“They’re just a bunch of bloody bankers.” Read how YOU pay for the banks to continue to operate as if they were supermen, not a clutch of broke businesses run by greedy idiots.

Posted: February 26, 2013 in Business Management, Political musings, Popular Culture et al
Tags: , , , , , , , , , , , , , , , ,

How lo9ng till the mob starts burning down the offices of those that rob them? It might be nearer than you think ... especially when they work out what's going on.

How long till the mob starts burning down the offices of those that rob them? It might be nearer than you think … especially when they work out what’s been going on.

The fascinating piece of reportage that follows from Bloomberg deserves to be re-blogged on every damn blog in the world. And if you’re a blogger reading this, I mean you. And if you’re not a blogger, then just repeat it on every FB page and email list in sight.

Let me first say this: I am not against banks per se – they’re a necessary evil in a modern mixed economy.

Am I against banks where the executives vote themselves massive salaries, yet where they fail to create any real shareholder value, and where without a subsidy from the poor bloody customers that every day they f*** over with unreasonable fees, charges and restrictive practices they would go broke? Yes I f****** am against them. I am customer, hear me roar.

Am I against them when they rort and skew the banking system to allow themselves to behave with utter irresponsibility lending money to people who will never be able to repay it, and then sloughing off that debt onto people they should deal fairly with but in fact they dupe, and doing so knowingly and ruthlessly? You damn rootin’ tootin’ I’m against them.

Am I against their executives not being prosecuted for their idiocy, but just shuffled around the boardroom tables of Wall Street, London, Paris, Athens, Rome, Madrid etc etc until the paper trail becomes so convoluted that no-one’s sure who is really guilty? Yes. I am against that. And if they all end up in jail together because no one can be sure who started the mess, then frankly serve them all damn well right.

In short: stop working class welfare for bankers before it wrecks our society!

The Bloomberg article follows, referring the the USA, but essentially the story is repeated in every advanced country in the world. Bankers have got used to hanging off the teat of Government by crying poor. Enough is enough. Oh, and just a side note? The entire foodstamp programme for the USA cost $78 billion last year …

Why Should Taxpayers Give Big Banks $83 Billion a Year?

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks – notably JPMorgan Chase & Co. Chief Executive Jamie Dimon – make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

It's your money. Just keep saying that to yourself as you consider how you feel about this story. It's YOUR money.

It’s your money. Just keep saying that to yourself as you consider how you feel about this story. It’s YOUR money.

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.

Big Difference

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

The top five banks – JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry – with almost $9 trillion in assets, more than half the size of the U.S. economy – would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy.

Monopoly. It's meant to be a game, not a blueprint for the world banking system.

Monopoly. It’s meant to be a game, not a blueprint for the world banking system.

The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.

(And picture what it would mean to the very people who are propping the banks up then and now. That’s you and me. Ed.)

Regulators can change the game by paring down the subsidy. One option is to make banks fund their activities with more equity from shareholders, a measure that would make them less likely to need bailouts (we recommend $1 of equity for each $5 of assets, far more than the 1-to-33 ratio that new global rules require).

Another idea is to shock creditors out of complacency by making some of them take losses when banks run into trouble. A third is to prevent banks from using the subsidy to finance speculative trading, the aim of the Volcker rule in the U.S. and financial ring-fencing in the U.K.

Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better.

This could entail anything from cutting pay packages to breaking down financial juggernauts into more manageable units.

The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

"Hello fellas, need a hand keeping the pitchforks at bay?"

“Hello fellas, need a hand keeping the pitchforks at bay?”

Read more : How Obama squibbed his chance to rein in Wall Street.

Advertisements
Comments
  1. WE MUST COLLECTIVELY PULL THE PLUG ON god’s ASS, B4 ANY MORE LIVES R NONSENSICALLY LOST OVER THIS SHEER N’ UTTER FOOLISHNESS….
    There is absolutely no need 4 money any longer in-o-society that has progressed this far.(WE’RE SIMPLY SPINNIN’ OUR WHEELS WITH THE S.O.S. DAY AFTER DAY!Look @ some wealthy family’s 2 better understand my point Bush,Romney,The Royals in Windsor castle just 2 name-o-few yet somehow these types-o-ppl think they’re somehow better than the rest.This brief lifetime that we all share is 2 B enjoyed there4,I feel eventually this world will realize the need 4 absolute equality across the board 4 every human and that should end this violence epidemic that seems 2 thrive in certain ppls psyche:)(;WE’RE ALL THE SAME,THERE4 WE ALL SHOULD BE AFFORDED AN EQUALLY HONEST OPPORTUNITY::THANX 4 READIN’:)(; N’ HAVE-O-GREAT DAY:)(;

    Like

  2. Richard Ember says:

    Meanwhile back in the real world………..

    You are right about some of these institutional banks – all American I see, btw. But there certainly are British Banks in the same situation. I don’t know about Australian Banks because my man on the ground in Australia only writes about American stuff.

    What the banks have done, along with the ratings agencies btw, is criminal. Let’s take as read how they got us into this global meltdown and look at one bit of what has happened since Govt stepped in. They went to G and said we cannot continue to lend without your support. Knowing this would bring most western economies down, Gs stepped in with billions of our money – remember, Gs don’t have any money of their own; it’s all taken from the people of borrowed in their name. Once this line of virtually free (incredibly cheap) money had been established, what did the banks do with it? Did they loan it out again? No – they matured it in Govt Bonds paying somewhere between 3% and 4% – equivalent of over 5% gross. And took the profit.

    Your tax dollars/pounds at work, people. And still G stumps up. Why? Politics of course. G knows it is unacceptable that the cash machines stop producing money for people. Look at the run on Northern Rock – imagine if those rumours hit one of the banks above. Ouch. So it goes on. In an unfettered market, a lot of these banks would have gone to the wall. But we have not had pure market capitalism for decades so we are where we are.

    Like

    • Exactly right, Richard, except I specifically made the point that it was as true in other countries as it was in America. Less so in Australia where the banks tend – only tend – to be more stable and less supported by taxpayers because the the mineral wealth of the country in which they hold a big stake. But in general – yup, they’ve all got their snouts in the public trough, and we let them do it.

      Like

  3. AsGrayAsGray says:

    Reblogged this on Shit's Gotta Stop and commented:
    What can I say? Apart from: “I agree! – This Shit’s Gotta Stop!!”

    Like

  4. My Homepage says:

    … [Trackback]…

    […] Find More Informations here: wellthisiswhatithink.wordpress.com/2013/02/26/theyre-just-a-bunch-of-bloody-bankers-read-how-you-pay-for-the-banks-to-continue-to-operate-as-if-they-were-supermen-not-a-clutch-of-broke-businesses-run-by-greedy-idiots/…

    Like

What do YOU think? That's what matters. Please comment!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s