Friday, May 22, 2015

Will Anyone Ever Defend Banks?

There are some pretty evil banksters around, mostly at the large banks, but Larry Kudlow has a point, banks do provide a number of important services, from making loans to providing ATM services. The bankster operations should be shutdown, but the banks that provide useful services should be allowed to operate without interference. 

Kudlow doesn't differentiate between bankster operations and decent, honest bankers. but I can second what Kudlow says below, but only when it applies to non-bankster operations. 

Those Kudlow calls out for attacking banks such as Elizabeth Warren and, well, pretty much every other politician, deserve to be called out. They are attacking all banks with out making the distinction between banks that provide services demanded in the market place and crony banksters who cozy up to government for special favors. -RW

Will Anyone Ever Defend Banks?

By Larry Kudlow

One of the interesting nuggets coming out of the conservative sweep in the British elections was the failure of bank-bashing by the Labour Party. Labour leader Miliband, who has since resigned, was anti-bank, anti-rich and anti-business. It failed. And while conservative leader David Cameron didn't necessarily defend banks, he didn't attack them either.

Now, the case for Tory economic management wasn't bad. The London Stock Exchange has been hot as a pistol. And the British economy is growing about 2.5 to 3 percent. Not great, not awful. It was enough for a handsome Tory victory. And it may be a message to British pundits that tax-the-rich, redistributionist, bank-bashing talk is old hat. Been there. Won't work.

But the question is, how will bank-bashing do in the U.S. election next year? It's already coming from both sides of the aisle.

Of course, the Obama administration has led the way on bank persecution. It has levied over $100 billion in fines for past sins, mostly related to mortgage bonds.

And nowadays, the thinking goes, it would be politically suicidal for anybody to actually defend the banks. That's the interesting part of this story: Nobody will defend the banks.

Well, outside of the banks that is.

A recent news piece in the Wall Street Journal proclaims, "Banks Prep Defense for Anti-Wall Street Campaigns." It seems the Financial Services Forum, representing all the big banks, held a clandestine meeting on the 51st floor of Bank of America to figure out a defense. Very conspiratorial, and not very exciting. The thrust of the Journal article is that the banks have done everything, and paid everything, the government has asked of them.

"We atoned for our sins. We will never do it again. Please forgive us for it. And by the way, would you clarify what 'it' is?"

Few will admit it, but unaffordable, undocumented mortgage quotas came out of Washington, not Wall Street. And Fanny and Freddie enforced them. And while the Fed's ultra-easy money destroyed the dollar, it also caused a bubble in home prices.

Yes, banks made risk-management mistakes. But when will the firing squads stop? You know, you can't have a decent economy without banks.

But when will you ever hear a politician say that?

Sen. Elizabeth Warren never misses a chance to slam banks. Nor does socialist Bernie Sanders or far-left former Maryland Gov. Martin O'Malley.

Hillary has caught the bank-whacking virus, which is hilarious given all the money raised on Wall Street by the Clinton Foundation.

But Republicans are whacking away, too. Of all people, former Florida Gov. Jeb Bush bashed banks while in New Hampshire.

But wait, didn't Jeb's brother preside over the big bank bailout? Oops.

Former Texas Gov. Rick Perry is slamming the banks. So is former HP CEO Carly Fiorina. She actually said, "I agree fully with Elizabeth Warren." Huh?

Yes, there is an issue with "too big to fail." And it's bipartisan, since both Democrats and Republicans voted for the bailout in 2008. Might we go there again? Economic writer Amity Shlaes has a good suggestion: The candidates should make no-bailout pledges along with their no-tax-hike pledges.

And Federal Deposit Insurance Corporation Chairman Martin Gruenberg has said that if a major bank runs into trouble today, "they would be allowed to fail and suffer the consequences of that failure." Do we believe him?

Either way, it's doubtful the political assault on banks will end. But I wonder, at some point, will someone in the U.S. — a big-shot politician, a small-business person, a struggling middle-class mom or dad — actually say something good about a bank?


Banks do make business loans, which have picked up quite a bit. They do provide mortgages, though the terms are more difficult. They do offer credit cards, decent ATM machines, car loans, farm loans and student loans. Even though the Fed has decimated interest rates, they do allow large savings accounts. And they do, after all, connect savings with investment. (I think that was their original purpose.)

Sure, I'd get rid of a few banks: Like the Export-Import Bank, which makes loans to our enemies and destroys jobs at home. Or Fannie and Freddie, which helped cause the problem in the first place, and are now actually being expanded by Team Obama. They have no capital. Disaster waits all over again.

But I have a caution for the candidates: Sometimes British politics leads our politics. And if bank-bashing didn't work in the U.K., maybe politicians here should let it go, and instead focus on pro-growth measures like flat-tax reform, free trade, deregulation and sound money. Just for a moment, why not leave banks alone?

Wait a minute. I did not even remotely mean to suggest that I'm defending banks. That would be wrong.


  1. SEC Commissioner Furious That SEC Has Made A Mockery Of "Recidivist Criminal Behavior" By Banks

    Commissioner Kara M. Stein

    May 21, 2015

    I dissent from the Commission’s Orders, issued on May 20, 2015, that granted the following waivers from an array of disqualifications required by federal securities regulations:

    UBS AG, Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. (“JPMC”), and the Royal Bank of Scotland Group Plc (“RBSG”), waivers from the provisions under Commission rules that automatically make them ineligible for well-known seasoned issuer (“WKSI”) status;
    UBS AG, Barclays, and JPMC waivers from automatic disqualification provisions related to the safe harbor for forward-looking statements under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934; and
    UBS AG and three Barclays entities waivers from the automatic Bad Actor disqualification provided under Rule 506.

    The disqualifications were triggered for generally the same behavior: a criminal conspiracy to manipulate exchange rates in the foreign currency exchange spot market (“FX Spot Market”), a global market for buying and selling currencies. Traders at these firms “entered into and engaged in a combination and conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for,” the euro-dollar foreign currency exchange (“FX”). To carry out their scheme, the conspirators communicated and coordinated trading almost daily in an exclusive online chat room that the traders referred to as “The Cartel” or “The Mafia.” Additionally, salespeople and traders lied to customers in order to collect undisclosed markups in certain transactions. This criminal behavior went on for years, unchecked and undeterred.

  2. RW - Since the passage of The Depository Institutions Deregulation and Monetary Control Act of 1980 there is no "distinction between banks that provide services demanded in the market place and crony banksters who cozy up to government for special favors." At least not in the U.S. Despite the title of the legislation, there was no deregulation. There was a sweeping expansion of the Federal Reserve's control over all depository institutions. The US banking industry is nothing more than an extension of the FED. Success as a bank in the US means currying favor with the FED and its special interest groups. There is no defense for the banking industry.

  3. Uh Larry K:

    What about the good ship goldiepops, doing god's work, as they fawned and fawned over shit can CDO's which they put in unsuspecting customer's hands, knowing full well they were going down the drain? Then, not happy with fees and commissions, they shorted same, all the while douching their clients. Have they really "Atoned for [those] sins"? How many hapless teachers, corporate employees, or members of cities and states had pension funds which were loaded with that crap? Remember, they, as I recall, were rated pristine AAA (by an entire other criminal conspirator).

    The only atonement I remember is, being passed a, "Get out of jail card", and paying a small fine, which likely amounted to a few basis points on all of the money they stole.