by Jason Kendall, contributing columnist |
June 05, 2013
In between parties, vacations, repealing Obamacare for the 37th
time and naming post offices, someone in Congress has an idea.
Apparently, the bailouts of the American banking industry did not have
the outcome Congress desired. Shocking that the strategy of blindly
handing billions of dollars to bankers has yet to do much good for
anyone except, of course, bankers.
The Terminating Bailouts for Taxpayer Fairness Act was introduced in
the Senate in April, and if it survives from the onslaught of banking
lobbyists, the bill may be able to do some good.
The act would require banks with more than $500 billion in assets to
keep capital reserves of about 15 percent, about twice the current
amount. Simple enough, but if you don't understand the impact of this on
big banks, don't worry - just look at their response and you can see
the threat this poses.
Before you question the motives of this bill, let's take a look at
the 2008 bailout and what the banks have done with your money.
The Emergency Economic Stabilization Act of 2008 gave billions to
banks, whether they were financially healthy or not. Secretary of the
Treasury Henry Paulson threatened Congress that America would lose more
than $5.5 trillion in wealth and the "world economy" would collapse if
Wall Street did not get $700 billion. It was such a scary moment that
the Senate added another $150 billion - you know, to cover the vig.
Well, what happened?
Let's start with the money loaned to help reduce mortgage
deficiencies; this was one of the main justifications for the bailout.
Most large banks took bailout money but failed to modify home loans.
This is why they are constantly being sued.
Next, millions in bailout funds went directly to pay bonuses for bankers. Priceless.
Even more interesting is that your money is probably in the banks of
the Federal Reserve. Up until 2008, the money banks had to give to the
Fed gained no interest. The money was there to help stabilize banks. By
not charging interest, banks would invest any access money, over what
they had to put into the Fed, into the marketplace. Now that the Fed is
paying interest, why would they invest that money elsewhere? Before the
2008 bailout, only about $2 billion was held in the reserve - now there
is more than $1.6 trillion earning $5 billion in interest yearly.
The Fed printed money, Congress gave it to banks and the banks then
returned it to the Fed in order to earn interest on that money.
Lastly, and to lock your children further into debt, in 2010,
Congress and the president established the Small Business Lending Fund,
loaning community banks $30 billion to invest. What did these banks do?
They paid back their TARP loans from the 2008 bailout.
The banks were
given taxpayer money to loan but the money was instead used to pay back
loans that the taxpayers had originally loaned them. They were bailed
out of their bailout.
Former President George W. Bush said, "Fool me once, shame on - shame
on you. Fool me - you can't get fooled again." The saying goes, "Fool
me once, shame on you. Fool me twice, shame on me."
Americans were not fooled - they were