So much for democracy…
There isn’t even democracy among bankers these days. Community and regional banks are being shuttered around the country by the FDIC to the tune of 218 since 2007. Any bank that levered more than its fair share of capital, suffered losses due to bad subprime, and generally managed their money poorly dies a quick painful death as it is swallowed up by the government “safe banking” machine.
Any bank that is except for the Supersized Big Bailout Six…
Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Morgan Stanley, and Goldman Sachs - these banks live in a different universe than mere mortals. Why? Because of the buzz phrase you have heard a lot of lately. They are simply “too-big-to-fail.”
When a bank is insolvent, the Federal Deposit Insurance Corporation (FDIC) created by the Banking Act of 1933 not only has the right, but the legal duty to take over the bank, divide its assets, investigate its books, and make sure it is open for depositors on the next business day.
But the Big Six operate under a different financial system than the rest of America. Neither you nor I are able to put our debts “off balance sheet.” We are not able to borrow from the government unlimited amounts of mulah at zero percent interest. We are not able to keep our jobs after destroying our firms. We are not able to pay ourselves bonuses, buy Leer jets, take spa vacations, and golf on Trump’s course on government dollars.
Only the Big Six are “legally” allowed to get away with the economic murder of 10 million unemployed and desperate citizens and 8 million more newly homeless American families. Only the Big Six are able to walk away scot free from the greatest bank robbery in the course of human history.
Frustrated? Yup, me too. As Congress deliberates financial reform, their goal should be to create one set of laws for all 300 million Americans.
Currently, “ordinary” America, the too-small-to-save crowd, lives under a democratic capitalist system where economic failure is not met with pots and pots of government guarantees and cash. The Supersized Big Bailout Six Banks have created an elite super class that is bound by different standards – a world of no laws, a veritable economic anarchy reminiscent of Old World Kings. Theirs is a government sanctioned free-for-all-style monopoly on the nation’s wealth – a system that MIT economist Simon Johnson calls an “oligarchy.”
The Big Six are capitalist when it comes to profits and socialist when it comes to losses. Wow! What a world it would be for any of us if we could have some poor schmuck like you take over my debts for me. I can just keep the good stuff. Any takers?
Givers and Takers
Apparently, yes there are a lot of takers. According to the 2000 census, there are 300 million of them in the United States alone. That is the number of suckers on the dole for the Supersized Big Bailout Six. Not only is this one-sided undemocratic banking system legal, it has been orchestrated and executed by two presidents (one Republican and one Democrat), their administrations and two Congresses of the United States of America.
American democracy is characterized by equality throughout all economic classes, and not intended to support any privileged class of people apart from the common public.
Yet the financial deregulation of the past two decades, officially sanctioned by the monumental bailouts that began in early 2008 and continue to this day, have created a two-tiered system of economic inequality that favors the Big Six over everyone else.
So how did we become a society where all the rights and privileges are vested in the top management of the Biggest and Baddest Six American Banks?
Banks of our Fathers
The fight between citizen-centric Thomas Jefferson and banker-centric Alexander Hamilton echoed the current economic battle we continue to wage.
Jeffersonian economists warned vigorously against putting America’s financial power into the hands of a few select bankers exactly the way the government has done since 2008. As the nation’s “too-big-to-fail” banks were pulled back from the brink of economic abyss, the Federal Reserve and U.S. Treasury solution to the problem was to make these banks bigger.
While Washington Mutual, the largest bank failure in U.S. history, crumbled to its knees due to flagrantly irresponsible lending practices, JPMorgan Chase was allowed to acquire WaMu at a fraction of its value. The too-big-to-fail JPM had already benefited from the government “sale” of the fifth largest global investment bank Bear Stearns for a remarkable $2 a share. This sale price was accompanied by a taxpayer infusion of $30bn for JPM’s generous takeover of Bear along with the ability to leave Bear’s toxic assets in the hands of the Feds.
Bank of America with billions of subprime debts of its own happily acquired one of the great cowboy banks, toxic debt king, Merrill Lynch. With this “acquisition” they received $20bn for their trouble on top of the initial TARP $25bn. Additionally, they were pledged $118bn in toxic debt guarantees. (Translation: the U.S. government took over their defaulting assets at taxpayer expense.)
In the quest for financial stability, Bank of America was encouraged to absorb the blatantly unethical Countrywide Home Mortgage. Wells Fargo, one of the largest three banks in the nation, was urged with government billions to swallow up “Was there a loan it didn’t like?” Wachovia Bank.
The U.S. government had created three global behemoths who are substantially larger after the crisis than they were before.
We know that humans are prone to “absolute power corrupting absolutely.” Bank of America, JPMorgan Chase, Wells Fargo, Citibank (the fourth largest U.S. bank) now hold absolute power over the majority of the nation’s mortgages.
Meanwhile back at the ranch, Goldman Sachs’ chief financial officer David Viniar was busy telling the industry that the “mortgage servicing businesses was critical for firms wanting to profit from the distressed mortgage market.” GS and fellow future bank holding company Morgan Stanley scooped up predatory lenders left and right only months before their own toxic debt bailouts.
These days, the Big Six are well positioned in the distressed markets, especially since they created them and enjoy government backing for their predatory efforts. They sink their tentacles into every distressed American home loan with glee. After all, they don’t have to worry about things like losing their job, income or investments. Uncle Sam, you, and I are taking the bullet for them.
All the while the Big Six pretend to be doing their “best” to modify contracts. To date only 200,000 mortgages of the millions at issue have been modified. Millions of homes continue to be foreclosed by the Big Bailout Six every day.
“Like all loans, mortgage contracts are based on a promise to repay money borrowed,” was the pearl of wisdom presented to the House Financial Service Committee by David Lowman, head of JPMorgan Chase home-lending business.
What Lowman really means to say is that if you are an ordinary human and not one of the Supersized Big Bailout Six you have to follow policies from which the banks themselves are exempt.
It seems F Scott Fitzgerald was on to something…
“If we rewrite the mortgage contract retroactively to restore equity to any mortgage borrower because the value of his or her home declined, what responsible lender will take the equity risk of financing mortgages in the future? What responsible regulator would want lenders to take that risk?”
Uh, excuse me, Mr. Lowman, but your concern for responsible lending and responsible regulators does seem… I mean under the circumstances, a bit of an oxymoron.
If too-big-to-fail JPMorgan Chase, fire-sale subprime trading wing Bear Stearns and the irrationally criminal Washington Mutual lenders hadn’t tanked the markets along with the rest of the Supersized Big Six, we wouldn’t be debating this. The irony of ironies is that it is precisely due to the irresponsible behavior of the Big Six and their regulators that we have the need for home-loan modification in the first place.
So much for justice and fair play. Hail to monumental hubris and hypocrisy!
Okay, calm down girl. Get a hold of yourself. This isn’t the first time in history that the perpetrators of crimes blamed the victims for those crimes. Remember Rome circa Year Zero of Our Lord? Remember the Holocaust?
The list goes on. Back to the beginning…
Economic Civil War
Eleven score and thirteen years ago “our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men (and women) are created equal.”
Okay that was a good start…
Now we are engaged in a great civil war between the have and have nots, the big banks and local banks, the big “swinging dick” mortgage companies and small struggling homeowners, the politicians, lobbyists, and bankers pulling the strings versus the common interests of the taxpaying population – testing whether this nation, or any nation so conceived and so dedicated to the ideal of democracy and equality, can long endure.
We are met on a great battlefield of economics. We have come to debate this in the halls of our legislature in the hope that the democracy created by and fought for by our forefathers and mothers should be true to its original vision of equality and justice for all Americans.
It is altogether fitting and proper that we should do this now at this time as the home foreclosure and jobless rates escalate, as small businesses continue to be shuttered, as families and neighborhoods are forced to split apart in the struggle to financially survive.
It is for us, the economic survivors of the Great Recession, to be dedicated here to the unfinished work which our founders devoted their lives to and have thus far so nobly advanced. It is for us, those who are left standing, to help those who have fallen and suffer at the tyranny of the Big Bailout Six. Ordinary America should not be forced to lose their family homes, jobs, and livelihoods due to the irresponsible lending and market manipulations of the Big Bailout Six. We must right this great wrong.
It is rather for us to be here dedicated to the great task of reforming our financial system that remains before us – that from this great duty we increase our devotion and highly resolve that those honored ancestors who fought for freedom from the banking elite and private interests of a small group of privileged money men shall not have fought in vain.
That this nation, under God, shall have a new birth of freedom from the tyranny of the Big Bailout Six and that government of the people, by the people, for the people, shall not perish from the earth and be replaced by government “of the banks, by the banks, for the banks.”
In the purity and sanctity of American Democracy, we trust and pray. May our nation rise once again to embody its promise of equality and unchain the millions of wretched souls who remain enslaved by the hubris and hypocrisy of the Big Bailout Six.
Monika Mitchell - Executive Director email@example.com
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