Too big to fail banks have a built in safety net against default. That safety net is the threat to do away with the 30 year mortgage. Wells Fargo, no doubt speaking for the cartel, has said that without guarantee of virtually all loans, not just subprime, that they will quit writing the 30 year mortgage. That was reported in the New York Times on January 20, 2011.
If you think housing in America is dead now, then wait until this threat is carried out! So, the Tea Party argument that we just let the banks fail, and forget about regulating them is a bogus Wall Street argument that the unsophisticated have embraced.The banks are building in a permanent Too Big to Fail!
TBTF banks have the blessing of Basel 3, to go out and buy so many Fannie and Freddie bonds, and put them into tier 2 capital structures, that no politician would ever want to take away the GSE guarantees on those loans. Add to this, the warning from Wells, and you can see that even if Fannie and Freddie are shut down, and the TBTF banks take over this business, they are not going to do so without taxpayer guarantees. Now we are reading that only a few countries are big enough to have too big to fail banks. Let the taxpayers of the big countries, like the USA, China and a few others, shoulder all the risk. In exchange, our taxpayers will have access to a lot of easy money and we might get to keep the 30 year mortgage! To the TBTF I say BFD.
So then, failure of the TBTF banks is out as an option. It never was in as an option even if the financial system would have been able to handle it. It could be very well true that it was a bogus warning in the first place that the financial system would have been destroyed by letting them fail.
But we are past that opportunity to do what Bill Seidman wanted, to take these banks into an RTC and clean them up.
What we are left with are bigger TBTF banks than ever, and a business model patterned after payday lending, where fees are needed to keep these banks going. We have even heard of these banks being unable to properly service loans because of lack of manpower in the servicing departments. It is difficult to know how widespread this is, but we know it increases if people are behind on their payments. That alone is a good reason to boycott the 30 year mortgage even if these banks keep writing them!
The Wall Street argument to not regulate is based on this business model of fee generation. It is necessary to keep easy money flowing and the fees, late charges, etc, that accrue from that model. The banks are prevented from fleecing mainstreet if there are consumer agencies making their scam known. They are prevented from fleecing mainstreet if the Volcker Rule is in force. That is why Bachus of Alabama wants to do away with the rule.
And without regulation we have Fed mole Tim Geithner going around telling prosecutors not to prosecute the financial fraud, and we have the Fed bailing out hedge funds in the Cayman Islands who are cheating on taxes. We have way too little regulation as crimes in high places are rampant.
So then, if the banks are too big to fail by central bank fiat, then what can we do? Well, we will have to shame the bankers. Whether you like unions or not, some unions are protesting at banks meetings. This should go on indefinitely. We need to call out these banks until everyone in the United States knows what this NWO criminal enterprise is all about. You don’t have to support unions to support what they are doing in this area.
We need to support state banks, like the model in North Dakota. That way, if capital dries up, community banks can have some protection.
We need to support the concept of RICO prosecutions of people engaged in a business model that is purely fraud. But from a grassroots perspective, we need to educate people to be wary of taking out loans. It is better for three generations to live together than to take out risky loans. It is better to have fewer children than to take out risky loans.
And they will get more risky as banks have tasted the crack addiction of the ponzi bubble. Bernanke, with his backstop, wants to shoot these banks up with a fix as soon as possible, since sound underwriting is no longer a reason for banks to make 30 year loans. Banks apparently are no longer interested in sound underwriting if they are guaranteed by the taxpayer. The business model of the good banker no longer applies to Wall Street.
Our sovereignty as a nation has been hit hard by this loss of authority to take down and regulate big banks. So, all we can do is to keep exposing them, hoping that people will understand the risk.
We have guys like George Soros trying to make a moral system out of the financial skunk. How about we boycott the skunk instead? I am encouraged by many cutting down on driving as gas prices are ballooning. People are wising up to the ways of Wall Street. They see the skunk and they don’t like how it behaves, lifting it’s tail and spraying everyone.
When TBTF banks become the untouchables, dirty and unwanted, then our nation will be stronger and the balance sheets of our families will be more sound. It is a dirty skunk of a system George, so don’t try to give it a ribbon and expect mainstreet to embrace it!