The time has come to break up the big banks. There are 5,000+ banks in the U.S. However, just a dozen of them dominate with 69 percent of the assets in the banking sector.
America grew strong as the result of a free-market system.
But the nation barely survived the Great Recession that was largely caused by the dysfunction of the big banks on Wall Street.
Enter pollster Scott Rasmussen. He’s one of the most-accurate, authoritative pollsters of the 21st century. (The Rasmussen Poll and the USC Poll were the only two firms that accurately predicted the 2016 Presidential Election.)
Mr. Rasmussen wrote in a 2013 blog that “69 percent of Americans believe that large corporate executives are overpaid, but only 17 percent want the government to regulate their pay.”
On the other hand, Mr. Rasmussen wrote 50 percent of voters want to break up the big banks vis-à-vis 23 percent of voters who disagree.
“If a large bank reaches the point where it can no longer meet its obligations, just 25 percent support a bailout to keep it in business,” he says. “But federal policy is just the opposite.”
Too big to fail?
Wall Street and politicians of all stripes argue that the big companies must be saved no matter what. The companies’ failures would devastate the nation’s economy.
He cited the opinion of a wise Federal Reserve official: Richard W. Fisher, president of the Federal Reserve Bank of Dallas. He quotes Mr. Fisher who calls the bailouts “perverse market incentives.”
Mr. Rasmussen explained: “It lets big banks engage in risky behavior knowing they can’t lose because the federal government will have taxpayers pick up the tab.”
He pointed out that 66 percent of the voters are cognizant that the banks that got the windfall at taxpayers’ expense even though the banks were the root of the fiscal problem.
“That’s one reason why 75 percent expressed anger at the bailed-out banks in 2011; 49 percent were ‘very angry’.”
So we got the Dodd-Frank Act in 2010, which was “a law that scored political points but didn’t address the biggest problem,” he wrote. “The limits of that law as far as the largest banks are concerned were highlighted in a recent Senate report showing the misbehavior of JP Morgan Chase while racking up record trading losses last year.
Another aggravating eye-opener for taxpayers:
“It’s hard to put much faith in regulatory answers given the revolving door between big banks and big government,” wrote Mr. Rasmussen. “For example, current Treasury Secretary Jack Lew received a $944,000 bonus for his work at Citigroup right after leaving the bank to join the Obama administration. Citigroup had the money because of a taxpayer bailout.”
But the Obama Administration wasn’t the only culprit. Remember when President Bush named Henry Paulson of Goldman Sachs as Treasury Secretary? He was the culprit who launched the controversial bailouts, which also benefited his former employer.
Then, we had the Goldman Sachs’ scandal (see Will Goldman’s Scandal Prompt Cultural Changes on Wall Street?)
So, now we have the call to break up the megabanks. Again, citing the opinions of Mr. Fisher, Mr. Rasmussen advocates a halt to the subsidies to the big banks because the taxpayer handouts prop them up unfairly.
The Federal Reserve gives money to the big banks at lower rates than their smaller competitors. The megabanks also know they always have the government guarantee – a threat to taxpayers.
“Take it away, and the big banks would be forced to compete on the same terms as other banks,” asserts Mr. Rasmussen.
“Bloomberg News estimates that the 10 biggest banks receive subsidies of $83 billion,” he wrote. “Fisher and others agree that the size of the subsidies is roughly the same as the total profit reported by these banks.”
More Rasmussen data:
“Not surprisingly, in a nation where people hate crony capitalism, just 7 percent think these subsidies should continue,” he wrote. “Seventy-six percent want them to end.”
Agreed. Stop this fiscal nightmare, and the monopoly by dysfunctional bankers. Break them up.
From the Coach’s Corner, related reading:
- Is it Time to Police Pay at Wall Street Banks?
- Federal Reserve Typifies What’s Wrong with Economy
- Why Is Transparency Crucial at the Federal Reserve?
“If stupidity got us into this mess, then why can’t it get us out?”