Too big to fail, and unfortunately getting bigger
Fed officials such as James Bullard, Thomas Hoenig and Gary Stern have spoken eloquently about the need to address banking’s too-big-to-fail problem, but in the real world, bank regulators haven’t done much about it. In fact, the Washington Post reported last week, they have helped the big get bigger. David Cho writes:
The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.
How big are the gants? Bank of America, Citigroup, JP Morgan Chase and Wells Fargo combined now have two-thirds of the U.S. credit card market and nearly half of the mortgage-origination market.
The story does note that a proposed regulatory overhaul would force the biggest banks to hold more capital, and would spell out a way to liquidate them should they get into trouble. It’s far from clear whether this will actually work, but it is certainly clear that we need to do something about the problem.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
As much as I hate to see these “too big to fail” financial institutions get any larger, our governmental financial oversight is so lousy that maybe the only way they can keep track of them is if there are only four.
The “Too Big To Fail” tagline will continue working until Americans wake up and realize it was a marketing ploy to release them from their own hard earned money and shift the wealth from the middle class to uber-wealthy.
Americans lost big at the poker table and were asked to leave the game while the uber-wealthy played on using taxpayer money for their kitty instead of their own wealth. Americans are under the naive notion that at some point they will invited back to the game in order to get an opportunity to win back their losses. Silly, silly fools! The game was shutdown and the uber-wealthy cashed out at the bank. You were the BIG loser!
Another misconception that Americans have is that the Multi-National Corporations are loyal to Americans. MN Corps have no loyalty to anyone and don’t recognize any nation’s borders. The American Sheeple think that there’s such a thing as “honor amongst thieves” and these Western Multi-National Corporations would never exploit Americans the way they have Asia, South America, Middle East, Central America, Eastern Europe. Guess what folks you got had! Big Time! The intent is to bankrupt the American economy and turn you in to the next serf labor pool. Hundreds waiting outside the gates to the factory for a handful of jobs. Then they can pick and choose and tell you what the wages are. This “recession/depression” didn’t just happen. It was created and it was designed to shift the remaining wealth in the world in just a few hands and to make it permanent.
Taxpayers got all the risk and the banks and their CEO’s got all the gains.
It well happen again when someone cooks up a plan to make themself rich with no regard for the share holders or the taxpayers. The companies will be broke and the C.E.O. will be rich and gone. Give me that gig
We have come too far, and now albeit the Feds claim “too big to fail” will never be allowed, they are pushing for those same banks to become bigger, by forcing local community banks out of business through assessing outrageous charges and guidance limitations on everything from fees to rates.
The real solution is to abolish FDIC insurance or strictly limit the insurance on deposits to (say) 10,000. and go back to a buyer be ware philosophy.
The second round of failures is coming by 2011….keep an eye open for what Goldman is now doing with derivatives.. (simply a replacement for their past practices) and guess what will happen….no different than what happen with mortgage securitization, stripping, etc.