How many billion must the TBTF banks pay for their malfeasance?
Too-big-to-fail banks face billions of dollars in claims from their bad behavior during the housing bubble. They deserve the pain.
The bailouts of the too-big-too-fail banks irritated me (and many others). I would have far preferred to see the architects of the financial catastrophe of 2008 lose their jobs, their wealth, their social status, and be demonized for their atrocious behavior. Instead, we bailed them out, allowed them to keep their ill-gotten gains, and put them back in charge of our financial system. It wasn’t right.
Further, this is being sold to Americans as a necessary evil; ordinary people were “saved” by bailing out the 1%. Since there is no way to test alternate realities, we have no choice but to accept their contention.
Personally, I don’t believe it.
We had other policy options, including nationalizing the banking system. Sweden did it, and it worked. Iceland did it, and it worked. Our financial elites prevented this cleansing from occurring, and now the bad debts still reverberate through our financial system. We have banks propping up home prices through can-kicking loan modifications in an attempt to recover on their bad loans, and today’s homebuyers have to pay higher prices in order to bail them out. How does that help the little guy?
Former Treasury Secretary on public perception of bailout
Sarah Wheeler, May 13, 2014 6:13AM
During an NPR interview Monday, former Treasury Secretary Timothy Geithner said he and other administration officials failed to communicate how the bailout of big banks benefitted the American people.
“I don’t think anybody found a way to, in that moment, to explain and describe it. And I think that’s because at its core the things we had to do — the work — was going to look like we were rewarding the arsonists,” he said on All Things Considered.
“And it is, I think, impossible to expect a normal human to understand that the only way to protect them from that risk was to reward the people who had taken a lot of risk with their money.”
It’s impossible to make normal people understand because it was wrong; plain and simple. People aren’t so stupid that they can be convinced something that is obviously wrong is right.
“This was not a crisis caused by financial innovation on a massive scale. It wasn’t a crisis caused fundamentally by a set of new fancy things that, in retrospect seem very risky,” Geithner said. “It was a crisis caused because we had a long period of confidence that it was safe to lend a lot of money, safe to borrow a lot of money relative to income, that your house prices would never fall, that recessions would be short and shallow.”
And the federal reserve and its board of governors, a group Geithner was part of prior to becoming Treasury Secretary, completely abdicated their responsibility to evaluate these risks and protect the public from them.
“People on the right and the left both believe that there was a way to save the country from disaster and still let the system fall apart, impose losses on creditors.
Yes, that’s exactly what should have happened.
But in a financial panic, as we saw in ’08, it’s the opposite of what makes sense to protect people. In some sense, the paradox of this is the only way to reduce damage to the innocent victims of a crisis is to make sure you keep the lights on. Because if you don’t keep the lights on in a financial system, then you’re going to face depression-level unemployment.”
Bullshit! A group of wealthy investors would have lost money on their bad bond investments in these big banks, and a group of wealthy investors would have lost money on their stocks in these banks. The bailouts merely preserved their wealth. We could have wiped out the banks and recapitalized the financial system with the $700 billion bailout we used to save them.
Settlements as comeuppance
The silver lining in this as I see it is the major financial hits these entities are taking now that they are financially solvent enough to pay them.
By Tom Schoenberg and Hugh Son Apr 24, 2014 9:00 PM PT
U.S. prosecutors are seeking more than $13 billion from Bank of America Corp. to resolve federal and state investigations of the lender’s sale of bonds backed by home loans in the run-up to the 2008 financial crisis, according to people familiar with the matter.
The settlement would come on top of the $9.5 billion the bank agreed last month to pay to resolve Federal Housing Finance Agency claims, said two people who asked not to be named because the negotiations are private. A deal could come within the next two months, the people said.
If the Justice Department gets its way, the case against Bank of America will eclipse JPMorgan Chase & Co.’s record $13 billion global settlement over similar issues in November. That settlement, which included a $4 billion agreement with the FHFA, encompassed loans JPMorgan took over with its purchases of Washington Mutual Inc. and Bear Stearns Cos.
Does anyone else get a warm and fuzzy feeling from this?
Jeff Cox | @JeffCoxCNBCcom, Sunday, 11 May 2014 | 3:52 PM ET
These are not happy days for big banks whether on Wall Street or Fleet Street.
There’s been a steady stream of negative headlines suggesting that five years after the end of the financial crisis, the bell finally may be tolling for too-big-to-fail financial institutions.
- JPMorgan Chase and Barclays both have announced huge first-quarter trading declines—20 percent and 41 percent respectively—and others are expected to follow suit. Barclays said it will begin a massive layoff program in which it will lose 19,000 employees over the next two and a half years.
- Fines from regulators continue to pile up stemming from crisis-era bad behavior. The latest domino looks to be Bank of America, which could have to pay a levy in excess of the $13 billion already extracted from JPMorgan.
- Recent leaks in major publications indicate that Credit Suisse is nearing a settlement that will see it plead guilty to criminal charges for aiding its customers in avoiding taxes; BNP Paribas also faces possible sanctions from the U.S. for dealing with countries on an embargo list—with the end result likely being in excess of $1 billion in penalties.
All told, this is not a great time to be running a major global financial institution.
If it’s a bad time to be a banker, it’s a good time to be an American.
In a message delivered on the Justice Department web site earlier this week, U.S. Attorney General Eric Holder made clear his position on large banks.
“There is no such thing as too big to jail,” Holder said. “Some have used that phrase to describe the theory that certain financial institutions, even if they engage in criminal misconduct, should be considered immune to the sheer size and their influence on the economy. That view is mistaken and it’s a view that’s been rejected by the Department of Justice.”
Make them feel pain…