“The dominant public policy imperative motivating reform is to address the moral hazard risk created by what we did, what we had to do in the crisis to save the economy,” Treasury Secretary Timothy F. Geithner said in an interview.
The worry for consumers is that the bailouts skewed the financial industry in favor of the big and powerful. Fresh data from the FDIC show that big banks have the ability to borrow more cheaply than their peers because creditors assume these large companies are not at risk of failing. That imbalance could eventually squeeze out smaller competitors. Already, consumers are seeing fewer choices and higher prices for financial services, some senior government officials warn.
Those mergers were largely the government’s making. Regulators pushed failing mortgage lenders and Wall Street firms into the arms of even bigger banks and handed out billions of dollars to ensure that the deals would go through. They say they reluctantly arranged the marriages. Their aim was to dull the shock caused by collapses and prevent confidence in the U.S. financial system from crumbling.
Officials waived long-standing regulations to make the deals work. J.P. Morgan Chase, Bank of America and Wells Fargo were each allowed to hold more than 10 percent of the nation’s deposits despite a rule barring such a practice. In several metropolitan regions, these banks were permitted to take market share beyond what the Department of Justice’s antitrust guidelines typically allow, Federal Reserve documents show.
The obvious solution to “too big to fail” was to break up the behemoths into smaller banks and/or let regional banks buy their branches. The government took the opposite approach and absolved the guilty. Now they have “too big to fail” on steriods. Great job!
And Obama can’t blame Bush for this one. The Dems did it.
They will find a way Michael, have no doubt….
It’s the government’s fault not the market. The US is becoming a banana republic. Like most of the rest of the world throughout history, a few of the very rich like these and a lot of the very poor.
If it’s “too big to fail,” it’s too big. Full stop. That applies as well to government. It has been said that three boxes ensure American liberty — the ballot box, the soap box, … and the ammo box. There is one more chance for the ballot box to work, in 2010. People have already begun to resort to the soap box, only to be met by union thugs.
If diminution of governments’ pressure on citizens’ lives is blocked by entrenched interests or defeated at the polls because the parasites now outnumber the producers, I suspect (sadly) that we shall see increasing recourse to the third box.
The [url=http://www.lts.com/~cprael/Meade_FAQ.htm]Jacksonian America[/url] has been (as is typical) quiet for a long time. Jacksonians, however, outnumber Jeffersonians, Hamiltonians, and Wilsonians … combined. When roused, their fervour is not limited to the foreign sphere, and they [i]will[/i] rise violently in defence of liberty when absolutely necessary. The self-appointed Wilsonian elite had better be careful, and if you doubt me, check out ammo and gun sales in the last year.
It’s not that “big,” in and of itself, is a problem, it is when the government gives “big” (labor, contributors, business, Acorn, etc.) anything an unfair advantage. What the government should do is regulate so the little guy/gal has a level playing field on which to compete with the “big” players. All the talk in the world about raising taxes on the evil rich, who only got that way by opressing the people and taking unfair advantage of them, so our dear leaders can more equitably distribute income won’t do nearly as much as having people know they will get an equal shot to compete with the “big” players and be able to realize their dreams through hard work and risk taking. That’s what our republic is supposed to be about, not a nanny state run by arrogant oligarchs who promise to take care of us from cradle to grave – translation, everybody but them has to put up with a lower standard of living so nobody has to endure any negative consequences.
One remembers the breakup of AT&T. I had reservations at the time, but the creation of the Baby Bells during the Reagan administration (finalized on January 8, 1982,) is a big part of what made the Technology boom in the 90s possible.
Nothing the democrat party have done so far is irreversible. Yet. People dying because of rationed medical care is irreversible. By us anyway.
I see a race between the totalitarian impulses of the current administration and the shift of perspective of the American voter back to conservative rationalism. Next year will tell the tale. Do Rahm and the boys think they have enough muscle to stage a coup? Are there enough ANSWER and SEIU stooges? Will they run out of kool-aide?
I’m with Bart. Too big to fail is just plain too big…and I work for one of these juggernauts.
2. Br. Michael wrote:
[blockquote]And Obama can’t blame Bush for this one. The Dems did it.[/blockquote]
Well, actually the mergers have been going on for years.
And the major recent ones, along with the big bank bailouts, came before the November 2008 elections and were driven by Bush appointees Ben Bernanke as Chairman of the Federal Reserve and Henry Paulson as Secretary of the Treasury.
Yes, the Congressional Democrats did vote for the Republican administration requests under the threat that a major depression was in the works if they didn’t go along.
You’re partisan screed won’t work.
3, Chris you were right.
No #10. #9 is correct. All the big shotgun weddings plus the governement take-over of Fannie and Freddie were by President Bush and Treasury Secretary Paulson with their fingers on the trigger. Perhaps you will recall that the original bail-out request was from Paulson including the proviso that “no one shall inquire as to how he disposed of the funds”. The congress correctly balked at this one. But they did approve of the funds. I agree that the big banks should now be busted up a la AT&T.
11. Northwest Bob wrote:
[blockquote]No #10. #9 is correct. All the big shotgun weddings plus the governement take-over of Fannie and Freddie were by President Bush and Treasury Secretary Paulson with their fingers on the trigger. Perhaps you will recall that the original bail-out request was from Paulson including the proviso that “no one shall inquire as to how he disposed of the fundsâ€. The congress correctly balked at this one. But they did approve of the funds.[/blockquote]
I thought elephants were supposed to have good memories, but apparently not.
Hey! Children! Control yourselves! This is in no way a Bush vs Obama or GOP vs Democrats issue. [b][i][u]All[/b][/i][/u] share plenty of blame in this including all of the voting public that remained silent and actually believed that their elected officials knew what they were doing.
Pointing fingers may help in a small way to identify the origin of the problems so that the mistakes aren’t repeated. But what is really needed are creative solutions. Looking to the government – lawyers and career politicians with no experience in business – is only setting us up for the next collapse. We have 70 years of accumulated regulatory detrius. Another layer (especially if the politicians don’t read the bill) will not help.
Too big to fail means the company is too big to manage.
13, I agree, but there is no point in discussing this with Obama partisans. I think that Bush made terrible mistakes, but the Democrats went along with a lot of them to advance their own interests.
Ken, good day to you, sir.
True enough Br. Michael. But what boggles my mind is that Mr. Hope ‘n’ Change is running roughshod over the federal budget and over the law in ways that GWB never even dreamed of and the Left thinks it’s peachy.
I agree. No Democrat seemed to mind when Clinton went to war against Serbia.
Oh and Nikolaus, was it not true that in the last two years of the Bush administration the Democrats controlled the Congress?
And of courst there is this:
[blockquote]Democrats worked this week to find a way to quickly fill the senator’s seat, thus ensuring them of the votes needed to overcome Republican objections to a healthcare vote this year. Kennedy himself had requested asked Massachusetts lawmakers to allow Governor Deval Patrick to name a temporary replacement to serve in his vacant Senate seat in the five months before a special election could be held.[/blockquote] http://moneynews.newsmax.com/economy/healthcare/2009/08/28/253589.html
That is, repeal the law that Kennedy wanted in order to require a special election to elect a Democratic senator when it looked like a Republican would appoint a Republican. Now they want to put it back the way it was so that the Democratic governor can appoint a Democrat to preserve the Democrats congressional advantage. It would be more honest to pass a law requiring that only Democrats can represent Massachusetts.
This is not rule by law, it is dictatorship covered with legal veneer.
16. Nikolaus wrote:
[blockquote]But what boggles my mind is that Mr. Hope ‘n’ Change is running roughshod over the federal budget and over the law in ways that GWB never even dreamed of[/blockquote]
Current projections are that the debt will double in the next 10 years; Bush was able to double it in 8.
17. Br. Michael wrote:
[blockquote]Oh and Nikolaus, was it not true that in the last two years of the Bush administration the Democrats controlled the Congress?[/blockquote]
Well, yes and no. It is true that there were Democratic majorities in both houses, but the Democrats lacked a “super majority” in the Senate, so the Republican Senators could (and did) block any piece of legislation they chose to block.
And if anything got by that hurdle, after six years in office Bush had finally learned to spell the word “veto” and there were insufficient Democrats in either house to override a presidential veto.
13. Nikolaus wrote:
[blockquote]We have 70 years of accumulated regulatory detrius.[/blockquote]
One of the things governments do is regulate. Even the U.S. Constitution says the federal government is to regulate. And U.S. government regulation did not begin in 1939.
At least one of the causes of the banking crisis of 2008 was the failure of government to regulate, both by repealing and restricting regulations intended to prevent another Great Depression and by lax enforcement of existing regulations. While Democrats have been willing partners in “deregulation” the big push came from Republicans like Phil Gramm.
Except Ken, the legislation was enacted and the Democrats had it well within their power to block it. However you are to much a partisan for me and I am going to leave this discussion.
[blockquote]No Democrat seemed to mind when Clinton went to war against Serbia.[/blockquote]
Why on earth would they? The Serbians were defending themselves from Muslim territorial aggression sponsored by Iran, Albania, and the usual Muslim Brotherhood types. For whatever crazy reason, Muslims are the favored demographic group of the American left. maybe it’s because of their announced intention to enslave all the worlds non-Muslims.
Off topic? Probably, but it makes you wonder why the American left consistently follows policies ( like putting all of our financial eggs in large baskets, under government control because of the “Bailout” funds) That are contrary to the interests of Americans.
RE: “I agree that the big banks should now be busted up a la AT&T.”
There would be far far less need of that had the “big banks” that made hideous decisions over the past decade been allowed — by market principles — to FAIL.
That is what the market is supposed to do.
But no . . . the State — both Republicans and Democrats — propped up the banana banks with billions and billions and billions of dollars — so that they may become larger and make more utterly reprehensible decisions. And now they have learned that they can blackmail the State into offering them more money the next time they get into trouble — and the State has learned to exact more control over various matters, out of revenge for the billions and billions.
So we will get larger, more behemoth, bureaucratized further-State-controlled banks that make larger and larger mistakes.
And for this we may blame both Republicans and Democrats — who voted for the ridiculous first and second bailout packages [bank and auto].
I, of course, will not be voting for those people who voted for those initial bailouts, as it is a *perfect* list of the people who have absolutely no fiscally conservative principles.