Tuesday, September 29, 2009

Designation As 'Too Big To Fail' Seems To Guarantee Failure

Obama has said that many banks are too big to fail. And as has become his style ever since being sworn in, he sees ineluctable catastrophe for the US and the world if his plan is not enacted immediately. He never spent enough time as a state or US senator to learn how to bring something about via the normal give and take of the legislative process. It is almost as if he was saying, “I’ve never learned how convince someone through discussion and argument. But this, ‘the world will end if you don’t do what I say’ thing has worked pretty well for me. Let’s see how far I can push it.”
What do we need these expensive banks for anyway? Right now it would be good if they were making loans. That could get the economy moving and make a dent in the plague of unemployment. But they just aren’t making many loans. Some of them spent their bailout money acquiring other banks. Many now have higher standards to be met before giving loans. And they just plain aren’t making many SBA loans.
So the loans that would most help to build the economy, the loans that would do the most to reverse the spiral of unemployment are being dodged by banks. There is some sense to their behavior. If you don’t need to take the risk of a loan to stay in business why accept the unnecessary risk? Since Barack Obama has made it very clear in a very loud way that he will not allow certain banks to fail, the management of these banks knows where they stand. (And I’m sure there will be more communication via contributions to the appropriate political campaigns and committees, e. g. all of the money recently flowing from bailed out banks to ACORN.)
The major problem I see with all of this is that I cannot distinguish between a failed institution and one that no longer performs the function for which it was needed. The banks ARE failures. And the over vigorous intervention of the government was the kiss of death. At this point the banks are dead to me. Their present purpose is to serve the Obama administration in their theft of tax payer money for their partisan political ends.

1 comment:

Jeff Stone said...

Will there be more or less "Banks too big to fail", after the new FDIC plan fails ?

We surely do have the brightest people in America in charge !