The advice given to governments by bankers, like the advice they gave to industrialists, was consistently good for bankers, but was often disastrous for governments, businessmen, and the people generally. ~ Carroll Quigley
A fundamental friction that we've been living with for a while is not red states vs. blue states, rock-and-roll vs. hip-hop, or the Giants vs. the A's (or if you're from NYC or Boston, the Yankees vs. the Red Socks) – although these are indeed important. No, it's one that humans have faced for millennia and is at its heart is bankers vs. the rest of us.
Banks and bankers have been at the center of key public decisions for a very long time, way before they have dictated (again) how far the Greeks – and their government – need to bend over to receive precious funding. According to The Economist, banking originated in Mesopotamia around 3000 BC, and the first "central" (national) bank was created in 1668 by Sweden. Ever since governments around the globe have been beholden to "too-big-to-fail" banks (and vice versa). Why else would the US government, in the persons of Treasury Secretaries Henry Paulson (former CEO, Goldman Sachs) and Timothy Geithner (former President, New York Federal Reserve bank), have provided at least $500 billion through the infamous Troubled Asset Relief Program (TARP) to shore up the nation's largest banks (and also included foreign-owned banks and AIG, General Motors and Chrysler) without requiring any substantive "strings" attached? Strings such as, forcing the recipient banks to provide loans to needful individuals and/or firms.
Despite the vast influx of taxpayer funds that re-capitalized the banks, they didn't provide needed loans – home lending is at its lowest level in 12 years. The banks got cleaned up 3 years ago thanks to TARP, but individual loan- and mortgage-holders who went "under-water" due to the banks' shenanigans are still suffering, still going bankrupt and still being foreclosed upon without any meaningful relief. Over 10 million home-owners' mortgages are now underwater; $150 billion in home loans became delinquent at the end of 2011. In large part this is why Main Street now despises Wall Street.
This happened for several reasons, most prominently because provisions of the Glass–Steagall Act (aka, the Banking Act of 1933) were repealed in 1999 by the Gramm–Leach–Bliley Act. This change effectively removed the separation that previously existed between investment banks which issue securities, and commercial banks which make money through deposits and loans. There were two consequences. First, investment banks purchased commercial banks (and vice versa), increasing banking market consolidation of power even more. And second, after 1999 the banks could once again speculate with "their" money using ever-more complex financial instruments such as mortgage-backed securities (MBSs), collateralized debt obligations (CDOs) and credit default swaps (CDSs). Many argue these investments by banks brought down the US economy in 2008.
In effect, the bankers have become more powerful than political institutions. Given the bankers' influence, it is unsurprising that no meaningful, politically-possible solutions have appeared yet to actually remedy the underlying causes of the bank/credit crisis. But that hasn't stopped Ken Livingstone, former mayor of London (Including the "City of London", one of the world's most important financial centers), from suggesting a constructive reaction to the financial crisis might be to "hang a banker a week until the others improve." Mr. Livingston is now running for mayor once again – guess what institutions are not supporting his campaign.
For a very long time, the power elites' (PEs') ultimate underpinning has been financial institutions (aka, banks and bankers). The banks and the PE's money are even more intertwined thanks to the Supremes' Citizens United decision two years ago. Now, the power elite's chokehold on placing favored politicians in office has increased immeasurably, as we've seen in this year's presidential primaries.
The voices of the supposedly-secure PE have always spoken with a common, money-tinged accent consisting of hypocrisy, conceit and self-righteousness.
Interestingly, with considerable help from the PE, at some not-so-distant point in the past the banks have transformed from being the lubrication system for the engine of our economy to being treated as the engine itself. How did this happen? The banks create nothing in and of themselves, yet they siphon off significant amounts of wealth. [According to the NYTimes, in 2010 the financial sector accounted for 29% of all US private sector business profits; up from 19% 30 years ago.] To no one's surprise, US banks' power is highly concentrated. The five (5) largest banks in the US – out of over 9,000 operating banks and savings & loan institutions – control 45% of the US banking market; concentration in specific markets like the San Francisco area is much higher, the top five (5) banks control over 77% of all bank deposits in the SF area.
Like all too many people, bankers apparently believe (and certainly act like) there is no long-run, no short-term; there is only now. As narrow-minded as this perspective is, it contrasts with Mitt, Rick, Ron and Newt who seem to want to reverse time and go back to those wild, crazy "good old" days, say in the 18th century, when government was "small" and average life expectancy at birth in the US was 39 years, about half of what it is today. Where's that stretch DeLorean when we need it?
