Even more ironic is that the ‘bailout” was not a bailout.” It was extortionate. The banks had no losses. They were SELLING bonds so they couldn’t have suffered a loss from devaluation of the bonds. They were funding loans with investor money so they couldn’t have had losses from loan defaults. And they were writing mortgage documents for loans that did not exist. What they risked losing was future profits they would make if somehow there was someone with money (i.e., the U.S. Government) who would shore up the unfortunate patsies who wrote insurance on completely worthless bonds, and who were indirectly insuring against defaults on loans that the mega banks had already planned to fail because they were not funding those loans.
In no instance, as far as I can tell, did any of the major policy decisions emerge from a discussion about what was good for the country, which is to say what is good for the common man, woman and child. Adding insult to injury, the people we elected and their appointees who said they knew what was going on, didn’t have a clue. True enough we don’t elect people who are experts in everything, but we do entrust them with the authority and the mandate to find out what they need to know before they do anything.
Incredibly all three administrations and all the Congresses and state legislatures functioned off of cliff notes and 30 minute meetings that consisted of Wall Street people selling the idea of de-regulation on an industry that had repeatedly proven it was untrustworthy and still allowed to promote themselves as banks you can trust. I count 6 times in American History that banks forced us into depression or deep recessions — all caused by pernicious schemes that were too bad to ever succeed. But it was worth it for the big banks because they made far more money than they ever had to give back.
Even more incredible is that it would appear that the two major candidates for the next administration will not change a thing. And THAT is why the vast majority of the American people don’t think either one of them will be good for the country. As long as they start from the assumption that protecting the banks is the same thing as protecting the financial system, which is the same as protecting the American populace. This assumption is patently wrong. Protecting the banks is enabling them to continue their fraudulent behavior which strikes at the unimportant people — i.e., most of the people who live and work in the United States.
7,000 Community Banks, Savings and Loans, and Credit Unions can weather the storm if the Mega-Banks face consequences for theircrimes against the American people.
There is nothing that the mega banks do that cannot be exactly duplicated by all those smaller 7,000 banks. In fact, the smaller banks are geographically closer to borrowers, make better loans and have fewer defaults. As for ATM card access, credit cards etc, any bank can become a co-branded issuer using that existing IT platform and the gateway organizations that control it — if the mega banks were forced to comply with the recent U.S. Supreme Court decision stating that access to the internet is and should be treated as a utility.
Those transactions fell into a gray unsecured area of finance the law in which the homeowner (erroneously called the borrower) received money that came from a party who did not know that they were being cheated. The liability exists — that the homeowner must pay the that portion of the money that was received from specific “investors” (victims) but there is no loan contract where the party funding the transaction and the person taking the money have no agreement and no knowledge of the existence of the other.
Add to that that none of the intermediaries have any contractual authority to do what they did — directly fund loans out of money from pension funds et al — and you have one thing left on the plate, to wit: an unsecured liability that arises only in the event that the injured party(ies) (investors) make an equitable claim against the homeowner (e.g. unjust enrichment).
The idea that only the homeowner should pay for losses on this scheme is absurd and the idea that the banks can continue to sell their “rights” to servicer advances that were not advanced by the servicer but rather out of the investors’ money is absurd on steroids. If that doesn’t motivate anyone, think about this: I know for a fact that all the top Wall Street bankers are laughing nervously at how stupid we are and restating the old adage “Nobody ever lost money by underestimating the stupidity of the American people.” The only reason they are nervous is that they know that all good things come to an end. Jamie Dimon likes to remind people in the first minute of any conversation that he speaks to the very top of political power in this country. Maybe we should give him someone else to talk to.