By Seth Richardson
We’ve always been left to wonder why the bailout of the Big Six banks, including JPMorgan, Bank of America, Citigroup,Wells Fargo, Goldman Sachs, and Morgan Stanley were so painless for the banks and how they were able to weather the financial tsunami that has devastated our economy and indirectly the economy of the world and instead flourish.
Turns out it’s all Ben Bernanke’s and the Federal Reserve’s fault.
A story in Tuesday’s Denver Post by Bloomberg News reporters Bob Ivry, Bradley Keoun and PHil Kuntz illuminates just how it is that these six firms avoided their natural free-market fate of bankruptcy. It was the Federal Reserve that saved them, and it was the Federal Reserve, in collusion with the Big Six, that kept taxpayers in the dark, deliberately, about how much the Big Six were getting from taxpayers. The staggering total is far, far more than the $700 billion in TARP funds. When it’s all said and done, the Big Six took 63 percent of the funds you and I will be paying for, and worse, through secrecy, chicanery and manipulation they managed not just to avoid bankruptcy, they all managed to grow substantially, collectively by some $2.5 trillion dollars, or 39 percent, between 2006 and 2011, while innocent homeowners who had never missed a payment had their homes foreclosed upon merely because local property values made their homes worth less than the balance remaining on their mortgages.
The maths are complex, and I refer you to the article for a good explanation of exactly how it happened, but the upshot is that the Big Six banks that should have been shut down by the Federal Reserve and the FDIC because they were failing and genuinely under-capitalized, were instead not just saved at public expense, but were given preeminent position in our banking economy, at the cost of many thousands of small, independent banks that were, and continue to be shut down by the government because their loan portfolios and cash capitalization are sub-par, in large part due to the machinations and malfeasance of the Big Six and the Federal Reserve itself. No bank bailouts for your local bank who, through no fault of their own now hold precarious or non-performing loans. Just arrogant FDIC auditors walking in and shutting the bank down without notice and selling its assets to a bigger bank.
I’ve said it before, and I’ll say it again: It is reasonably clear that this administration is attempting to concentrate all US banking in the Big Six and perhaps a few other interstate and international large banking networks, at the expense of local banking, in order to consolidate the Progressive-in-Chief’s power and control over the economy. The Federal Reserve is complicit in this centralization of banking because it’s the non-governmental, immune-from-scrutiny, un-audited controller of, quite literally, the entire economy of the world. When the Federal Reserve speaks, nations listen. It’s easier for the Fed and the Progressives to control a few large banks, and consequently the economy, than the tens of thousands of local banks we have in our independent banking network.
So I come to common cause with the Occupy Wall Street protesters insofar as they argue that the Big Six should be put out of business as punishment for their fiscal malfeasance, their officers (and Ben Bernanke) prosecuted for fraud and collusion, the Federal Reserve should be either disincorporated or placed under the close scrutiny and direct control of Congress and required to be fully transparent and its officers identified and held personally accountable for their actions, and that people should immediately withdraw all their money and investments from all of the Big Six and place them in their locally-owned banks and credit unions, as a way to protect our nation from the devastating evil of central banking.
Perhaps the OWS movement should change its name to “Kill the Big Six and the Fed.” With that agenda I completely agree.
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Both groups see the same problem. The OWS people want the government to get bigger to solve the problem, the TEA party wants the government to get smaller and quit causing the problem. What the OWS people want is Russia of 1917 and the TEA party wants America circa 1790. They have nothing in common.
In this sense it really seems that OWS and the Tea Party are on the same page… I can’t figure out why they seem to be so adversarial.
Aren’t both groups against bailouts, TARP, and the stimulus packages?
I have not seen the Tea Party attacking the OWS. Perhaps I have just missed it.
I think you have it right that the Tea Parties oppose the bailouts, TARP, stimulus packages and other deficit spending. If that is what the OWS opposes surely the two groups would find common cause. Is that what the OWS opposes? It is not clear what the OWS opposes or supports.
@skipanders – it did happen in the sense that when these homeowners are transferred (either for work, or because they need work) they can’t sell their existing homes for as much as they owe. So in many cases they’re either forced to pursue a short sale, or simply walk away entirely and hand it over to the bank.
If you were unfortunate to have bought at the height of the market in 2006-2007, even if you put 20% down, there’s a good chance you’re underwater and owe more than your home is now worth. There are markets in this country that lost 40-50% of their total equity. Even formerly hot markets like the Bay Area shed 25%.
This bad economy has forced people to make many difficult choices concerning their homes. If people decide a short sale or walk away is their best option that is their choice. But I see no way to blame that on the banks.
It is sad that people have underwater houses. That is not the banks fault or problem. People bought the houses, almost all of them believing house prices would go up forever. They were wrong, now they have a problem. They also have the responsibility to solve their problem.
Agree completely that we 99%ers should move what money we have out of the big banks. There is no down side to doing so.
Think Seth is wrong about foreclosures on homeowners who have never missed a payment, but are underwater. Don’t think that has happened.
Where was OWS when both Bush and Obama voted to bail out the big banks, thereby causing substantial financial harm to shareholders, employees, customers, and taxpayers? The total lack of leadership and political courage back then is precisely why those banks are still destroying lives today. The only difference today is that Dodd-Frank has, and will continue to make the financial carnage even worse in the future. Meanwhile, the big bank CEOs continue to write big checks to the campaigns of Obama, Romney, et al.
Big surprise you would blame the secret loans of 2006 on Obama. LOL
The “Flow of Funds Account” of banks buying treasury bill at .0078%, then lending it back to the FED at 3.5% has always been another way to redistribute public money into private pockets.
This link gives the quarterly amount of the top 6 banks which was a total of $3 trillion.
They do that transaction at the same speed as high frequency trading: an auto mouse button click of .01 seconds.
http://www.docstoc.com/docs/78051905/CRS-on-the-Federal-Reserves-Bailout
The private central bank has to go.
CSaction, not sure where you got the 2006 date. This activity has been going on since the 1920′s, but got really bad during the Bush1 and Clinton years while Freddie and Fannie ramped up.
From your data – very succinct and hopefully factual – you can see where Banks were being required to absorb ever larger portfolios of MBS from defunct banks and the GSE’s. Only Banks can handle the processing of these monstrosities. The GSE’s were as reckless and more culpable than Big 6 Banks.
Someone has to deal with the underwater loans, foreclosures and so forth. Thus Banks are being forced to do so. The quid pro quo is “free” money from the Fed as you point out. The spread allows them to pay employees and keep money velocity apace to prevent 1929 style calamity. That’s the premise anyway.