Why Are we so Angry With banks?
A good question. We need banks; they have always been an integral part of our economic blueprint and when they are functioning correctly they provide needed services. So what’s the problem?
Well the problem is that they are no longer functioning correctly. They no longer think of themselves as service organizations that function for the benefit of their customers and to make a profit. They are now only interested in the profit part of the original equation.
Right now bank profits are the highest since 2007, when they set a record of $36.8 billion in the second quarter. JP Morgan Chase is currently making record profits but not from the service they provide to their regular banking customers. Despite this flush of profits, Bank of America, Barclay’s, Goldman Sachs and Credit Suisse are planning to lay off thousands of workers.
The financial sector makes 30% of total corporate profits in this country and they produce no product. Since the crash of 2008 because of failures and mergers the nations biggest banks, Bank of America, JP Morgan Chase and Wells Fargo are now bigger than they were before the recession. They now hold 40% of total deposits as compared to the 32% they held before the crash.
The four biggest banks, Bank of America, JP Morgan Chase, Wells Fargo and Citigroup issue 50% of all mortgages and almost 66% of all credit cards in America. Today the ten biggest banks hold 60% of bank assets when in 1980 they held only 22%.
Now for the big one, the six biggest banks hold assets equal to 63% of the country’s GDP when in 1995 they only held about 17% of GDP. This, without producing so much as a thumb tack.
Even more disgraceful is the fact that the five biggest banks hold 95% of derivatives, the credit instruments that were a major factor in the crash of 2008. This crash cost U.S. Households nearly $20 trillion in wealth of which they have recovered only about $9
trillion.
And with all this wealth that the banks have accumulated and a pressing need for small business to get money to start and expand the banks only devote about 18% of their commercial loan portfolios to small businesses.
What do the banks do with all this extra cash, the approximately $3 trillion that they are sitting on? Surprise! They create bonuses for their traders and bankers, about 5000 of them, in 2008, each got over $1 million in bonuses.
So what do we do about this mess of greed and irresponsibility? The demonstrations on Wall Street and across the country are a start. Like most demonstrations they will not provide an answer, what they will do is call attention to the problem and possibly bring it into focus for our leaders who have been so focused on their own electoral goals they have ignored our eating goals.
But how can you do something? Well, the first thing you should do is pull all your deposits out of big banks and put them in small local banks. Help your neighbor and by doing that create more competition. The big banks thrive on monopoly. This country has always known the dangers of monopoly but sometimes, like now, we forget.
From a governmental point of view the first thing we have to do is implement & enforce the Dodd-Frank regulations wholly and completely and bring back the Glass-Steagall Act. The banks, of course, are going to howl like junk yard dogs over this but they absolutely brought it on themselves. If they had acted like mature adults running a sophisticated business this would never have happened. Instead they have acted like bad children on crack, running amok and doing everything and anything they can, to try to crank up profits with no thought to what their manic ways have done and are doing again to our economy.
The destructive effects of deregulation and the insane unregulated gambling of the banking industry and Wall Street can be traced directly to the destruction of the economy. It’s very simple, the guys who run the investment banks, the guys who run the brokerage houses, the guys who run the hedge funds have no respect for anything but the almighty buck. They don’t care if the economy crashes as long as they make more than the next guy. They have done more to destroy America than all the Islamic terrorists in the world.
A perfect example of the above, is Bank of America’s stupid, greedy grab for their debit card, holder’s money. Not satisfied with the 55cents to $1.60 they currently make on every transaction on which, they do not have to process a check, they want to add a $5 per month fee to you for saving them money. What to do? Screw them. Dump your debit card and pay everything by cash or check. If you pay by check you will be costing them a processing fee on every check you write. If you pay by cash you will be depriving them of the interest they accrue on the funds of yours they are holding against your debit card balance.
Take advantage of the special days coming up that will be dedicated to moving your bank accounts to small banks and credit unions.
But more on what the government should be doing. Investment banks should be prohibited the way they once were, from being commercial banks. If investment banks want to gamble with their investor’s money that’s one thing, the investors can always pull their investments but for them to be gambling with personal savings and business deposits must be prohibited.
All high speed trading should be slowed to the point where it can be observed and regulated. There is no practical reason for high speed trading. Its only reason for being is to avoid control when what we need for Wall Street is more, not less control.
Wall Street’s masters have to realize how morally indefensible their position is. They are not people who have added to the American experience. They’re not people who have enriched the lives of their fellow Americans in any form other than the accumulation of wealth. They are people who got rich selling incomprehensible financial schemes, only partially understood even by themselves… and then betting against them. These were schemes that never delivered any clear benefit to the average guy, but that actually helped push us into a horrendous economic crisis, the aftereffects of which, have blighted the lives of tens of millions of Americans.