Quote Of The Day – Big Bad Banks
By Justin Gardner | Related entries in Bailouts, Economy, Quotes
“Nobody is going to put fresh capital into the banking business when your major competitor is going to be continuously bailed out by the United States government with more and more money.â€
- Rusty Cloutier, President/CEO of MidSouth Bank
So there’s that.
And then I keep hearing the word “nationalization” being bandied about by leading economists. However, just imagine if Obama started talking about that as an option. Talk about playing right into the hands of libertarians and House Republicans.
But if a Senator like Lindsay Graham is now open to the idea, would folks like McCain and Boehner get on board if they thought it was the right thing to do?
Here’s a key point from the aforementioned bank Prez/CEO…
Rusty Cloutier [...] recently told major news outlets that “[c]oncentration is a bad thing†and called for the feds to break up the “miserable eight†largest banks that, he said, control 60 to 64 percent of the country’s assets, restoring competition to the banking industry and restoring investor confidence in the system.
I agree that concentration is a bad thing, but that’s what capitalism brings with it. The animal wants to keep eating and growing larger and larger. We could have easily prevented these massive mergers, but our free market philosophy prevented that from even being an option. And now we’re seeing what happens when banks are “too big to fail.”
(h/t: HousingWire.com)
This entry was posted on Monday, February 16th, 2009 and is filed under Bailouts, Economy, Quotes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
February 16th, 2009 at 4:05 pm
Nationalization is about the worst political mistake Obama could make.
And Lindsey Graham and John McCain are far from representative of the fiscally conservative/libertarian strain of GOP thinking.
The Federal Government’s problem is that it continues to think it can shield these banks from the consequences of the mistakes they made by using taxpayer dollars to prop them up. The more they continue to do that, the worse the reckoning will be.
February 16th, 2009 at 4:37 pm
The taxpayers are going to pay the bill for this no matter how it plays out. The question is if the bill will be larger by taking over the banks, or by letting them collapse and then picking up the pieces. However as long as the housing market continues to drop (and the Credit Default swaps get worse) it is hard to tell how much money we are on the hook for. Calculated risk has some interesting information on the “stress test” and how it may play into this:
http://www.calculatedriskblog.com/2009/02/stress-test-almost-100-regulators-at.html
February 16th, 2009 at 4:41 pm
Divestiture. Happened when Bell/AT&T got too big, government stepped in and broke it up. Believe that was ’83 or ’84 under Reagan. Was a good example of government tempering the appetite of the free market with another free market concept, competition.
February 16th, 2009 at 5:02 pm
“I agree that concentration is a bad thing, but that’s what capitalism brings with it.”
After businesses get to a certain size in terms of market share, it’s not like mergers just automatically happen unimpeded whenever people want them. You may have noticed that not only does the DOJ antitrust division step in and opine about mergers where the resulting merged company potentially captures a sufficiently large portion of total market share (i.e. XM Radio and Sirius), they also step in and opine for sufficiently large vertical integrations (i.e. Ticketmaster/Ticketsnow intending to acquire LiveNation).
I know there’s a lot of people that would scream “interference with the workings of the free market!!!1111″, but maybe there’s an argument for more scrutiny and pushing back against these large mergers to start with.
February 16th, 2009 at 8:59 pm
Nationalization should be a controlled collapse, not the disaster that Doug is willing to see happen. Nationalize the huge bad banks, keep them going just long enough to accurately value their remaining assets and sell them off to the banks that still exist and are stable. Selling their assets for the most accurate valuation available to smaller banks, without allowing concentration to build up by selling too much to any one institution. Then just maybe they’ll have learned that there are good reasons to enforce antitrust laws.
February 16th, 2009 at 9:47 pm
Jim,
The disaster is already happening. It’s been happening all around us for much longer than most people realize, but we just haven’t acknowledged it.
We’ve been living in a world where the banking system is propped up by little more than promises called “dollars” that are backed by nothing. Now that the national debt is skyrocketing, which in turn will require the printing of yet more “dollars”, the value of the dollar will, inevitably, collapse.
The Federal Reserve will do everything it can to stop this, but at some point the rest of the world will realize that those pieces of paper coming out of Washington really aren’t worth anything.
We can pretend to prop this up for as long as the politicians want, which is until the next election, or we can start talking about how to really change things.
February 17th, 2009 at 7:47 am
Recorded history so far tells us that when you hand out more and more of your currency without backing it via additional value (like, say, GDP growth), it becomes devalued, and inflation ensues.
One has to be a fool to be unconcerned by this dynamic. However, I am not sure how many of history’s case studies involve Earth’s favored currency, considered the safest of available currencies by comparative measure.
Seems to me that for the dollar to collapse, Earth will need, at minimum, a replacement favored safe currency. Or it’ll all collapse for everyone, as we return to hoarding gold. Which the US has a sh!+load of, BTW.
Another thing the US has a sh!+load of? Food.
FWIW, I have been hearing more and more people acknowledging that the federal deficit spending level of the last couple years (last Bush, 1st Obama) really must be a 2 or 3 year thing. If, within a year or two, the US can go back to budgets that are within a few percent of revenue collected, there’s a pretty good chance that the rest of the world will stomach our current spending bubble. Not because they like it or because they are unconcerned about the devaluation dynamic, but because they lack alternatives that allow them to thrive or even survive, financially speaking.
February 17th, 2009 at 8:31 am
Capitalism can lead to concentration. But, at that point, it ceases to be a free market. It becomes a market controlled by the company or small collection of companies who control the vast percentage of resources. That’s why, I think, any true proponent of the free market would also support trust busting.
February 17th, 2009 at 1:50 pm
[cue theme music]
:05 [fade music, hold under]
Hi there! Welcome to Mr. Paulson’s Neighborhood. We have a new word today, boys and girls–actually, it’s two words…
“Zombie Bank.”
Now, our good friend Chris Arnold, over at National Public Radio, has this really fun explanation of a zombie bank.
The magic screen captured this stunning image of a bank zombie in its natural habitat–isn’t it scary?
Remember, boys and girls: The only good zombie bank, is a dead zombie bank. Exterminate all the little zombies living and working inside; if any of the zombies escape, do your best to prevent them from every coming near a bank or financial institution, ever again! Then, demolish the zombie bank–burn it to the ground!
If zombie banks aren’t destroyed… they’ll feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed and feed…
until all the other little banks go down the tubes.
Then, boys and girls… those zombies will turn on US!!
February 21st, 2009 at 12:28 pm
Lets stop calling it “Nationalization” and start calling it what it is: Receivership. Treasury can test the banks – the ones that don’t measure up get restructured and re-privatized. Additionally, Obama, Summers, et al ought to take a damn look at our *100 year-old* anti-trust laws – particularly as they pertain to the modern financial services industry.