Democrats & Liberals Archives

Ruled by 6 Bankers

I recently read “13 Bankers,” by Simon Johnson and James Kwak. The authors start with 13 big bankers that President Obama spoke to after the Crash. But it soon becomes clear that the real financial and political power in this country rests with the leaders of the 6 biggest banks. They should have titled the book “6 Bankers.”

The book makes a convincing case that Wall Street grew too powerful at the expense of Main Street. The leaders - especially of 6 Big Banks - used their financial power to unduly expand the financial industry while decimating non-financial industries, to design highly-risky sophisticated financial products with which to extract fortunes from "clients," and to gain political power that enabled them to destroy the financial regulatory system. The result: The biggest depression since the Great Depression.

There are many diagrams in the book. The most hard-hitting diagram, the one that struck me between the eyes because it demonstrates the outrageous and dangerous power of the 6 Big Banks is this one:

The diagram shows the tremendous growth of 6 banks - Morgan Stanley, Goldman Sachs, Wells Fargo, Citigroup, JPMorgan Chase, and Bank of America - as a percentage of GDP (Gross Domestic Product) from 1995 to 2009. In 1995 these 6 banks produced 17% of the country's GDP. In 2009, the 6 most powerful banks gave us 63% of total GDP!

Unbelievable! 63% of all economic activity, as measured by GDP, is performed by 6 banks! Is there any wonder why there is little work in other economic sectors? Why these bankers are called "Masters of the Universe"? Why these "Masters" take chances that lead to bubbles that burst? Why their shenanigans led to our present economic mess? Why they are considered to be "too-big-to-fail"?

Even after we bailed out the "Masters," they jumped right back to life and profitability, while the rest of us "pawns" are still struggling. How on Earth did our financial overlords become so rich and so powerful? In one word, "deregulation."

And it all began with President Ronald Reagan. He spent most of his time in office telling us that too much government is the problem, and that markets should be kept "free." He began a long trend of deregulation that was followed by President Clinton. In 1999 we repealed the Glass-Steagall Act that separated commercial from investment banks. President George W. Bush continued the deregulatory trend by placing regulation opponents in charge of regulatory agencies.

During this time, starting with Reagan up to the Crash, the financial industry made out like bandits while the rest of the economy stayed in the doldrums. Incomes of financial employees doubled while those in industries did not budge. Profits of financial companies exploded. The 6 Big Banks got so rich, I repeat, they got to the point where they represent 63% of our entire GDP!

Before the Crash, there were plenty of bubbles, plenty of financial disasters. We had the S & L crisis and Junk Bond King Michael Milken, the Long-Term Capital Management Hedge Fund for the super-rich that we bailed out, Enron and Worldcom fraudsters, the housing bubble, several offshore bubbles and the financial calamity we are trying to extricate ourselves out of today.

The 6 Big Banks have tremendous power because they are "too-big-to-fail." They can and do buy votes, pay for hundreds of lobbyists to keep laws to their liking, and participate in the revolving door between government and the financial industry.

We are ruled by 6 Big Bankers. The authors believe that the best solution is to break up the big banks so they are not "too-big-to-fail." Unfortunately, because they are so powerful, we cannot break them up. At the very least, however, we must legislate some tough regulation. If not, another Crash will meet us down the road.

Posted by Paul Siegel at May 15, 2010 8:17 PM
Comments
Comment #300586

Welcome to the 21st century and the dilemma of Andy Jackson. Let’s hope Obama isn’t as dumb as Jackson.

Posted by: gergle at May 15, 2010 10:28 PM
Comment #300596

Great article and right on the nose. Deregulation has always and always will lead to abuses and a feeding frenzy by those in control on those least able to protect themselves. Trickle down economics does not work. It is nothing I repeat Nothing more than protectionism for the wealthy. Only thing I disagree with is they are not to powerful to be broken up. The American people need to DEMAND lobby reform, campaign finance reform and sensible regulation of industry. The masses should be the base for economic and social well being in this country not the elite. If the American people ever took the time to be informed and to look at who works in their best interest we could take back control of our country right at the polls. It would not be easy and it would not happen over night. It is a process of elimination and it starts with educating ourselves with information like this book and this article.

Posted by: R.Macklin at May 16, 2010 10:28 AM
Comment #300620

BORING!!!

Posted by: Beretta9 at May 17, 2010 10:53 AM
Comment #300636

Serious chunks of our government have been skewed not to manage public systems for public benefit, but to
externalize and hide private entity costs under the public tax pool.

We all know how this situation was facilitated. Politicians have to get elected. In our current system that takes money so only rich people who take money from other rich people and their corporations. Even if the politician in question is not corrupt they will OWE their biggest supporters for both their last election and their NEXT. They will sit on phones even going out the door to get money for their party as well, for what they owe there. This group of wealthy individuals will not only generally lack an understanding of their constituency. They are not the same people and not the same culture or issues. (Yes, I am saying that the general populations is unrepresented) They also will be, usually, professional politicians, thus not only a lack real grounding in practical living but in any other matter that will help them understand the issues of the people they are said to represent or the scientific issues of the
day. Additionally, the simply fact of legalized pay and payback (AKA bribe and kickback) seems inherently corrupting. Our Party system serving to disguise a set of people corrupted completely from those just sort of going along with a corrupted system. This whole recent business with the high court allowing the corporations open season is just making more public the already common condition.

The lynchpin of this mess isn’t the system overall, but of our “Open source” campaign funding. Shut that down and a major system change is inevitable.

We need a constitutional amendment. Publically funded websites and sheets showing each candidates history, associations, platform and track record on said platform.

Posted by: Pego R at May 17, 2010 4:43 PM
Comment #300641

Baretta9,

In this column, you wrote “BORING” about this topic. In another column you wrote “the European economy and the euro is on verge of collapse; the US is $14 trillion in debt and can’t continue to spend;and all we can talk about is “6 Banks,…”

I guess your correct. Lets just speculate about the causes of the worldwide financial crisis, the demise of the middle class, private sector and public sector deficits and the main street economy. There is little sense in discussing what actually happened to our economy and the role that the consolidated banking sector has played in the collapse of the financial sector and the impact on the main street economy. Who cares that six banks control 63% of our GDP? Who cares that the public sector has had to “socialize” their losses to the tune of literally trillions of dollars? Who cares that billions of dollars of capital were diverted from productive investments to speculative finacial gambling? Who cares about the future of our economy?

I would suggest that if you are truly interested in the future of our country that you take some time to review the issues presented in “13 Bankers.”

Posted by: Rich at May 17, 2010 7:05 PM
Comment #300644

Baretta9,

One additional comment. In another column, you stated that Senator Dodd has all but disappeared from the political scene. Huh! The sweeping financial reform bill currently before Congress is sponsored by Dodd! That bill may not seem important to you. But it is extremely important to the future of our financial system.

Posted by: Rich at May 17, 2010 7:28 PM
Comment #300656

Rich:

The “6 Banks” or “13 Banks” are smoke and mirrors. The problem is spending. Whether it is America or European countries. When you spend more than you make, you go bust. If governments lived by the same rules as companies or individual families, we wouldn’t have any problems. It’s easy to blame banks and it’s not easy to take responsibility for one’s own actions. Europe is just a short distance ahead of America on the financial ladder. Where they are, we will be. When 1/3 of a nation’s workforce is working for the government, and the other 2/3’s draws government subsidies, the nation is destined to fail. We are paying out more in SS than we take in; the only workforce that is hiring and continuing to give pay and benefit increases is the government; companies and investors are a slush fund for the left; and there is no limit to the social programs the democrats come up with, we can’t go anywhere but down the tubes. If our politicians were working for private industry and did the same things, they would be in prison. It’s interesting that liberals want to hang CEO’s of private industry, but turn a blind eye to politicians who do even worse.

Wake up America!!!

Posted by: Beretta9 at May 17, 2010 11:09 PM
Comment #300670

People have become so brainwashed by the bull$#!7 rhetoric of both parties and their handlers in big finance that they no longer recognize the truth when they see it. Americans have given away control of our countries future through apathy and ignorance. People should read this and if they don’t quite get it, read it again. It will become obvious that “13BANKERS” at least has information that should be considered before we draw our conclusions who the bad guys and the good guys are. Accountability is the answer to changing this country back to its intended direction. Identify the problems then support those that will hold the guilty parties responsible and regulate their future actions. Deregulation and self regulation just don’t work for the betterment of this country. Its not enough to just know the truth, people need to care enough to do something about it by seeking out and electing candidates that will support change.

Posted by: R. Macklin at May 18, 2010 8:42 AM
Comment #300671

Barretta9,

Wake up yourself. The TBTF banks have cost the taxpayer trillions of dollars due to their malinvestments. The public sector has had to absorb massive private sector debt in addition to direct subsidies in order to save the TBTF banks and avoid economic catastrophe. You state that “If our politicians were working for private industry and did the same things, they would be in prison.” Well, here is a clear case in which the CEOs of private industry are not only not in prison but are receiving bonuses for their work.

The point of “13 Bankers”, in my opinion, is not to call for a lynch party but to direct attention to the systemic risk associated with the concentration of financial services in a few mega-entities in a de-regulated environment. If one or more fail, the entire system is threatened. The additional point, is to bring attention to the dysfunctional nature of our financial system over the past 30 years. Our economy became increasingly dependent upon private sector debt expansion (350% of GDP in 2008) for growth. Middle class wages remained flat and jobs were “wage arbitraged” oversees. The only real beneficiaries of that illusory growth were in the financial sector and their wealthy investors. Until, of course, the unsustainable debt imploded bringing down the architects of that ponzi scheme only to be saved by the average taxpayer.

Debt is not inherently bad. It is the only means by which money is created in our system. The problem is what is done with the money created by debt, whether in the private or public sector. If it is invested in productive enterprise and infrastructure development, then we will all benefit in the long run. However, if it is invested in financial gambling instruments and unnecessary McMansions, then it will be lost forever. So, it seems to me that the challenge is to create a financial regulatory scheme that directs investment toward sustainable long term growth in the main street economy. The financial system should be the engine of the economy not a parasite on it.

Posted by: Rich at May 18, 2010 8:51 AM
Comment #300774

I think we should get past the current Democratic culprits and the current Republican culprits. We should get past the blame game we’re playing. This problem didn’t start two or ten years ago. It didn’t start twenty or thirty years ago. It’s obvious when this country’s problems started if you contrast the first half of our history to the second half. The differences are obvious.

It’s pointless to blame one party or the other because we are complaining about the results of a process that is subected to human nature. If they aren’t called moneychangers in the temple they are called speculators or robber barons or greedy bankers. The name always changes but the song remains the same. Our unfortunate circumstance is the moneychangers are in the temple.

We’re blessed with a way out though, a choice.
1. We can blame others and continue, or
2. We can look at our country’s history and compare the difference between the “constitutional” government we started with and the so-called “democratic” government we have now.

The U.S.A. doesn’t have a mommy. If we continue to think she does she will become a food source.

Posted by: Weary Willie at May 19, 2010 10:20 PM
Comment #300780

I pledge allegiance to the Flag and to the republic for which it stands, fifty nations, indivisible, with liberty and justice for all.

Posted by: Tired Tim at May 19, 2010 11:15 PM
Comment #300783

That’s not too much to ask, is it?
We could say it’s a club! You need liberty and justice for all before you can join.

Does Puerto Rico have liberty and justice for all? If it does we can say:

I pledge allegiance to the Flag and to the republic for which it stands, fifty-one nations, indivisible, with liberty and justice for all.

How about Quebec? Do they pledge allegiance to a Flag and to a republic that stands for liberty and justice for all?

If so, do they want to join the club?

How many nations? How many stars? Should we ask Mommy?

Posted by: Tired Tim at May 19, 2010 11:36 PM
Comment #300857

What’s sad is that the leading expert on this collapse, Mike Stathis, has been banned by the media. He predic ted everything in detail in his 2006 book America’s Financial Apocalypse and Cashing in on the Real Estate Bubble. He actually advised readers to short Fannie and Freddie when they were $60. check his site www.avaresearch.com

Posted by: tom at May 21, 2010 8:34 AM
Comment #375109

Who will listen to a concert, North Face Jackets Outlet, of Wang Jie, Longchamp Paris, and Yu tears, of nostalgia trip, will be a blessing for, Gucci Outlet, the hot summer and ecstatic, Coach Factory Online, once for friends, Burberry Outlet, and sentimental romance, Ralph Lauren UK, will be for a long-awaited, Coach Outlet, reunion does not drunk return, Polo Outlet Online, how much passion, Michael Kors Outlet, and difficult moments, Canada Goose Outlet, his own covered with mill edges, Coach Purses Outlet Online, lost his best, North Clearance, those who have been ignored, http://www.guccivshoesfactory.com/, by the vulgar, Polo Lauren Ralph, reality of youth ah, MCM リュック, those pure idealism and vision ah, Gucci Shoes Outlet, I do not know, Marc Jacobs Outlet Online, when to actually be, Coach Factory Outlet Online, covered with dust into years, Coach Purses Outlet, of ruthless thin bookmarks, for a long time, Michael Kors Outlet Online, has forgotten to open, Cheap Hollister UK Online, this is a forgotten era, UGG Boots Sale, subject look back, Coach Outlet Online, adrift.

Posted by: coachbag at December 19, 2013 10:10 PM
Post a comment