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Friday, September 30, 2016

It’s nearly impossible to get 99 U.S. senators to agree on anything.

But this past weekend, 99 senators agreed to send a non-binding message that the $83 billion subsidy “too big to fail” banks get from the government needs to end. The measure was co-sponsored by senators Sherrod Brown (D-OH) and David Vitter (R-LA).

The implicit subsidy first came to light in February when a Bloomberg News report found that “recurrent bailouts of the largest financial institutions have given [big banks] a unique advantage: They get a break on their borrowing costs, because creditors expect taxpayers to support them whenever they get into trouble.”

Shortly thereafter, Attorney General Eric Holder made the shocking admission that the Justice Department exercises restraint in prosecuting big banks for fear of shocking the global financial system.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” Holder said, during testimony to the Senate Banking Committee.

Now all of the Senate’s Republicans have joined with senators Brown and Elizabeth Warren (D-MA) — who have long warned of the big banks’ continued ability to wreck havoc on the economy — to call for an end to the implicit subsidy.

“I’m glad that Republicans and Democrats can agree: ‘Too big to fail’ needs to end, and these big-bank subsidies make no sense,” Senator Warren said.

Bank lobbyists have denied that the subsidy exists. But as a Bloomberg editorial notes, they’ve rejected any steps that would prevent the government from having to serve as their backstop in case of a crisis.

“If big banks don’t get a subsidy on their debt, it’s hard to understand why they’re so adamantly opposed to measures, such as increased capital requirements, that would put a limit on their borrowing,” the editors noted. “Large banks commonly borrow $25 or more for each $1 in equity — or capital — they get from their shareholders, compared with less than 50 cents per $1 of equity for the average U.S. corporation.”

Financial reform following the financial crisis was weakened by bank lobbying. As Senator Dick Durbin (D-IL) noted at the time, the “banks own the place.” And by “the place,” he meant Congress.

This vote shows the sentiment is swinging against the banks. Whether senators are willing to vote against them when actual legislation is on the line still remains to be seen.

 

 

  • Siegfried Heydrich

    Whoa. That has GOT to send a chill through the banking industry. The fact that it was a unanimous bipartisan resolution is the kind of thing that gives banking lobbyists nightmares, and I strongly suspect you’re going to see them spending an awesome amount of money to stop this movement dead.

  • John Pigg

    I am deeply glad that “down with the banks” is becoming a non-partisan battle cry.

  • dtgraham

    The banks own the place. That is one sad and sorry statement to make. How does it get to the point where the banks own the government?

    Their lobbyists are working hard to completely undermine Dodd-Frank, concentrating on the Volcker rule part of it. Banks with FDIC insurance are not to get involved in risky proprietary trading under Volcker, which still hasn’t even been implemented. However lobbyists have already weakened the Volker rule if it ever does get implemented. The concern now is that there is going to be a London Whale sized loophole in it. It may make sense to hedge individual trades but there’s now an exemption in the Volcker rule that lets banks hedge at the portfolio level. JP Morgan claimed that London Whale was just a portfolio hedge.

    Volcker needs to be airtight. If it’s not done strongly and in a complete way we are going to see banks gambling with deposits. Instead of putting excess deposits into safe instruments they’ll continue to engage in reckless bets.

    At the time of the London Whale trades JP Morgan blew through multiple risk limits and that was known by them at the highest level as early as January. When Jamie Dimon appeared before the Senate he said nothing. He flat out lied and that’s now known. When they had a call to investors in April they didn’t report anything. The DOJ needs to ask questions about whether JP made material misstatements and violated securities fraud.

    • Lovefacts

      I recently heard that the large banks are also trying to stop the spread of the Muslim banks, because if those banks became popular there would be a sea change in how people viewed borrowing. Muslim and Orthodox Jewish banks see charging interest as a violation of their religion. And before anyone attacks me, I’m not a Muslim.

      So, say you’re a business and needs to borrow money. You must to produce a business plan and show why they would be a viable business. If approved, you will receive the loan with a onetime fee attached. Repayment of the loan is 10% of the net earned by you on a monthly basis until the total loan including the fee is repaid. If the net is only $50, then the bank is repaid $5. Just imagine how that would help a start-up or restaurant.

      IMO, this is what banks should be about–helping the community, being a part of the community, investing in us.

      • dtgraham

        I’m not much on religion but you’re talking me into it.

        I have to say that this administration and it’s department of justice, along with the SEC, have been abject failures when it comes to enforcing the rules of integrity in the market place…and I’m so sorry to say that. I’ll use the parlance of the big banks and hedge my language here. I like President Obama very much and I know he’s done a lot of good things, but in a few areas, not only do I not see the change—I’m even having problems finding the hope.

  • nobsartist

    Talk is cheap, just like our “representatives”. Unless you are seeking a favor……

  • johninPCFL

    Interesting that during all the arguments over the $85B in sequester spending reductions, eliminating or reducing the $83B in bank subsidies was never mentioned as an alternative. Now we know that even those newly elected to Congress know who owns the place.

  • charleo1

    Remember in the late summer of ’08, when the wheels were coming off
    the economy? We found out later, they had been coming off in ’07, and
    we know now, many of the big money guys, including former Goldman-
    Sachs, CEO, and then, our Treasury Secretary, Hank Paulson, and Fed
    Head, Bernanke, had known the elements of an historic crash were in
    place for some time. But figured, any overt moves to avoid it, would tip
    the markets, and cause what they were trying to prevent. But, the hard
    facts of the matter, were, the people that handle the world’s money, had ask a compliant Congress for a big box of rope, and, Congress had obliged. And now
    these huge institutions, that on paper were collectively worth trillions, were
    as broke as a Las Vegas drunk on Sunday morning. Some, we were soon to find
    out, had been allowed to essentially borrow $40 dollars, for every $!,00
    they owned, Furiously trying to pump enough money in the real estate
    bubble to keep it hot, so they didn’t lose everything they had, plus the $39.
    they didn’t. That $39. dollars, we gave them. You, and I. And the Federal
    Government, pulled their fat hind ends out of the fire they built, that was
    going to consume them. You would think they would be chastened. One
    would think they would treat the public with a new found respect. We
    would all be wrong, of course. They took some of the very money we gave them,
    and used it to bribe Congress. I suppose, so the next time they screwed
    the world, none of them would face any jail time then, either. So, we could
    at least expect some tough legislation coming out of Congress. So, at least
    this didn’t happen again. Maybe take a look at Glass-Stegal. Or, the tons of
    money poured into our Government, by special interests, that was no doubt
    a factor in all this. We would be wrong again. Even as the new regulation was inadequate, to prevent too big too fail. As the institutions who got the bailout
    money, were bigger now, than before the crash. So what did ordinary Americans
    get? Mostly a, “serious talk,” about how WE, had been living beyond our means.
    How WE, were taking unfair advantage of the rich. And, programs such as
    Social Security, and Medicare, WE, depend on, were unfairly burdening our
    children with debt. I am amazed there are such men, with such gall, walking
    among us.

    • Reply to charleo1 –

      But, make sure the children go to church on Sunday.

      Good Christians all!!!

      • charleo1

        Well, right! Where would we be if these bankers, and politicians,
        didn’t have a strong moral foundation, from all that Sunday learnin’?

  • Lovefacts

    Although the banks are “too big to fail,” it doesn’t mean bank officials shouldn’t be prosecuted for wrong doing or that the banks be fined. Hopefully, Capital Hill will pass legislation that remedies at least part of this problem. Guess the Justice Dept hasn’t heard of anti-trust.

    • Put them all in JAIL!! To heck with fines! Take away their freedom! They lied, cheated and stole from everyone!

      • What, overcrowd all the Country Club Prisons?

        Get serious.

  • howa4x

    I think this subsidy is the tip of the iceberg and that Americans are growing weary of Big corporations getting tax deals and financial support, while shipping US jobs out of country. I’m surprised that this issue was not led by the Tea party who want to shrink the size of government and curtail spending. Maybe they aren’t smart enough and don’t realize that a tax cut and subsidy are really spending by a different name. Seems they like cutting programs for the poor while preserving tax cuts for the rich. This just shows how despised the Big bankers really are. Lets see if republicans follow through on the threat to filibuster Cordry’s nomination to head the CP agency to protect these same banks and their risky practices. I guess getting painted as protectors of the 1% in the last election wasn’t enough. Now they want to double down with this filibuster which will just give the democrats more ammunition for the mid terms

  • Mark Forsyth

    Too Big To Fail,Too Big To Prosecute,America has been warned of this countless times.And since so much is tied up in the banks it makes since that their troubles roll down hill.This may have the effect of implicating others.The mess is so bad that more and more the people are desirous of a thorough housekeeping of not only the banks but also government.The arrogant ones should beware.The people will tear you down and tear you apart and have done with you as they get back to the business of building and maintaining a Democratic Republic. Fascists Be Damned!

  • docb

    Key word…NON-BINDING… They will vote for anything with NO TEETH!

  • JDavidS

    Could it now be that bankers have replaced used-car salesmen as the sleaziest occupation?

    • Mark Forsyth

      If not,they’re running a close second.

  • Sand_Cat

    Yeah, I’ll think about being impressed when a majority of 60 votes for anything even remotely similar to stopping subsidies for banks and other corporations.