going to give its average employee a $750,000 bonus this year. This year! Enough said.

If you a libertarian, then I say to you: These firms are corporations with the power to tax. Taxpayers absorbing losses is the opposite of a free market. The Fed printing trillions of dollars and dumping them in bank vaults is the opposite of limited government.

This is not about Democrats or Republicans. It is not about Barack Obama or George Bush or Glenn Beck or Keith Olbermann or Sarah Palin or even Nancy Pelosi.

This is about the financiers versus everybody else. And we are losing, badly.

Now I am going to say something I never dreamed I would say: God bless Bernie Sanders.

Senator Seeks to Break Up Banks ‘Too Big to Fail’

Senator Bernard Sanders, the Vermont independent, is taking aim at banks that are considered too big to fail. He introduced legislation on Friday that would force the Treasury Department to break up all financial institutions whose failure could cause a major disruption to the nation’s financial system.

“If an institution is too big to fail, it is too big to exist,” Mr. Sanders said in a statement. “We should end the concentration of ownership that has resulted in just four huge financial institutions holding half the mortgages in America, controlling two-thirds of the credit cards and amassing 40 percent of all deposits.”

Senator Sanders has a petition on his site.

We urge the immediate enactment of the Too Big to Fail, Too Big to Exist Act, which directs the treasury secretary to compile a list of those financial institutions that are too big to fail in the next 90 days, and to break up these banks and insurance companies a year after the legislation is signed into law.

I urge you to set aside your political affiliation and just be a United States citizen. (Unless you are not a U.S. citizen, in which case, thanks for reading.)

Sign the petition. And then forward it on.

7 comments to Too Big To Fail

  • OregonGuy

    Why would you never dream of blessing Bernie Sanders?
    Open your mind Nemo.

  • JF

    To mention an often neglected side- aspect: the problem and sins of the media, their
    often very problematic role in all that. The media / newspaper crisis might not be as bad
    as presented when looking back, a look at their failure if not complicity:

    And throwing in the famous video with Peter Schiff and the bunch of other financial pundits
    surely does no harm either. It is really a must-see for (general) reasons, no waste of time
    if unknown. Most of the financial experts were incredibly wrong, hence it’s classic character.
    That video makes a lot of sense to forward for instance to friends, people who are not so
    much into finance / economic, who stay rather away from that. In such cases that video
    makes a lot of sense because it tells so much, it all is easy to understand.

  • manuel

    Without the role of government in creating and supporting these monstrosities with regulation there’d be no too big to fail institutions.

    The problem is with the government that made them and supported them. You’re working on the wrong problem.

  • Signed by an ultra-conservative, “right-wing conspiracy” in MS. :)

  • doug

    signed by dfh. go bernie

  • G. L. Monahan

    Will the real leader please stand up.

    There are ten million Americans waiting for someone to give us a date to march on Washington.

    We need publicly funded campaigns. Insist that your legislators support HR1826 and Senate bill S752; the Fair Elections Now Act. It is a bipartisan bill that eliminates corporate funding of election campaigns.

    It was introduced in the House by U.S. Reps. David Price(D-NC) and Brad Miller(D-NC) and Rep. Walter Jones(R-NC) and in the Senate by Sen. Richard Durbin (D-IL). It has over 100 co-sponsors in the House and 5 in the Senate. It languishes in comittee in both House and Senate. It won’t again see the light of day if we don’t act.

    Will it stop the corporate oligarchy? No. Of course not. Greed and avarice will always find a way to corrupt. But, it will slow them down and transparent lobbying is another battle.

    Will the real leader please stand up!!!

  • AnonymousMonetarist

    Corporations with the power to tax.

    That pretty much sums it up doesn’t it?

    To listen to the well publicized rationalizations of banksters that rent-seeking is some form of “noblesse oblige” is particularly heinous.

    The premise of this nauseating pablum narrative is that in order to project American financial power a taxpayer financed bailout of rich folks’ bad speculative bets was in our national interest.

    To take such nonsense to a ‘higher level’ and argue on behalf of a ‘bankster manifest destiny’…. wrapping American exceptionalism with Romantic nationalism, and a belief in the natural superiority of what?, the ‘Wall and Broad Street’ Race?, is truly beyond the pale.

    The greatest atrocities in the history of humankind have usually been accompanied by moral certainty and religious fervor.

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