To Fail Too Big

bank_error_in_your_favorRemember back in 2008, when it was decided by those who decide such things that Lehman Brothers wasn’t too big to fail, and the planet’s financial infrastructure melted down? Remember when the mortgage bubble built from “collateralized debt” burst like cheap balloons?

It’s been five years. Memories fade. You may have already forgotten that the bankers behind the economic collapse were permitted to (re)write the legislation regulating their anarchic industry. And that not one of them went to prison. Or ever faced a trial. Or were even charged with any crimes.

Malfeasance of such obviousness and grotesqueness would shame the normal person. The bankers, though, resorted to a kind of persuasiveness typically found at the end of a gun barrel. The masterminds behind the massive fraud convinced their political assets in both of the parties they control that the banks were too big to fail. The banks go down, America goes down. So, it wasn’t a question of if they were bad guys. They were important guys – and we’d just have to trust them.Animal Farm in Suits

We did. And now it’s five years later. All those banks that were Too Big to Fail back in 2008 – well, let’s just say that trusting the financial industry to police itself hasn’t exactly solved the TBtF problem.

+ In 2008, Wells Fargo & Co had assets of $609 billion. In 2013, they have $1.4 trillion.

+ In 2008, Bank of America had $1.7 trillion. Now it’s $2.1 trillion.

+ In 2008, JPMorgan Chase & Co had $1.8 trillion in assets. In 2013, they have $2.4 trillion.

Times have been tough for Citigroup. They used to have $2.1 trillion, now it’s only $1.9 trillion, and they may in fact be getting small enough that they will be allowed to fail the next Criminal Mastermind Jamie Dimontime they have a bad run at the gambling tables. JPMorgan Chase, currently the richest of the banks, recently pleaded guilty to yet more illegal activity, admitting that it knowingly broke laws and agreeing to pay a $920 million settlement in their “London Whale” case, in which they blew $6 billion gambling on the wrong side of a complex derivatives match. That happened in 2012.

Don’t worry, no one is going to face criminal charges. Jamie Dimon and his henchman run a particularly sanitary mafia. The right people will be paid the right amounts, and the underlying truth of the matter will come to be understood by everyone involved: If you’re too big to fail, the best business strategy is to get even bigger.

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4 Responses

  1. well, next time round though the government will be ‘too small to bail’. I’d love to see all those loooooong faces …

    • Trader Jim says:

      “…next time round though the government will be ‘too small to bail…”

      Ummm… no. The government makes the rules and “prints” the money, so they’ll never be too small “to bail”. If they ever decide not “to bail” then the whole country is finished. Why do you think the banks haven’t changed their “business model”? They know they’ll be bailed out again at the cost of us “little guys”. Each time we go through these cycles your dollar is worth less… it will just keep approaching zero without ever reaching it.

  2. Todd Brown says:

    While the idea terrifies me, the sad truth is that this “great” government of ours is set up for financial failure simply because it is the way of capitalism. Love it or hate it, companies fail. All the time. Big ones.

    A quote from Mr. Larry Flynt just before Barack Obama became president the first time is, “America doesn’t need a Commander-in-chief, it needs a Chief Executive Officer”. He’s absolutely right. To think that this grand country of ours actually belongs to the little people is an absurd delusion. This country is TOTALLY run by the private 1%. It’s the reason for terrible foreign policies, terrible domestic policies and gridlocked financial situations. The fact that the little people have the right to vote someone in to office can easily be compared to shareholders of a public company being allowed to vote on executive level positions in public companies. The right to vote should never be confused with the idea of a true Employee Stock Ownership Program (ESOP)- they just aren’t the same.

    Again, the idea of total financial failure of this nation terrifies me, but I have to be honest and say that I’ll be laughing all the way to my blue collar, “not-what-I-have-a-degree-in” job scrubbing Free Clinic toilets, passing former fat cats on the street who are begging for change because they won’t know how to survive without easy cash from dividends.

  3. Hi Jim, sorry for stopping by so belatedly. No the eponymical Yellen is doing the printing or tapering. You are right in the sense that printing more is tapering too – the value is being tapered. But what I meant is that, taking e.g. a leaf out of German history (1923) or Zimbabwe only recently, these things don’t go on forever. I mean, these bankers are not using worthless chips to play their roulette. When these bonuses arrive and they can’t buy a Picasso, a Maserati, and, God forbid, no voluptuous girl “friend” with it, they are just without clothes as all the Caesars that debased money or lived off debased money before. That the dollar was long propped up by its reserve currency status, granted. We all saw that. But so was the British pound once and the French livres when there was gold behind them. I believe the Crimean crisis will in history books once be perceived as the turning point when yet another empire built on easy money (starting with the Romans) started to erode.