[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
Next Post in Topic, "The Great Recession"
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