Tuesday, March 30, 2010
Too Big To Fail Is Just Plain Crazy
Money talks and bullshit walks. Unfortunately, that is the way life is in America today, and it also explains some of the frustration seen today in some of the grassroots political movements. Money and the influence money can buy dictates what happens in the political-economy. The new banking regulations, unlike the old banking regulations that came out of the Great Depression - the Glass Steagall Act, will not have the power to prevent another financial crisis. The men and women in Congress do not have sufficient knowledge of money and banking, much less monetary policy in the United States, to make the kind of decisions necessary to eliminate or control the concept of "too big to fail".
Unless the President takes on the heavy lifting of banking and financial reform, we are headed back down the same road again. No one has to have psychic powers to see what is coming. A monetary system where banks can borrow freely and cheaply from the central bank, our Federal Reserve Bank, and use that money to literally gamble on the movement of securities markets around the world, can only exist for a matter of time before another Federal Government bailout is necessary.
This stuff, banking and investment banking combined, is not too hard to understand the inherent weakness in such a system or concept. Investment banking works best when the corporations are privately held and public monies are not at their disposal. Our present system of publicly traded investment banks, that double as bank holding companies and have access to the Fed window is just plain crazy. But, as I said at the beginning, money talks and bullshit walks.