The Great Recession: It Didn't "Just Happen"

No, contrary to what the bankers might want you to believe, the "Great Recession of 2008 / 2009" didn’t just happen. It was not something that resulted from normal and unavoidable economic conditions. The Great Recession was in fact engineered by the financial industry. And while they (the financial industry "Masters of the Universe") probably didn’t intend for the resulting outcome, they did intentionally pursue the path of greed and recklessness that brought about the meltdown of the U.S. economy.

You see, economic recessions are not all that uncommon. They are a natural part of the economic cycle, and adjust the economy in response to changes in consumer spending and consumption, or increasing or decreasing prices of goods and labor. In many ways, a recession is like re-booting the economy - a fresh startup without all the "bugs" that were bogging-down the system.

A recession is classically defined as two consecutive quarters of negative economic growth. The National Bureau of Economic Research (NBER) defines a recession as a "significant decline in economic activity lasting more than a few months" (see Recession Defined).

On average, the U.S. economy experiences a recession every 5 - 8 years (see Recession History). The magnitude of economic contraction, and the duration of recessionary conditions, determines whether a recession is classified as mild, moderate, or severe. "Normal" recessions are typically mild to moderate in their impact, and are relatively short-lived (5 - 15 months average).

An economic slowdown that doesn’t quite meet the definition of a recession is referred to as a "correction". Corrections tend to occur every 2 - 4 years. It’s all part of the normal economic cycle: A period of accelerating economic growth, followed by a growth spike and plateau, and then a period of economic contraction leading into the next growth phase.


By February / March of 2008, many economists were predicting that an economic correction, or a mild to moderate recession, was on the horizon due to the slowdown in the previously red-hot residential real estate (housing) market, and concerns over a rising level of defaults in so-called "sub-prime" mortgages (Frontline Thoughts; Economist Forecasts). But virtually no one, not even as late as mid-summer 2008, foresaw what was actually going to happen to the economy in September (2008).

That’s because the financial industry had worked very hard to keep hidden the nature and full magnitude of the outlandishly-risky "investments" they had made in the mortgage markets. When the extent of those investments were finally exposed, and the degree to which many of the mortgages underlying those investments were identified as being at extreme risk for default, panic swept the financial industry and within days the entire economy was teetering on the brink of total collapse.

So, what should have been a tolerable, mild to moderate recession, turned into the worst economic calamity since the early days of the Great Depression 80 years ago. The U.S. economy skirted around the abyss, threatening for almost 6 months to fall into complete depression. Only super-human responses by the federal government kept the economy intact at all. All because a relatively small group of greedy financial industry "Masters of the Universe" decided to play craps with the U.S. economy. They gambled, they lost, and we, the American people are paying dearly for their greed, arrogance, and recklessness.

After what they did, you’d think these fallen "Masters of the Universe" would show some shame and penance. But that’s far from the case. They’ve been in complete denial since Day 1. And as the recession has dragged-on, they’ve increasingly taken the position that they’re innocent victims of the economic downturn too (earlier posting: Banks Revise History).

Maybe that denial is the result of their well-ingrained arrogance. Then again, maybe they’re afraid of the public relations consequences of taking responsibility for their actions (it’s hard to ask people to trust you with their money after you’ve just admitted to being reckless and negligent with trillions of dollars). Or maybe, just maybe, they recognize the liability implications - if they admit to any level of responsibility, there’s a good chance that they’re going to be required to compensate both individuals and companies for the financial damages that were incurred - and that would probably put them out of business altogether.

Just don’t forget - this Great Recession didn’t just happen. It was caused by the reckless actions of a small group of greedy, arrogant commercial and investment bankers.


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The Great Recession: More on "Too Big to Fail; Too Big Too Exist"

[original posting on subject, "Too Big to Fail; Too Big to Exist Act of 2009"]
[also see, "Still More on Too Big to Fail; Too Big to Exist"]

I’ve heard more than a few people comment that the notion of the federal government dismantling private financial companies sounds un-American: It’s unconstitutional and just one step away from communism they say.

Just as a matter of full disclosure, I am one who believes that the federal government has vastly over-stepped its constitutional authorities in the last 75 years or so, and as such, I usually don't support giving the Feds even more authority to intrude into our lives (that's topic for discussion at a later date). But in this case, I do completely support the concept of the federal government being granted the power to break-up financial companies that pose an unacceptable risk to the U.S. economy and the overall greater good of the American people.

Remember - the large commercial banks that were involved in causing this current economic nightmare were essentially created by the federal government. For the first 80 or so years after this country was founded, banks were regulated primarily at the state level. In 1864, the federal government created a system of national banks: Banks chartered and regulated by the federal government [see occ-history and wiki-national-bank for more information].

The stated purpose was to promote and facilitate the role of banking in interstate commerce. However, a large part of the motivation was to give the financial industry a way to circumvent what was often very stringent state-level oversight and regulation. As such, the federal government does have the right, and even the duty, to effectively regulate and control the monster that it created.

Look at it this way - the federal government participated in the creation of these mega-banks, so they certainly have the right to participate in dismantling any of them that threaten the stability of the overall U.S. economy.

If a national bank doesn’t like these new rules, they always have the option of going back to being a state-chartered company.

Of course, the mega-bankers insist that their largesse has provided significant benefits to American consumers and businesses in the form or easier access to credit. I guess in light of the current economic landscape, I should paraphrase Dr. Phil and ask, "so America, how’s that workin’ for ya ?"

The fact is, the whole argument (the same one they used all through the 1990s to persuade Congress to relax regulations and let them morph into mega-banks) is nothing but bullshit.

Any of us who were around prior to 1994, when this feeding frenzy of activity to become the largest banks in the country was first allowed to start, know that financially-responsible people had no difficulty in obtaining the credit they needed. I had all the credit cards I wanted or needed all through the 1970s and 1980s (a MasterCharge (later MasterCard); a BankAmeriCard (later Visa); American Express; Discover Card; Diners Club; store charge cards; gasoline cards). I never had any problem getting a car loan (and I got at least 3 or 4 in that time period). On at least 3 occasions, I went to the local bank, met with the manager, and got small ($ 8,000 or less) unsecured loans. And of course, I was able to get a home mortgage without any difficulty. All this easy access to needed credit, long before the so-called "benefits" of interstate super-banking companies came into existence.

Citi Bank and Chase Bank were already giant financial institutions that dominated the banking industry in the U.S., and operated on a global scale, long before the frenzy of creating today's super-banks started in the mid-1990s. Their morphing into super-banks had nothing to do with a desire to provide additional or better services to customers. The existence of interstate mega-banks provides no compelling benefit to American businesses or the American people. To the contrary, as the current economic situation has made abundantly clear, allowing a handful of banks to grow to gargantuan size and monopolize the flow of money in the country can instead have severe detrimental effects on consumers, businesses, and the economy as a whole.

So, who really benefits from these super-banks? That’s easy - the bigger they get, the more segments of the economy these banking companies can control, and consequently, the more profits that they can rake in. And the more profit, the bigger the compensation packages for that small group of "Masters of the Universe" who control the mega-banks.

Conclusion - if any nationally-chartered financial company grows to a size where it has the potential to control or adversely impact the U.S. economy, or otherwise represents a threat to the financial health of the American public, then the federal government not only should, but must, take steps to breakup that company and eliminate the threat that it poses.


Read a summary of the Too Big to Fail; Too Big to Exist Act of 2009 at:

http://seekingalpha.com/article/172245-the-too-big-to-fail-too-big-to-exist-act-of-2009

then support the bill by signing the online petition at:

http://sanders.senate.gov/petition/?uid=c53f1aca-5881-403e-928b-a25980cb4e0c



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The Great Recession: The Banking Industry Tries To Revise History

The "Great Recession" of 2008 / 2009, the worst economic setback experienced by this country since the depression of the 1920s and 1930s, was caused by the greed and arrogance of a relatively small number of bankers and mortgage lenders who intentionally engaged in negligent and extremely reckless conduct from 2001 through 2008.

This is not speculation - this is fact. Not that you’d ever know it from the advertising that the major commercial banks (Bank of America; Wells Fargo; CitiBank; Chase) have been churning out the last few months.

Starting just about a year after their recklessness was exposed, resulting in a meltdown of the U.S. and world economies, these banks have been working overtime to try to revise the facts of history and convince us all that everything they do (and have done) is really in our best interests.

Is anyone else insulted and outraged by some of the advertising that’s out there? I mean, how arrogant and shameless can these bankers be (or, how stupid do they really think we all are)?

You’ve probably seen the ads - for example, the Citi ads that claim that their bank is working hard to help us (the consuming public) get through these difficult times. Of course, there’s no mention of the fact that they played a major role in creating these difficult times. And I guess by "helping" they must mean foreclosing on homes, repossessing vehicles, and engaging in abusive credit card practices against their customers who have been driven into financial distress as a result of the irresponsibility and recklessness of the banking industry. "Citi is Helping" - yeah, right.

How about the Bank of America ads that claim that they are now the "Bank of Opportunity"? Would that be the opportunity for customers to have their credit accounts closed and their credit ratings destroyed? Or maybe the opportunity to be financially raped by outrageous credit card interest rate increases and compounding penalty fees - practices that would make even a loan shark blush?

And then there is the bank ad that claims that they have responded to what we (their customers) have asked for, and that they are now offering simpler and fairer credit card terms and checking / debit overdraft policies. Of course, there’s nothing in the ad to reflect that their prior behavior was deemed deceptive, predatory, and unfair by the federal government, or that the U.S. Congress enacted new laws to force them to stop their abusive practices.

So, when you see bank advertising that is trying to change the facts of history, or that claims that they really only have your best interests at heart - just remember, this is propaganda from the people who crapped the economy big-time in their quest for obscene levels of personal and corporate wealth. There is nothing that they have ever done, or will ever do, that is in your best interest. The only interest that these people have is protecting their profits - and they have already proven that they will let nothing get in the way of profit growth, and that they will utilize any tactic, no matter how reckless, unfair, or consumer-unfriendly, to achieve their profit goals.


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The Great Recession: Never Let It Happen Again - The Too Big to Fail; Too Big to Exist Act of 2009

[also see: "More on Too Big To Fail; Too Big to Exist" and "Still More on Too Big to Fail; Too Big to Exist"]

Bernard (Bernie) Sanders, U.S. Senator for Vermont, has recently introduced a short and simple bill in the U.S. Senate. The bill is designed to prevent the banking industry from ever again getting itself into a position where banker irresponsibility, recklessness, arrogance, and greed can undermine the U.S. economy.

Basically, the bill, if enacted into law, would direct the Treasury Department to identify those financial companies that are too big to be allowed to fail (as in, those companies that the taxpayers have had to bailout this time around), and then require that those companies be dismantled into smaller component parts (kind of like what the federal government did to AT&T in the early 1980s).

You could envision, for example, the two largest bank holding companies, JPMorgan Chase and Bank of America, each being busted-up into maybe 5 - 10 smaller regional banks, similar to how things were prior to 1994 (that’s when restrictions on interstate banking were eliminated, and bank holding companies were allowed to universally operate in multiple states - the result was a feeding frenzy of banks gobbling each other up to create ever-larger companies, culminating in the five major banks of today who dominate (monopolize) the U.S. banking industry).

The rationale behind this bill is to prevent any financial company from ever becoming so large that its failure would jeopardize the security of the U.S. economy.

The proposed law is an outstanding idea that every American consumer should support (especially anyone who has been financially damaged by what the mega-banks did to the U.S. economy this time around).

You can demonstrate your support by signing the online petition that is located on Senator Sanders’ Website:

http://sanders.senate.gov/petition/?uid=c53f1aca-5881-403e-928b-a25980cb4e0c


[You can bet that the idea of the federal government havng the power to bust-up their private empires has the banking industry "Masters of the Universe" trembling in their pin-striped designer suits]

If you're mad as hell, and don't want to take this bullshit anymore, here's a way to take action against the banks that caused this economic meltdown. Sign the online petition, and forward a copy of the email (below) to everyone you know.

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UPDATE No. 1:

The concept of the federal government being granted the power to breakup bloated financial companies was initially met with skepticism -" a snowball’s-chance in hell of passing" was the initial reaction of many. But the House Financial Services Committee just approved (November 18, 2009) a bill that included provisions by U.S. Representative Paul Kanjorski (Pennsylvania) that would allow the government to dismantle even healthy, well-capitalized financial firms that were so large, interconnected, and/or leveraged that they could harm the overall U.S. economy if they ever got into fiscal difficulty. So, this is a concept that, if the American people show their support for it, may very well end up being law in some form or another.

UPDATE No. 2:

A bill that contained the "too big to exist" provisions discussed in Update 1 passed in the House of Representatives on December 11, 2009 (More). Action on a Senate version (e.g., Bernie Sanders' bill) is expected in early 2010.

You still need to show your support by signing the online petition, and advising your federal Senators to vote for a "too big to fail; too big to exist" bill.

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Here is one version of the email that has recently been circulating through the Internet regarding Bernie Sanders’ "The Too Big to Fail; Too Big to Exist Act of 2009". Help make sure that everyone is aware of this bill and has the opportunity to show their support for it if they want to. Forward a copy of the email to everyone you know.

******************************* email ***********************************

Fwd: Corrupted Mega-Banks - the Too Big to Fail; Too Big to Exist Act of 2009

>> Message >>

The "Too Big to Fail; Too Big to Exist Act of 2009"

This is Important !

Bernie Sanders, U.S .Senator from Vermont, has just introduced a bill in Congress that would break-up the mega-banks that caused this "Great Recession" we are struggling through (banks including JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo, and USBancorp. The purpose behind this bill is to prevent these banks, or any other bank, from ever again getting so large that their failure would threaten the overall U.S. economy.

The mega-banks are run by arrogant and outrageously greedy individuals who between 2001 and 2008 knowingly engaged in the negligent and reckless conduct which resulted in the destruction of the livelihoods and financial security of 30 million or more American citizens over the past 14 months.

After crashing the economy (worst recession since the Crash of 1929), these banks demanded government bailouts, and then used the taxpayer money to get larger (buying up distressed competitors) and paying the architects of the crisis obscene "talent retention" and "performance" bonuses. Adding insult to injury, they then embarked on a program of terrorizing U.S. citizens with foreclosures and repossessions, and have aggressively engaged in profiteering (jacking up interest rates on existing credit card balances).

It’s time for the American people to say "we’re mad as hell, and we’re not going to take it anymore !"

It’s time for the American people to give these mega-banks a good kick in the ass, and make sure that they can never damage this great country in this way again !

Read a summary of the proposed bill (Too Big to Fail; Too Big to Exist Act of 2009) at:

http://seekingalpha.com/article/172245-the-too-big-to-fail-too-big-to-exist-act-of-2009


There is also a petition that is soon going to be sent to U.S. Treasury Secretary Timothy Geithner that EVERY U.S. citizen should sign. It’s located at:

http://sanders.senate.gov/petition/?uid=c53f1aca-5881-403e-928b-a25980cb4e0c


This is EXTREMELY important !

At the very least, take the time to sign the petition online.

Here is the opportunity to express your outrage at the conduct of these banks – especially if you have been financially damaged by the actions of one or more of these banks.

If you really want to help prevent something like the current economic catastrophe from happening again, email, or mail a hardcopy of, the information at the two links provided above to YOUR federal legislators (House and Senate), with a note stating that you expect them to support the "Too Big to Fail; Too Big to Exist" bill.

If you do nothing, these banks will continue their abusive and reckless ways, will continue to financially enslave us all, and will have us back in a similar economic crisis situation in the not too distant future. Act now to protect the rights and financial security of yourself, and of every U.S. citizen !

Don’t delay – don’t give the politicians that have been bought off by the banks time to kill this bill in committee. Take a few minutes and deal with this today – DO IT NOW !!

And be sure to forward this email to everyone you know – especially anyone who has experienced financial difficulties as a result of the misconduct of these corrupt mega-banks.


Find the addresses for your federal legislators:
U.S. House of Representatives - http://www.house.gov/
U.S. Senate - http://www.senate.gov/general/contact_information/senators_cfm.cfm

**************************** end of email ********************************



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