Friday, March 15, 2013

Barry Ritholtz: Bankistan vanquishes America (and the EU, Japan and UK too)

From Barry Ritholtz blog, the Big Picture comes a terrific summary of exactly where the global financial system is currently:
Is there a single doubt left in your mind? 
Are you still a believer in Rufus T. Firefly Jamie Dimon as the world’s smartest banker? 
Is there a scintilla of wonder left in your mind that the giant banks are legitimate? 
Have you come around to understanding — finally — what some of us have long understood about banks? 
Are you willing to accept the truth about these corporate behemoths — that they are a horrific combination of economically dangerous, criminally inept, led by pathologically lying CEOs? 
Do you harbor any doubts that the giant banks are anything less than ruthlessly efficient criminal enterprises
Can you — finally — admit that our bank-created financial crisis of 2008-09 has led us to where we are today? 
Do you understand the only options presented as a result of that — either corporate bankruptcy and nationalization or a completely artificial Fed driven recovery? (The third option was a Japan-like multi decade recession). 
Do you realize that the feeble recovery, the slow, deleveraging-driven process of gradual economic healing was the result of how our policy makers chose?
Our policy makers chose the Japan-like multi decade recession in which bank bonuses are protected at all costs and society, particularly through cuts in social programs like Medicare and Social Security, pays the cost.
Do you recognize that the world of banking is divided into two camps? 
On one side, there are those who understand that the giant banks must be broken up. They are dismayed at the large banks  under-capitalization, over-leverage and opacity.  
These folks have figured out that these banks are not only too big to fail, but are so large that they are too big to succeed, and that the best route is to let insolvent banks fail. They are unhappy that our finance sector is a trillion dollar black box
Insert call for banks to provide ultra transparency here.
They know that the majority of giant banks’ profits come from bailouts, and subsidies. This group is dismayed at the corruption of our political system by financiers.
Insert Jeff Connaughton and the Blob (aka, politicians, regulators, lobbyists and Wall Street) here.
They understands huge banks are anti-competitive, a blaspheme against capitalism.
Insert that we need to adopt the Swedish Model and require the banks to recognize the losses on the excess debt upfront here.
They are shocked about  corruption of even the most fundamental measures of interest rates such as LIBOR.
Insert bankers behaving badly behind a veil of opacity and the need for ultra transparency as sunlight is the best disinfectant and the source of confidence in the financial system.
They are stunned that bankers have overturned a bedrock, fundamental principle of our society — the rule of law rule — with the threat of disrupting the world’s economy if prosecuted for their crimes.
Insert need for requiring ultra transparency as it is only the market that can discipline the banks as they are too big for individual nations to control.
On the other side lay the bank apologists, corrupted politicians, and crony capitalists.  
They advocate the Big Lie of the financial crisis. They choose to ignore the facts and data that disprove their narrative. 
They continue to push the lies that the bailouts were a good investment. (They weren’t). 
They work against the Bipartisan consensus that the giant banks should be broken up.
Insert if banks provided ultra transparency, market discipline in the form of higher cost of funds would force them to reduce their risk and complexity (closing those thousands of subsidiaries that only exist to arbitrage regulations and taxes).

A likely outcome of reducing risk and complexity is that the banks would shrink significantly in size.
They ignore the many former bank CEOs who call for thebreak up of “Too Big to Fail” banks
They mandated that GSEs were banned from Lobbying, but they made sure that the big banks retained their influence peddling and hold on Washington DC
They no longer represent the voters of their districts, but instead are the elected representatives of Bankistan
And unless we do something — and soon — they will vanquish America.
This is also true of the EU and UK.

In the EU, we had the appointment of technocrats to carryout austerity in countries that should have had the banks take losses on their sovereign debt holdings. 

In the UK, we had the chancellor pleading with the EU not to limit bankers' bonuses.

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