Political Crossfire Forums

They have grown to their size through a combination of real returns and pyramid schemes. Eliminate the pyramid scheme portion and they can keep the real returns portion afloat.

They grew to their size because of them not creating value to their customers but making money on nothing more than capital, capital that they created based upon nothing but speculation. If they created value for their customers then why are they suing? Happy customers don't sue. But the fact that these TBTF banks caused us to enter a recession is evidence alone they need to be broken up.

Is that from a babbage column?

That aside, those banks certainly did not utilize their commercial banking side to cover the rampant losses on the investment side. Derivatives do not enter the commercial banking equation. Bloomberg's FOIA subpeonas revealed huge sums given to banks of all sorts! Bear was allowed to go down because it wasn't a big enough player on either side, Lehman was reckless ideologically driven decisions.

And debt was at the heart of it all? What? No....companies were handling their debts differently. Thy worked with massive sums on a daily basis so when the credit dried up day to day debt servicing froze and started to cripple companies. Even GE did this! Did anybody bother to ask how the corporate sector allowed these extremely leveraged positions? And how subprime loans were formulated? No....because they didn't care so long as it all worked.

Debt wasn't the cause. You had cascading market failures that allowed debt to build up to unsustainable levels because the models back then saw no wrongs. We've already been over this, the investment banks very own trading desks were staking positions against the commercial arms of the same bank!!! Those commercial loans were pushed by the investment side to turn what they saw as a tidy profit for their side.

Systemic risk posed by that level of dysfunction within a single corporate entity significantly propels support for the organized dismemberment of these branches. Conflicting interests abound.

I'm not sure that these banks need to be broken up but they definitely need to be regulated in a better manner.

Huge banks shouldnt be downsized on purpose by the gubmint, but they shouldnt be supported or subsidized in any way either.