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Gigantism is a human condition where a person grows too large, creating multiple health problems. Surgery is required for healing. Banks "too big to fail" is an economic condition creating multiple problems for everyone else. Surgery is required for healing. Obama spent his first year in office enabling the problem, and thank goodness, he is starting his second year off by scheduling the banks for surgery.
Chase, Citibank, Wells Fargo, and Bank of America receive half of the nations deposits, issue two thirds of all credit cards, and hold half the mortgages. This is unacceptable. The tricky schemes of the financial industry almost sunk us. We were told these banks were too big. Then the government foolishly stimulated them with about a trillion dollars and the result - they got bigger!
The conservatives are balking at Obama"s attempt to perform surgery on the banks . I agree that it is useless to tax the banks and limit executive bonuses. But no organization should be big enough to sink the economy. The rules must favor smaller players to encourage competition and protect against corporate gigantism.
The problem is knowing what rules need to be in place. I am not an economist, but I am a bank customer with enough experience to generate some ideas for discussion.
The first problem I see is that the community bank is about gone. How did that happen? There needs to be big banks to deal with international finance but why not smaller banks to handle neighborhood finance? I live in a Chicago suburb and I don"t know of a local bank . I would be happier knowing my savings was being invested in municipal bonds supporting local projects, than building a resort for the rich in Dubai, Saudi Arabia.
I purchased a duplex a couple of years ago. Within 60 days I got a letter informing me that the mortgage had been bought by some company out of New York. Why would that company want my mortgage? There was some financial foolery going on and we need a rule. The local banker taking the risk to loan me the money should maintain the risk until paid in full.
I think we should rethink the FDIC. They insure deposits up to $250,000. In other words, banks can do crazy things with your money and the government will cover the losses. How can this not lead to riskier behavior? If there were no guarantees, I bet we would get informed about where the banks were investing our money. Smaller banks should have the FDIC backing but as banks get bigger they should lose the protection. As a customer, choosing bigger banks might provide greater opportunity, but there would be less protection.
Our big government has been siding with big business for far too long. Both republicans and democrats are guilty of this trend. Campaign contributions, lobbyists, and gifts all come from big business money. Legislators in turn create rules favoring the big and crushing the small. A strong economy needs strong banking . Can we at least agree that 4 banks should not control the bulk of all the money in the nation? Find a cure for corporate gigantism.
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Source by
William H Watson
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