The extent to which the banks own Congress

To what extent do the banks own Congress? Paul Blumenthal reports at Huffpo:

When Washington puts policy on the auction block, bankers are consistently the highest bidders. The industry's most striking victory has been the watering down of post-financial crisis reforms, to the point that banks are now bigger than ever and the bonuses keep flowing. But Wall Street's campaign spending and lobbying power is so intimidating that banks have repeatedly stuck the public with the tab for their losses and no one in Washington stops them. Why hasn't the government done something about outrageous ATM fees? Or credit card interest rates up to 30 percent? Bankers' clout is such that common-sense pro-consumer legislation is presumptively dead on arrival at Capitol Hill if it threatens banks' revenue streams.

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Quotes about banks

Prominent thinkers and politicians have often had harsh words about banks and bankers. Here is a sampling: -"Whoever controls the volume of money in any country is absolute master of all industry and commerce." James A. Garfield -"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson (1743-1826), Letter to the Secretary of the Treasury Albert Gallatin (1802) -"Thus, our national circulating medium is now at the mercy of loan transactions of banks, which lend, not money, but promises to supply money they do not possess." Irving Fisher -"Where would we be if we had I.O.U.'s scrip and certificates floating all around the country?" Instead he decided to "issue currency against the sound assets of the banks. [As opposed to issuing currency against gold.] The Federal Reserve Act lets us print all we'll need. And it won't frighten the people. It won't look like stage money. It'll be money that looks like real money." [Emphasis added.] (Source: 'Closed for the Holiday: The Bank Holiday of 1933', p20 - Federal Reserve Bank of Boston) Treasury Secretary Woodin, 3/7/33 -"Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good." John Adams -"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." Napoleon Bonaparte -“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” Friedrich A. Hayek (1899-1992) Austrian Economist, Author and 1974 Nobel Prize-Winner for Economics -"There can be no real individual freedom in the presence of economic insecurity." Chester Bowles (1901-1986) -“You are a den of Vipers! I intend to rout you out, and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.” Andrew Jackson -“The country is governed for the richest, for the corporations, the bankers, the land speculators, and for the exploiters of labor.” Helen Keller -“I hate banks. They do nothing positive for anybody except take care of themselves. They're first in with their fees and first out when there's trouble.” Earl Warren -“Paper money eventually returns to its intrinsic value ---- zero.” Voltaire (1694-1778) [More . . . ]

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Time to really focus on the banks

At The New Republic, James K. Galbraith argues that "The financial crisis in America isn't over. It's ongoing, it remains unresolved, and it stands in the way of full economic recovery."

To restore the rule of law means first a rigorous audit of the banks and of the Federal Reserve. This means investigations—Representative Marcy Kaptur has proposed adding a thousand FBI agents to this task. It means criminal referrals from the Financial Crisis Inquiry Commission, from the regulators, from Congress, and from the new management of troubled banks as they clean house. It means indictments, prosecutions, convictions, and imprisonments. The model must be the clean-up of the Savings and Loans, less than 20 years ago, when a thousand industry insiders went to prison. Bankers must be made to feel the power of the law in their bones.
I agree with much of what Galbraith says, although he wants to give the ratings agencies a free pass, which is, in my view, outrageous. If the ratings agencies had bothered to inspect even a few loan files, they would have seen the exploding ARMs triggered by 2 or 3 year teaser rates and the scant or non-existent documentation. A huge percentage of subprime loans were guaranteed to fail. It add insult to injury that the ratings agencies are successfully (so far) invoking the First Amendment to defend their incompetence and fraud.

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Finally, a politician talks straight about the need for Wall Street Reform

In an impassioned speech this morning, Sen. Ted Kaufman (D-Del.) called for the break-up of megabanks and a firmer separation between Main Street banking and Wall Street trading. At the above link video excerpts are available. OK, now we need 99 more senators and hundreds of representatives to get on board.

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How big are the big banks?

At The New Republic, Simon Johnson and Peter Boone offer some eye-popping numbers to illustrate how big the big banks have gotten:

As a result of the crisis and various government rescue efforts, the largest six banks in our economy now have total assets in excess of 63 percent of GDP (based on the latest available data). This is a significant increase from even 2006, when the same banks’ assets were around 55 percent of GDP, and a complete transformation compared with the situation in the United States just 15 years ago, when the six largest banks had combined assets of only around 17 percent of GDP. If the status quo persists, we are set up for another round of the boom-bailout-bust cycle that the head of financial stability at the Bank of England now terms a “doom loop.”
From the same article, here's more numbers to illustrate how big is big:
The big four have half of the market for mortgages and two-thirds of the market for credit cards. Five banks have over 95 percent of the market for over-the-counter derivatives. Three U.S. banks have over 40 percent of the global market for stock underwriting. This degree of market power brings with it not just antitrust concerns, which this administration has declined to act on, and a huge amount of economic risk--but great political influence as well. The banks are going to use that power to block legislation containing any meaningful financial reform. And they are likely to succeed.
Can we simply regulate banks? More bad news:
The idea that we can simply regulate huge banks more effectively assumes that regulators will have the incentive to do so, despite everything we know about regulatory capture and political constraints on regulation.
In their conclusion, the authors are not optimistic that the Obama White House has the will to push meaningful reform.

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