By Choosing The Big Banks Over The Little Guy, The Government Is Dooming BOTH

Should Government Help the Little Guy or the Big Banks?

If the government is going to give anyone money, giving it to the little guy is arguably more fair than giving money to Wall Street fatcats.

Moreover, as Steve Keen demonstrated mathematically in 2009, giving money to the debtors is much better for stimulating the economy than giving it to the creditors.

In addition, because runaway inequality causes depressions, helping out the little guy helps to stabilize the economy.

Government Has Picked Winners and Losers

The big banks were all insolvent during the 1980s.

And they all became insolvent again in 2008. See this and this.

The bailouts were certainly rammed down our throats under false pretenses.

But here’s the more important point. Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not. They were insolvent.

Tim Geithner falsely stated that the banks passed some time of an objective stress test but they did not. They were insolvent.

Both the creditors and the debtors were mortally wounded by the 2008 financial crisis. The big banks wouldn’t have survived without trillions in handouts, guarantees, loans, idiot-proof profits courtesy of the government.

The little guy hasn’t been helped since 2008. He has been left to suffer with his life-threatening wounds. See this, this and this.

So the government chose sides. The creditors were wiped out, just like a lot of Main Street was wiped out. In one sense, the government chose who would live (the giant banks and other bailed out and favored companies) and who would die (the other 99%).

But in fact, the big banks were no longer creditors after the 2008 crash. Specifically, the big banks which held the mortgages and the loans were wiped out.

The government moved the arms and legs of the big banks to pretend they were still alive … and have been doing so ever since. But they were no longer going concerns after they went bust.

The government pumped blood back in these dead banks and turned them into zombies. They will never come back to life in a real sense … they are still zombies, 3 years later.

By Choosing Wall Street Over Main Street, the Government Has Doomed the Economy

Many of the world’s leading economists and financial experts say that by choosing creditors over debtors, the government is dooming the economy. See this and this.

The big zombie banks can never come back to life, and – by trying to save them – the government is bleeding out the little guy.

By choosing the big banks over the little guy, the government is dooming both.

Category: Bailouts, Regulation, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Choosing Big Banks Over Little Guy, Government Dooms BOTH”

  1. bram says:

    yeah, and let’s get rid of the FDIC while we’re at it…. lame.
    it’s not about saving one over the other. it’s about extending the time line to allow everyone to unwind. Underwater homeowners should walk and take the hit. Banks with crappy RE portfolios should liquidate or consolidate and take the hit. The government should help facilitate the correction so we can move on.

  2. theexpertisin says:

    Excellent post. And how true.

    The same can be said about our government favoring those who shun work and persoonal respoinsibility for one’s actions at the expense of those productive citizens who try their best to keep the country afloat.

  3. MayorQuimby says:

    Helping debtors would have achieved nothing longer term except to cause more bubblicious inflation.

    The economy needs less consumer credit, a higher savings rate, and a return to old school investing. If we can grow the real economy, delever and pay down debts, it would be a nice start.

  4. blackjaquekerouac says:

    and? now what?

  5. Why can’t the see the big mistake and fix it now? The answer is that Obama was sold a bill of goods by Timothy G.

    They can make the banks mark to the market, revealing their insolvency.

    Then the stockholders and bondholders lose 100%, the banks are sold to a new group of BANKERS (not traders) – people who want to lend money to borrowers. Those banks, with clean balance sheets, could be sold at enormous profits by the government – hopefully enough to offset taking on all the bad paper of those banks

  6. number2son says:

    Joseph Stiglitz was right. From 2009:

    How to rescue the bank bailout http://bit.ly/qEC6kQ

    And everything he warned about has now come to pass. Obama, the naive, ignored him in preference to fools like Larry Summers. Look no further for the primary reason Obama will be a one-term president.

  7. number2son says:

    This is as good a place as any for this:

    DEMOCRACY FOR SALE: Dylan Ratigan’s Constitutional Amendment – Get Money Out Of Politics! http://bit.ly/nGQKC1

  8. wunsacon says:

    To fight deflation, don’t give money to specific groups (such as those who recklessly borrowed or those who recklessly lent) because that (a) often rewards the very people who created the problem and (b) punishes the people who behave or behaved responsibly. Simply give every citizen a debit card and put $200 on it every month. (Don’t issue new debt for this. Print the money.) Let every individual decide how to use it. (Some will pay off debts. Debt-free citizens will spend it or invest it.) And give them the money whether they “need” it or not, so that we don’t disincentivize people from acting responsibly. (E.g., unemployment insurance is a slight disincentive to searching for a new job, but only because the benefit terminates when you find one.)

  9. MayorQuimby says:

    That’s great wun. Well just hyperinflate and destroy every renter and saver in the nation.

    Amazing. People STILL want to print ourselves out of this mess and STILL believe in pain free solutions.

    Grow up. You cant print yourself out of debt in a credit based system because you destroy capital formation at the same time you are bailing out debtors. Iow, you destroy one gr to save another.

    Why not LET THE MARKET CORRECT ITSELF and knock off the desperate attempts to bail everyone and everything out?!

    Oh and before you chime in with the “savers don’t get destroyed because they can save the new money”….it doesn’t work that way unfortunately. What would happen is that prices rise quickly because a person with $200 a month can now afford $2,000 of debt so people would lever up and spend four to ten times what they are given creating hyperinflation, kind of like the housing bubbople on steroids.

    What would happen if you gave everyone a ten thousand dollar downpayment check? They can now ‘afford’ a $100,000 house! So the guy who saved $25,000 and was bidding $75,000 on a house now sees his purchasing power evaporate.

  10. wamarsh says:

    bailed out big political contributors duh

  11. Greg0658 says:

    I realized I’m not talking to Washington (& you’all) on this:
    http://www.ritholtz.com/blog/2011/08/the-trend-is-your-friend-%e2%80%94-until-that-nasty-bend-at-the-end/#comment-579205
    NO-oh .. I’m talking to the boys & girls at Jackson Hole

    need a picture .. polish up the AAPL and take a bite

    corporate stock desire is rotting world country base currencies

    maybe this on the 2012 Series “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE” “EXCEPT CORPORATE STOCKS WHICH HAVE UNDERMINED THIS NOTE”

    the hostile takeover scene near the end of “The Secret of My Succe$s”:
    “but as you’ve always told me, Howard…love is love…but business is business.
    You’ve run Daddy’s company into the ground, Howard…and I believe these people here can bring it back to where it belongs again. Now, up, Howard, out of that chair.”
    “Don’t be ridiculous. I’m not about to resign my position.”
    “You don’t have to, Howard. You’re fired.”