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Banks: “Overreaction” Will Destroy the Banking System

January 24, 2010

E.J. Manning

It’s President Obama’s fault say the banks. The nation, even the globe is about to experience a ‘nuclear attack’ on the investment banking community. In the words of Representative Judy Biggert, a member of the House Financial Services Committee, the Obama administration proposal to limit the trading activities of Wall Street banks is an overreaction that could make it harder for people to get auto loans and home mortgages. The Obama administration plan would prevent banks from owning and investing in hedge funds while disallowing proprietary trading. Fear is in the wings.

According to fear mongers, the Presidential spotlight on investment banking suggests that overregulation that would likely slow the pace of economic recovery in the U.S.

“If firms are unable to buy and sell assets, where will liquidity come from in the future?”…”How will auto loans and home mortgages be financed?” – Judy Biggert speaking the Security Traders Association of Chicago

Decades ago, it was enough for banks to make interest on loans while reloaning that same money to others over and over. This is called the fractional reserve. Bankers keep only a fraction of cash and ‘highly liquid asset’ in reserve. They lend out the remainder over and over, while maintaining the simultaneous obligation to redeem all these deposits upon demand. For decades, bankers have gone far beyond even this money making scheme.

Now the financial powers that be are involved in an endless leveraged gambling game of paper investment, selling short and long, in order to make money, which is quickly becoming worthless as the dollar continues to devalue over time. This great paper investment and bundling of securities is what has supported the great heights of the investment community resulting in the complete meltdown of the economy in the ‘Great Recession of 2008.’

The administration aims to more closely align banks’ interests with those of its customers while reducing the risk that major institutions pose to the broader financial system. Even so, President Obama prescribed that any move to limit proprietary trading activities in banking must not go so far as to discourage lending. Those involved in the financial power industry are skeptical, suggesting that regulation will result in ‘nuclear fallout’ for the securities industry.

The fact remains that the securities industry IS the problem. The House Financial Services Committee seems to have their bread buttered on both sides, fully compromised by banking and financial interests. They have argued that President Obama’s legislation would ‘inflict a new tax on transactions,’ which in turn would reduce liquidity in U.S. market and shift business overseas. Clearly, bankers see themselves as fully in control since their practices range the globe.

Bankers and compromised politicians also suggest that the U.S. government has profited greatly from banking and investing over the few decades. A transaction tax has also been proposed by Democrats DeFazio and Harkin. This ‘new tax’ is an attempt to recoup taxpayer money spent on rescuing the financial system from its’ own lack of financial literacy and its’ total ineptitude.

“Bureaucrats in Washington don’t necessarily know what’s best for our markets and market participants… They’re not the ones who maintain our markets through times of turmoil.” Bankers and investment sycophants still continue to ply their own interests while decrying an attempt to reign in their greed and monetary avarice.

Yes, even your auto loans have been bundled and repackaged as securities fodder for a system that expects to profiteer from every consumer and commercial transaction in spades. It would seem that many Republicans and the House Financial Services Committee are bent on keeping the financial system, a house of cards for greedy banking and investing, exactly the same. They are resisting regulation on any level. Even the mainstream media recognizes the disconnect between Wall Street and Main Street. The problem is that this kind of banking is not the real economy, but a system that has been built to profit from the runaway credit scam that has been proffered on the American people.

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