talkpolitics | We've Got Too Damned Much Money

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It is neither wealth nor splendor; but tranquility and occupation which give you happiness. - Thomas Jefferson

Once again, the private sector has shot itself in the foot with a bazooka and has nobody but itself to blame. This is yet another story in the ongoing aftermath of the financial meltdown of 2008.

According to a report in the New York Times, banks are complaining that they are deluged with excessive amounts of cash coming into their coffers. In this risk averse environment, investors are pulling their cash out of investments and putting it into banks. Banks aren’t lending; citing a dearth of credit worthy borrowers. As a result, the cash being stored in the banks is remaining dormant and not producing profit for the banks through loans.

Just as was proposed with fees on debit cards, banks are inflicting their misfortunes on the customers. Per the New York Times article:

“In August, Bank of New York Mellon warned that it would impose a 0.13 percentage point fee on the deposits of certain clients who were moving huge piles of cash in and out of their accounts.

Others are finding more subtle ways to stem the flow. Besides paying next to nothing on consumer checking accounts and certificates of deposit, some giants — like JPMorgan Chase, U.S. Bancorp and Wells Fargo — are passing along part of the cost of federal deposit insurance to some of their small-business customers. “

To safeguard their funds and draw some profit from it, Don Sturm, owner of American National Bank and Premier Bank in Colorado and 3 other states, is keeping his funds in familiar safe harbors:

“His next option is to invest those deposits in low-risk securities, like mortgage bonds backed by Fannie Mae and Freddie Mac, which in recent years paid as much as 3.75 percent. Today, they are paying, on average, less than 1.15 percent. Deposits parked at the Fed fetch a mere quarter of a percentage point. Federal deposit insurance premiums and other account maintenance costs cut deeply into his returns.”

I find it ironic that banks are running to the shelter of the same institutions they exploited for profit before the credit meltdown. Apparently Fannie and Freddie can be stable if they aren’t treated like toxic waste dumps by financial institutions.

If ever there was an opportunity for consumer backlash against big corporate wealth, this is it. If a large portion of consumers would transfer their cash from large banks to credit unions, it would send a painful message to the “too big to fail” institutions. The OWS "Bank Transfer Day" campaign is Nov. 5. The problem would be that ATM access is not as easily and cheaply accessible as the larger institutions.

Contrary to popular belief, cash does not equal wealth. Equity equals wealth. Equity is defined as the difference between assets (what you own) and liabilities (what you owe). Money is only one of any number of assets that can be owned. Credit came to a standstill because it was discovered that credit (liabilities) had exceeded available liquid assets in the U.S. in 2008. Private enterprise was in hock up to its eyeballs and there weren’t enough private funds available to fix it. That is why TARP and bailouts were necessary.

The government has done all it can for the economy whether you agree or not. It is time for the private sector to take their thumbs out of their asses and quit waiting for someone else’s shoe to drop. Investing by the public in more local and smaller scale financial institutions could be a grass roots opportunity to start doing this.

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stewstewstewdio.livejournal.com

I smell of another bailout in the future.

I wouldn't go that far, but you're right. Banks need some personal responsibility. Poor JP Morgan Chase is only projected to make 3 billion in profit this year. I don't know how they're going to scrape by on that. /sarcasm.

They may need to get a little welfare from the government. Or they could just do their jobs and promote the loans and investments they need to operate their businesses.

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We've Got Too Damned Much Money

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