Break Up These Banks

by: Mike Lux

Thu Mar 12, 2009 at 17:00


Excellent news from the NYTimes the other day: banks which are getting nervous about pesky government oversight are starting to ask to return government bailout money. As I wrote a while back in a fit of outrage when news reports indicated that Geithner wanted to go down the same sorry path that Paulson had been going down- handing government money to bankers with no strings attached to make sure they weren't just pocketing it while doing nothing for the economy- I think that if bankers, don't want accountability, they shouldn't take our money. If they are in such bad shape that they have to take our money to survive, there needs to be tough accountability on how they do business.

I also fundamentally agree with David Sirota that if these corporations are too big to fail, then they are too big to exist: a proposition also agreed to by the populists and progressives of the late 1800s/early 1900s, by Abe Lincoln, by Teddy Roosevelt, by FDR, by Harry Truman. Progressives of all eras have understood that corporations that grow too enormous threaten our economy and our democracy, and should be woken up into smaller entities that can't do so much damage when they are mismanaged. The era of bank consolidation has to come to an end, and these monsters need to be broken into smaller companies just like Standard Oil was in the early 1900s.

Ironically, some of our tax dollars were actually used by these bank conglomerates to buy other banks, instead of, say, giving out loans to consumers and businesses trying to buy things or make investments that would create jobs.

The mess these big bankers have created for our economy is stunning, and it will take many years to work our way out of it. Every day dealing with the wreckage of all this is going to be harrowing. But we can start by doing what our progressive forbearers did: breaking up the big financial trusts, regulating them with vigor, holding them accountable. When a class of people has screwed up as terribly as big bankers have, we should take away their power and watch them like hawks for the rest of their time on this earth.

Mike Lux :: Break Up These Banks

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Agreed to by all progressives. 4 and 4 more to Mike. (4.00 / 7)
A proposition agreed to by the populists and progressives, by Abe Lincoln, by Teddy Roosevelt, by FDR, by Harry Truman. Progressives of all eras have understood that corporations that grow too enormous threaten our economy and our democracy.

For not just the economy, but to protect also the democracy, without which our economy is a prison. Corporations that are too large threaten our economy and our democracy.

I have been putting together some thoughts about big, and about the theft of value that the last forty years has meant. More leter but essentially, if there had been no theft, if wages and social wealth had followed the same curve it had followed for the last 300 years, following the growth in the GNP and GDP, we would not be in crisis like this. People became too poor on MNain Street to support the top heavey economy. Shifting money back to the middle and working class is necessary in the long run, and the Reagan/Bush/Bush theft, the transfer through tax changes, to the owning class, caused our crisis.

It happened because corporations grew so big, as to own the way Americans tyalk to each other. Our dialogue is poisoned. While there is plenty of room for debate about what percentage of a healthy economy, and what sectors, and in what manner, corporations should control and which should be responsible to the democracy, to the people. There is no debate that the giants that control the economy are bad for us all.

No debate at all anymore.

A proposition agreed to by the populists and progressives, by Abe Lincoln, by Teddy Roosevelt, by FDR, by Harry Truman. Progressives of all eras have understood that corporations that grow too enormous threaten our economy and our democracy.


--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky


I'd give this comment and eight if I could (4.00 / 4)
This is principally why I've always been out of phase with the Democratic Party as it came to be after the New Deal faded. Bill Clinton was no fool, and as most successful politicians are, he was absolutely a creature of his time. Even so, it irritated me to listen to him, to hear others praise precisely those parts of his genius which equated a clever capitulation with victory. I figured that we'd have to pay an awful price for giving up the struggle; I just didn't know how soon the bill would come due.

The best you can say about the difference between 1992 and now is that events have confirmed the left's criticism of Clinton's sexy new Democratic Party, and that the struggle can no longer be papered over. The worst that you can say about it is that the while the Republicans have bullied and squandered their way into a vicious irrelevance, the leadership of the Democratic Party is still trying to paper over the status quo for them. This can't work, in my opinion, but it can delay or derail the actions which you suggest, and in the meantime try everyone's patience to the breaking point.

Opinions vary as to where Obama stands in all of this, but as I've said before, I don't think that matters nearly as much as what we -- not just the politically engaged, but the people as a whole -- are willing to do about it.


[ Parent ]
Totally Agree (4.00 / 3)
It should be noted that "too big to fail" was used by the FDIC long before Glass Steagall was repealed in 1999 to deal with the collapse of Continental Illinois in the early 1980s and in 1991 to look the other way when Citibank fell below their reserve requirements (yes they have been here before).

Even with the break-up of the mega banks you might still end up with a few banks that it makes sense for the FDIC to nurse back to health like Continental Illinois and Citibank circa 1991 but you would avoid the situation we have today where the whole financial system is dependent on 4-5 banks surviving.


Well said, Mike. (4.00 / 4)
These elites failed completely.

 

When a class of people has screwed up as terribly as big bankers have, we should take away their power and watch them like hawks for the rest of their time on this earth.


The COP Report addressed "too big to fail" (0.00 / 0)
At the same time as TARP, the Congressional Oversight Panel was created to "review the current state of financial markets and the regulatory system."  Chaired by Elizabeth Warren, the panel's report specifically points to:

three areas of regulation that could have prevented the current economic crisis, specifically basic consumer protection rules, supervision of credit rating agencies, and regulation of companies that are "too big to fail."



agree (0.00 / 0)
I have to agree with jmnyc
These elites failed completely.
When a class of people has screwed up as terribly as big bankers have, we should take away their power and watch them like hawks for the rest of their time on this earth.

positive thinking

I Agree (0.00 / 0)
I don't think nationalization is the right course, and, with the banking crisis seeming to have peaked, is not going to happen anyway.

The government should be directing these institutions to slim down, as Citigroup is doing.  What remains must be subjected to stringent regulation, which will be effective until the next Ronald Reagan comes around, probably in 40-50 years.


missing ingredient (0.00 / 0)
Agree with everything said here, only there needs to be PUNISHMENT! The only way anybody will invest in the market, or banking is for the investors to trust the system. At this time none do. Charge and prosecute the perps that a case can be made against, and remove all executives that had decision authority who can't be charged. This could be done with strings attached to bailout money. Coupled with stringent regulation and oversite, trust will return. Also follow and retrieve the money that can be found. By enforcing the law against these criminals and imposing career obsticles on bad judgment by senior management, future executives WILL pay more attention to the investors well being.

Government by organized money is just as dangerous as government by organized mob..... FDR

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