Decrease the Banking Sectors proportion of the GDP and Create Jobs. Banks and Bank” like structures” account for 60% of the GDP. With the new accounting rules, we’ve been fooled into believing the unemployment rate has decreased. But it’s not true! Wall Street and equities have skewed the numbers and these calculations have nothing to do with employment or the health of Main Street, we are tracking equities which make up the GDP.
Like 2008, we are tracking a “House of Cards”, as Banks and Bank “like ” structures, seek ever riskier investments to bolster their assets and profits. The details of the re-emergence of risky ventures, is a cautionary tale. Banks are TBTF and the Middle Class continues to suffer while the Banks and Bank”like entities”, overwhelm our Society to the demise of The Middle Class. They are sucking the “oxygen” out of America, as we continue to produce nothing. Time to curb Bank risk and start thinking job creation in areas other then the Financial Sector? The reasons will become obvious, so, Please, read on:
- The Economist 1/11/14 Back from the dead. A much maligned financial innovation is in the early stages of a comeback. Securitisation…Since regulators want Banks to become less risky, other institutions are taking on their risk, and these “institutions”, have the potential to be TBTF. As Regulators concentrate on the proposed” leverage ratio” appropriate to traditional Banks (10% proposed, which seems too low , when it was 25-30%?), Banks are increasing the ratio of equity to loans, thereby, putting the “quality” of their” assets” in doubt. ( A definition of a traditional Bank, they take in deposits and lend money against those deposits. These other entities make Banks less liquid and more risky as they seek greater profits.) So, once again, CDO’s, MBS’s and “other financial instruments” are proliferating, to be bundled, sliced and diced, just like 2008!
- According to Gretchen Morgenson, The NY Times, 1/12/14, Bailout Risk Far Beyond the Banks. Who else, in the Financial Markets, poses a threat to our Economy: It’s the $ 53 Trillion question? That’s the amount of money overseen by the current Money Management Industry composed of hedge funds or mutual funds. According to the International Financial Stability Board and the International Organization of Securities Commissioners, regulators should be identifying financial entities that are not Banks, but pose a systemic risk to the Global economy.
- Of concern are Investment funds with $100 Billion in assets, they may have become TBTF.
- Interconnectedness between financial entities is another concern. Remember the AIG debacle, The insurance company required $250 Billion in taxpayer bailouts, because other institutions covered their bad debts. New regulations have made some of the ” financial entities ” Banks have created , too expensive and too risky to service. That business is now being shifted elsewhere, sometimes to insurers. ( 12/27/13 FT , Insurers may be at the center of the next big crisis.
- As we track executive progress, “the same players keep rotating globally? Mr. Sullivan, who oversaw major losses at AIG, has now landed as CEO of LLoyd’s of London. Same culture, different place.
- According to Harvard professor David S Scharfstein, “There may be very large hedge funds like Long Term Capital Management, who are at risk and contain Money Market Funds. If there is a significant downturn in the market, as investors seek liquidity and redeem their funds, the entire structure of those firms, might be at risk. Remember the Lehman brothers collapse?: A $62 Billion reserve fund was at risk and shareholders and taxpayers took a loss.
- The lack of data on the asset management industry, coupled with their Concentration of Wealth, increases the Public’s exposure to their risk. Only, in 2014, the Public can no longer be relied upon to bail out Banks.
- 10 Firms, like Black Rock, State Street Global Advisors and PIMCO oversee more then $ 10 Trillion in assets. These entities, seeking yield/profits, tend to game the system, using leverage or derivatives to secure their portfolios. It leaves us questioning, What is the percent of “real” liquid asset held? How much of these assets can be turned into instant cash, when needed? (Gretchen Morgenson, Bailout Risk, Far Beyond the Banks, NY Times 1/12/14)
According to the Dallas Federal Reserve, the cost of the Financial Crash to the Country is estimated between $6-$14 Trillion or $50,000.00-$ 120,000.00 per household. For individuals, the financial crisis may have cost them their life savings, certainly the middle class was bled dry, while the total amount, as large as it was, amounted to one years’ GDP. (Wikipedia)
The number of Billionaires created last year soared to 300 and their net worth, according to Bloomberg News added over a 1/2 $ Trillion to an aggregate of $ 3.7 Trillion. Thus as the Wealth Factor continues to multiply for a few , the income of the top 1% of Americans has risen 275 % from 1979 – 2007, while the bottom 20% profited by 18% during that same period. ” Data from the Congressional Budget Office”
- No need to debate income inequality, it exists. No need to further debate TBTF, it exists. No need to debate Corporate Welfare, it exists.
- Only these debates should take place: our action plan for separating the Banks. Our action plan for accountability and responsibility for money dispersed ; whether you are a Bank or a Corporation with the Potential to bring down the Economy of the United States. Our action plan for putting the Middle Class back to work!
- We, the people, need a way back to the Middle Class way of life and to the land called “HOPE”. Hope for a better future, because we know it’s attainable. It is the American Dream. Politics Effects Us, be involved call for laws to govern Banks and Bank ” like entities”. Our future depends upon laws to live by! We have a choice.