Showing posts with label bank deregulation. Show all posts
Showing posts with label bank deregulation. Show all posts

Thursday 23 March 2017

Saint Mathew Pray for Us! Bank Deregulation Is Back!

Shock and awe and bank deregulation

Amid the boom and flash of the spectacular political theatre going on right now, you may not have noticed the announcements in a single utterance on television or in columns in the back pages of your local newspaper—“banks need to start lending money again,” (Trump on CNN), “President Donald Trump promised a meeting of community bankers to strip away some Dodd-Frank financial regulations” (B3 Globe and Mail 10 March 2017) and White House fires Preet Bharara “the high-profile Manhattan prosecutor known for his pursuit of public corruption and Wall Street crime” (A18 Globe and Mail 11 March 2017)—bank deregulation is back! “Bank deregulation” was the precursor to the financial collapse of 2008 causing banks and financial institutions to go bankrupt, individuals to lose homes, jobs and pensions, and triggering the government bailouts of the banks costing taxpayers what is now estimated to be a trillion dollars.  (Historically the British and Americans defined “billion” and “trillion” differently, but these days the American definition seems to prevail.  In the American system, a “billion” is a thousand million and a “trillion” is a thousand billion. Here is a more visual and visceral sense of how much a trillion is.)   The “Dodd-Frank regulations,” about to be "stripped away," were the rules put in place to prevent the collapse of 2008 from happening again.

Saint Mathew, the patron saint of bankers and accountants

Saint Mathew was an apostle of that Jesus the Anointed (who was voted “God” by the Council of Nicaea in 325).  Mathew is the alleged evangelical author of the first gospel of the New Testament  (although his name was not attributed to the text until after he was long gone, and oddly, in the gospel, he refers to himself in the third person--but then again so do I sometimes), and the patron saint of bankers and tax collectors (these days we might suggest that he choose a side), of accountants and money in general  He has a lot to answer for.  Even though I have graduated from agnosticism to atheism since beginning this blog, I’m recommending prayer in this case, because there really don’t seem to be any other options.  Bank deregulation isn’t just on the agenda, it seems a foregone conclusion.  

Bank regulation, bank-robbery deregulation; tomato, tomaato

I have to confess that I broke my pedagogical rule of Do No Harm Part II: Avoid Irony in my last post on bank robbery, but the point I wanted to make is that the next time you hear someone talking about “deregulating banks,” you can substitute “deregulating bank robbery”  and discover that the arguments, the logic and justifications turn out to be the same. So what?  We may be living in a global oligarchy these days with wealth dictating government policy and the law, but perhaps there is some measure of solace in being able to say, “I know you are going to screw us because you have that power, but forget being smug and self-righteous because we know what you’re doing.”

Step one of being un-fooled is to understand what the expression “bank deregulation” means.  Here are three words that you need to know in order to know what "bank deregulation" is all about: "derivatives," "leverage," and "rent-seeking."

  • Derivatives.  I may have talked “derivatives” to death in my earlier post, but basically what you need to understand is that “derivative” means that banks and financial institutions can “bet” on the stock and bond markets.  “Bet” is the important word here.  As described in The Big Short (both book and film), these “derivatives” are not investments in companies or products or services, they are simply companies and individuals betting that a stock will go up or down without actually investing in the company they are betting on or against.  Finance people make “derivatives” sound reasonable by describing them as “insurance”; as in you buy an insurance policy on your house to protect yourself against the possibility that it might burn down.  However, a derivative is more like buying an insurance policy on your cigar-smoking, alcoholic neighbour’s house in the hopes that his house will burn down—so why not buy him a bottle of vodka and a box of cigars for Christmas, his birthday, etc?  In the film version of The Big Short derivatives are shown as being like following your neighbour to the casino and when he bets two dollars on the roulette table, you bet 10,000 dollars with someone else that he is going to lose his two dollars, and someone else bets 100,000 dollars that you are going to lose your 10,000—that’s the derivatives market.  The derivatives market is estimated to be between between 710 trillion and 1.2 quadrillion US dollars.  (see "The Size of the Derivatives Bubble").  Just to put those numbers in perspective once again the total GDP of the USA is 17 trillion.

  • Leverage. How are these crazy numbers possible?  How is it possible that so much money—40 to 70 times the total wealth of the USA, 700 to 1000 times the amount of US paper currency which actually exists in circulation—is being gambled?  The answer is “leverage” (that’s chapter six in The Art of the Deal, the book which Trump’s ghost writer, who wrote the book, called “a tissue of lies”).  “Leverage” is what “bank deregulation” is all about.  If a bank has assets worth one million dollars, the average person might imagine that a bank can therefore lend out to clients up to one million dollars.  Under current US banking regulations the leverage ratio is 4%, which translates as a ratio of 1 to 25.  In other words, if the bank has 1 million dollars, they can lend 25 million dollars.  That’s right; for your mortgage or your car or your kid’s education, they can lend you 24 million dollars that they don’t have—but you, of course, must repay in money that you actually have.  (By the way, the mortgage that you owe to the bank is considered one of the bank's assets.  If you owe the bank $200,000, by regulation the bank is considered to have that money within its assets.)  The current "leverage ratio" (1 to 25) is the key regulation that banks find too onerous, limiting and difficult to comply with.  They want to change the leverage ratio so they can lend you even more money that they don’t have.
  • Rent-seeking.  This is the concept that we really need to watch out for.  The idea has been around since the 1970s, and is being much discussed in financial circles.  I found out about it reading Christia Freeland's Plutocrats:  The Rise of the New Super-Rich and the Fall of Everyone Else.  You might imagine that with all this money floating around it should be easy to cure cancer, end world hunger and poverty, offer everyone daycare and free education from kindergarten to PhD, but as the operations of rent-seeking become more obvious, it is becoming apparent that all this fabulous wealth doesn't actually produce anything, and it isn't the result of anything being produced.  Monumental wealth is being produced simply through the manipulation of government regulations, in particular the laws govern finance and banking. "Money" has become like Tinkerbell's pixie dust, not tied to anything of value, but available to the super rich to sprinkle on politicians, and for politicians to sprinkle back in greater measure on the super rich by adjusting the regulations for banking and finance to their whims and favour.  The disappearing middle class can look back on "trickle-down economics" and crumbs from the big table as "the good old days" because pixie dust may float in cosmic clouds above  but the .1% are exceptional at keeping it afloat and have little motivation to let it fall on the rest of us.

Friday 17 March 2017

Should Bank Robbery Be Deregulated?

Phoenix, Arizona
March 9, 2017



  • Height: 5'4"
  • Sex: Female
  • Complexion: Light
  • Race: White (Hispanic)
  • Remarks: The suspect was described as having a medium build with long dark curly hair. She was seen wearing a purple hat with a white flower on the front, purple jacket, purple dress and was carrying a large black purse.
  • Vehicle Information: Tan older model Nissan Pathfinder


On March 9, 2017, at approximately 10:18 a.m., the suspect entered the Fry’s grocery store located at 2626 S. 83 Avenue in Phoenix. She proceeded to the Wells Fargo branch inside where she displayed a robbery demand note which indicated she was armed with a gun. The suspect also told the teller to not follow her because there was a second suspect in the parking lot that would shoot anyone who did. The teller gave the suspect U.S. Currency and she fled the store to the listed vehicle parked in the lot.


Should bank robbery be deregulated? 

I have decided to spotlight this particular Phoenix bank robber (above--oops, not sure why her photo has disappeared from my post) from the FBI's list of 486 because I liked the panache of her purple hat with a white flower, plus I thought her image might gain me some cred with righteous Americans in search of undocumented Mexican criminals--though there is no evidence she is Mexican or undocumented.  

Why bank robbery should be deregulated:

  • Bank robbery is a business transaction between an individual and his or her banking institution of choice.  Government interference through regulation and enforcement causes inefficiency, bureaucracy and needless costs to tax payers.
  • Banks are better able to deal with bank robbery than outside government agencies because they are uniquely positioned and qualified to understand the business of bank robbery and how best to deal with it.  
  • Bank robbers take risks, like any investor, and are sometimes rewarded and sometimes penalized for their risk taking. Banks and bank robbers are better qualified in risk management than government agencies currently tasked with regulation and enforcement. 
  • The average bank robbery nets less than $8,000.  The cost of policing, security and enforcement (incarcerating one prisoner for one year in the USA currently costs more than $30,000) is much higher than the amounts that bank robbers actually steal.

Alternatives to the current system of regulating bank robbery:

  • Banks currently supply much of their own security.  Bank security should be turned over entirely to the private sector and banks themselves, replacing onerous costs to tax payers and a system of multiple layers of conflicting police forces (FBI, Municipal, State, sheriffs, marshals from local police forces as well as the banks' own security systems and other private security companies, CIA, NSA, Homeland Security, and Private Military Contractors such as Blackwater) with a single efficient system paid for and managed by the banks themselves.
  • Many prisons in the USA are private, for-profit ventures.  In essence banks already own and run a significant part of the prison system.  Allowing banks to once and for all take over the incarceration of captured bank robbers would alleviate the burden on middle-class tax payers, clear the court system for more profitable forms of litigation, and convert the incarceration of prisoners into profitable work.  
  • Smaller banks may feel unprepared to manage their own security, policing and incarceration.  Private contractors and franchises will be able to fill these gaps.  Some smaller banks may simply decide that bank robbery is "the price of doing business" and such a policy will no doubt function in the short term given the relatively small cost of individual bank robberies; however, it seems clear that these banks will eventually be absorbed by larger enterprises with their own police forces, court system and prisons.  
  • Some left-leaning, liberal bankers (widely know as "oxymorons" or just "big morons") may decide on sending bank robbers to school (a year of college costs less than a third of the cost of a year of incarceration in the USA) and profit from the disparity of costs.  However, until such time as banks have more fully privatized the education system in the USA, this approach is not  recommended.

The time is ripe!

The USA is once again on the verge of massive deregulation of the banking and financial services industry, and a return to the golden age of 2007.  The time is right and ripe and propitious for the deregulation of bank robbery within the wider and much more significant scope of the deregulation of banking as a whole.  Don't let this moment pass you by without considering how you and I and the entire world will benefit from the deregulation of banking and financial services!

Creedence heard it though the grapevine.

Just to reinforce the point:  

'Deeply concerning': Canada pension fund invests in US immigration detention firms

Addendum (Aug. 29, 2020)

Accidentally, the bank robber I featured at the beginning of this post (the picture has disappeared) looks a lot like the "bombshell bandit" whose life story is described in this article:

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