How can it begin to right itself when its entire banking/investment infrastructure and culture developed in a way that leaves it profoundly vulnerable to economic disaster?
How indeed? Mark Twain is said to have commented, "history seldom repeats, but it tends to rhyme."
Well, this is a very old rhyme indeed, its more recent history carrying us through the Great Depression, Savings and Loan Collapse, the Dotcom Bubble and finally, the 2008 Lesser (but not by much) Depression. Now today a worldwide shadow shrouds corporate bank loans about to go to hell.
Corporate? Indeed, it is so. Packaged home loans have become passé and banks are hot on the trail of new victims.
It seems they eagerly re-wired the mortgage asset packaging that set the stage for the 2008 collapse, only this time with shady corporate loans. Turns out not to have worked so well.
The vehicle in both cases was (and is) unregulated derivatives, packages of debt passed on to investors with exuberant return percentages. I will remind readers that a vehicle accurately describes the means by which bank-robbers escape the scene.
So, what the hell, why not try it again? The last time banks failed the government bailed them out, so what’s the risk?
Need we mention that student loan default looms, as do auto loans, credit card non-payment and the dreary fact that 40% of American adults stand unable to raise $500 in a financial emergency?
No small thing, there are trillions of dollars at immediate risk. The banking landscape is as crisp as a California meadow and the match may be struck at any moment.
We’re in tough shape, folks. But the premise as stated is how should a society respond?
I suggest jail terms for fraud and numerous other bankster crimes against society. The time is past for financial slaps-on-the-wrist.
Congress wrings their well-paid-off hands and ignores their duty to return us to prior banking laws that stopped such nonsense. But law is still law and bank after bank has admitted to laundering drug and illicit foreign income. So those laws would suffice.
Bank CEOs shield themselves with plausible deniability, denying any awareness of such acts, the time honored who-knew? defense. But that simply won’t fly past a skilled, patient and well-funded prosecutor. Should a bank CEO claim not to even be aware of the primary profit generators within his bank, a juror would certainly be disposed to raise his eyebrows.
If such a thing ever got to jurors. But they don’t and more on that in a moment.
Congress claims to have no answers and throw their hands up in despair regarding compliance. But jail one or two (or three) CEOs and you’ll very quickly see compliance run like a shiver down the spine of the banking community. Bernie Madoff doesn’t count. Bernie was a loner small-time pyramid builder.
The Securities and Exchange Commission (SEC) is arguably a co-conspirator in these shenanigans, allowing monetary settlements with no admission of guilt in case after case. Banks such as Wells Fargo hold a 3.3 billion dollar legal defense fund. That’s over $1,500,000 each and every day for over a year, so it’s pretty obvious they have sufficient knowledge of possible illegalities to defend. A CEO claiming plausible deniability of that fund and its purpose is absurd.
For its part, the SEC claims it cannot afford the time and money to take such cases to conclusion.
My personal conclusion is, horsefeathers. The Securities and Exchange Commission is a federal government agency. As currently structured, the SEC must go through the federal appropriations process for its annual operating budget, even though it annually collects registration fees that exceed its appropriations.
If the Congress elects to keep its sticky-little-fingers off compliance, it might more easily choose to properly fund its own agency in the interests of those Americans who bear the financial brunt of every collapse Congress has thus far allowed.
But they choose not.
Dial up some Youtube videos of Senator Elizabeth Warren if you wonder how that violation of trust is allowed to continue. And the video I have chosen as an example is five years old. No progress has been made since then, notwithstanding Senator Warren’s vigorous pursuit of the matter.
On can only wonder why. But wondering will not get us where we need to go.