American Proscenium

How To Succeed in Banking Without Really Trying

The Bush-Obama financial-rescue plan is premised on saving the big banks that caused the trouble.  The theory is that we need to help Wall Street to help Main Street.  Government would make money available, and the banks would make loans to business, which would revive the economy.  “Once you assume,” Michael Lewis, author of The Big Short, told Charlie Rose, “that the creditors, shareholders and management must be made whole, you have no alternative to gifting the banks.”  The “gifting” program for banks has succeeded beyond the dreams of avarice.  In the first quarter, Goldman Sachs earned at least $25 million on each of 63 working days.  They made more than $100 million on 35 of them.  JPMorgan Chase and Bank of America also made money every single day in the first quarter.  The New York Times called it the equivalent of a perfect game in baseball.

The Federal Reserve, the Treasury, and the FDIC set up 25 programs to bail out the banks, committing $23.6 trillion to the task.  The biggest gift is probably the ZIRP (Zero Interest Rate Policy) program, first announced in December 2008.  Tom Hoenig, president of the Federal Reserve Bank of Kansas City, reported on the April meeting of the Federal Open Market Committee (the board that sets short-term interest rates): “conditions will likely warrant keeping the fed funds rate, which is our...

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