UNSTOPPABLE OLIGARCHY- 6 Banks Control 60% Of Gross National Product: By Bill Moyers

[kpete]

Bill Moyers Journal / By Bill Moyers

Moyers: Six Banks Control 60% of Gross National Product -- Is the U.S. at the Mercy of an Unstoppable Oligarchy?
Moyers and economists James Kwak and Simon Johnson wonder whether the financial powers are more profitable, and more resistant to regulation than ever.
April 23, 2010 |

...................

Let me get to the blunt conclusion you reach in your book. You say that two years after the devastating financial crisis of '08 our country is still at the mercy of an oligarchy that is bigger, more profitable, and more resistant to regulation than ever. Correct?

Simon Johnson: Absolutely correct, Bill. The big banks became stronger as a result of the bailout. That may seem extraordinary, but it's really true. They're turning that increased economic clout into more political power. And they're using that political power to go out and take the same sort of risks that got us into disaster in September 2008.

Bill Moyers: And your definition of oligarchy is?

Simon Johnson: Oligarchy is just- it's a very simple, straightforward idea from Aristotle. It's political power based on economic power. And it's the rise of the banks in economic terms, which we document at length, that it'd turn into political power. And they then feed that back into more deregulation, more opportunities to go out and take reckless risks and-- and capture huge amounts of money.

Bill Moyers: And you say that these this oligarchy consists of six megabanks. What are the six banks?

James Kwak: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

[DaveJ]

1. Six corporations, or in legal terms 6 "people" with all that power

The problem I have with this is I'm not like most people, and I'm probably nothing like any of these 6 "people" (since corporations are legally considered people) and therefore whatever their opinions, outlook, best interest, etc., they are probably nothing like mine. Yet they control what businesses get loans to hire employees, build products, and shape our country and our future. These 6 people who are nothing like me.

[Blue Owl]

14. can't you just picture the sold-out SCOTUS judges gettin' all buddy-buddy with them?

[Newest Reality]

2. That fact signfies something crucial!

It clearly spells out a final threat to what we hold sensible and fair. That much of our GNP in the hands of a few is quite the opposite of life, liberty and the pursuit of happiness. It, in my mind, stands as a DIRECT AFFRONT.

I think it is reasonable at this juncture to call that statistic to symbolize a line in the sand that we either reject and reckon with, or passively accept knowing full well the consequences. Our position, as a people, is quite critical and that is not alarmist or sensationalistic. In this case, the Constitution and what we express as our national solidarity is trumped by capitalistic oligarchs and, effectively, becomes nothing more than a piece of paper as Bush Jr. declared it.

It appears also that our government has been, and still is, complicit in this takeover. What metaphor would best illustrate the dire nature of the process we are watching unfold as it usurps, in broad daylight, everything that we think or say we stand for in a traditional sense? Does anyone admit that the Rubicon has been crossed, yet? Are we at the critical mass? Will nothing move the masses as they are moved out of their estate and into corporate serfdom and economic slavery?

[Uncle Joe]

3. Kicked and recommended.

Thanks for the thread, kpete.

[kpete]

6. and happy Spring to you Uncle Joe

always try to say hi,
and peace, kp

[Uncle Joe]

10. Starry Starry Night and a happy spring to you as well, kpete.

http://www.youtube.com/watch?v=dipFMJckZOM

:hi:

Peace,

UJ

[laughingliberal]

4. Yet, the President's top economic adviser defends the TBTF's

and does not want them broken up.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8203095

[chill_wind]

9. Ain't that something?

eom

[anigbrowl]

13. Yeah, but he's one among many, and happily in a minority on this

I think he's wrong, and trapped in an isolationist view of governance in which the US has to balance international competitiveness with purely domestic regulation. Summers is beginning to look very much like yesterday's man, and I don't think he carries as much water as he used to.

By contrast, many other nations and even the IMF are expressing support for a more globalized regulatory environment, so that the large banks can't play their old game of setting one regulator against another and threatening to move their operations (and the significant and necessary tax revenues they directly or indirectly generate) to competing markets. Until now the attitude has been 'too many regulations on wall Street? We'll do more business in London and the EU, and NY and the US will lose out.'

But this argument is beginning to ring hollow as support builds among national government for pooling some sovereignty in order to have a consistent global regulatory environment. Governments are coming to understand that if an industry becomes too powerful to regulate, they will find themselves in direct competition with it.

[laughingliberal]

15. Well, that's funny. Cause the current legislation does nothing to break up TBTF

even with 3 Fed chairmans saying it's essential to break them up. If he wasn't carrying water I'd expect to see the legislation breaking up TBTF's and it does not.

[anigbrowl]

16. Sez you

How about section 109B.5.b?


(5) FAILURE TO RESUBMIT CREDIBLE PLAN.—
14 (A) IN GENERAL.—If a specified financial
15 company fails to resubmit the resolution plan
16 within the time frame established by the Agen17
cy, with such revisions as are required under
18 subparagraph (4)(B), FIRA and the Corpora19
tion may jointly impose more stringent capital,
20 leverage, and liquidity requirements and restric21
tions on the growth, activities, and operations
22 of the specified financial company or any of its
23 subsidiaries, until such time as the specified fi24
nancial company resubmits a plan that rem25
edies the deficiencies.
50
O:\AYO\AYO09D49.xml SION DRAFT S.L.C.
1 (B) DIVESTITURE.—FIRA and the Cor2
poration, in consultation with the Agency, may
3 direct a specified financial company, by order,
4 to divest certain assets or operations identified
5 by FIRA and the Corporation, to facilitate an
6 orderly resolution of the specified financial com7
pany under title 11, United States Code, or
8 title II of this Act in the event of its failure, in
9 any case in which—
10 (i) FIRA and the Corporation have
11 jointly imposed more stringent require12
ments on the specified financial company
13 pursuant to subparagraph (A); and
14 (ii) the specified financial company
15 has failed, within the 2-year period begin16
ning on the date of the imposition of such
17 requirements under subparagraph (A), to
18 resubmit the resolution plan with such re19
visions as were required under paragraph
20 (4)(B).

The whole point of section 109 is that banks and bank holding companies have to submit regular reports to the (newly created) FIRA on how they are structured and exposed, and if the FIRA determines that they are indeed 'too big to fail' they can order them to become smaller by forcing the sale of assets. In addition, the bill increases the scope of existing bankruptcy and antitrust regulation to cover bank holding companies and other private financial institutions which have previously enjoyed exemptions of some kind.

[laughingliberal]

17. It does not break them up. And it needs to.

And you're free to keep defending them. I never want to go through another screwing of our country like we're in now.

Ooooh, regular reports!! That'll teach 'em.

[anigbrowl]

19. I have not defended any banks, thank you

so, you think the bill should break them up now, yes? And just how do you expect that to work, given that it would be unconstitutional to dismantle them without due process? Do you understand that any law which punishes a person or a company for something which is not illegal at the time the law is passed is automatically unconstitutional?

The point is not the regular reports, but the fact that FIRA will have power to force divestiture, a power which does not exist at present, and that the FTC will also gain new powers to move against financial firms.

[laughingliberal]

20. I do think they should, yes. And so do 2 Fed chairmen at last count

I believe they already have the authority to do this. Not the will, but they have the authority. So, these 2 Fed chairmen are unaware of the laws and are calling for something unconstitutional? I don't think so.


<snip> Fisher's comments echoed those from last month in which he also called for giant financial firms to be broken up. Along with Federal Reserve Bank of Kansas City President Thomas M. Hoenig, the two regional Fed presidents are arguably the most qualified and influential voices calling for a new blueprint for the nation's financial system -- a level playing field between Wall Street and Main Street, embodied in ending mega-institutions' dominance over the U.S. economy. Both are deficit- and inflation hawks and both represent the nation's heartland -- Kansas City and Dallas. <snip>

http://www.huffingtonpost.com/2010/04/15/another-top-fed-official_n_537934.html

<snip> But Hoenig isn't just any reformer -- he's the longest-serving Fed policy maker; a voting member of the Fed's main policy-making body, the Federal Open Market Committee; and his credentials as a deficit- and inflation hawk are unparalleled.<snip>


http://www.huffingtonpost.com/2010/04/02/top-fed-official-wants-to_n_521842.html

edited to correct links

[anigbrowl]

22. you don't understand how laws are made

If they already have the authority (whoever 'they' is meant to refer to...), then it doesn't matter whether the Dodd bill passes or not. 'they' (who?) can use this hypothetical authority to break them up.

Now if they do not, then the Dodd bill creates an agency (FIRA) which DOES have that authority. And I would be delighted to see that agency created and see it use that authority, or see the FTC use the extra authority that the bill extends to them. and the fed chairmen can say that such an agency doing such a thing would be a great idea. That's not a problem.

What would be unconstitutional would be if the law itself specifically declared those banks must be broken up. that would be like passing a law saying 'laughingliberal is a criminal and must be sent to prison'. It's unconstitutional to impose a penalty if no trial has taken place. It violates section 1 article 9, which prohibits bills of attainder.

So a law that says 'the purpose of this act is to break up Goldman Sachs' would instantly, automatically fail in court. It wouldn't even get as far as a jury because the judge would pass it up to the Supreme Court, who would invalidate it.

[laughingliberal]

23. Perhaps you should let the Fed Chairmen know that what they are calling for can't be done

I'm certain they'd be ever so grateful for your enlightening take on all this. Here are the links again to the stories where they call for this exact thing-break up the big banks. I don't see a thing that says we have to prove they are criminal to break them up.


<snip> Fisher's comments echoed those from last month in which he also called for giant financial firms to be broken up. Along with Federal Reserve Bank of Kansas City President Thomas M. Hoenig, the two regional Fed presidents are arguably the most qualified and influential voices calling for a new blueprint for the nation's financial system -- a level playing field between Wall Street and Main Street, embodied in ending mega-institutions' dominance over the U.S. economy. Both are deficit- and inflation hawks and both represent the nation's heartland -- Kansas City and Dallas. <snip>

http://www.huffingtonpost.com/2010/04/15/another-top-fe...

<snip> But Hoenig isn't just any reformer -- he's the longest-serving Fed policy maker; a voting member of the Fed's main policy-making body, the Federal Open Market Committee; and his credentials as a deficit- and inflation hawk are unparalleled.<snip>


http://www.huffingtonpost.com/2010/04/02/top-fed-offici...

[anigbrowl]

24. Stop putting words in my mouth: I did not say that it could not be done

I said it can't be done in the text of the law itself, but must be performed by the agency which that law creates.

Also, I said nothing at all about having to prove the banks are criminal before breaking them up, and nor does Dodd's bill. A bill of attainder can declare someone criminal, but the example I gave of using one to break up a bank by name said nothing about that.

[JDPriestly]

30. anigbrowl, Do you think that the extent of the cooperation or collusion

or conspiracy (choose the word you think applies) among these huge financial institutions is great enough to trigger antitrust law?

If so, is there some other reason that antitrust law could not be used to break up these institutions.

Would the kinds of loans that banks extend to each other qualify as conduct that could trigger antitrust law?

On the one hand, the banks compete, but then on another they were all employing the same strategy with regard to sub-primes and derivatives and they seemed to be working together with regard to covering up the inherent dangers in their investment strategies. The off-balance-sheet deals in which a company disguised debt required some cooperation I should think.

I'm just kind of brainstorming here. You seem to know a lot more about this law than I do. Is there any chance that antitrust law could be invoked to force the banks to sell assets? Any way to find a fit?

[chill_wind]

5. K & R.

Nothing like a little perspective.

[marions ghost]

7. How do the

pigs at the end of the trough (us) fight this?

"more resistant to regulation than ever..." Maybe it's no use fighting for regulation. Just won't happen?

This concentration of power has really scary implications, many which we've seen already.

Wouldn't it be great to live in a country where the government worked for the people, instead of only for the rich?

x(

[TheKentuckian]

8. Anyone not DEMANDING these companies be broken up and never allowed

to grow to such size again is pretty much insane or willfully blind. There is no way this is remotely healthy or desirable for the people.

[laughingliberal]

21. No, some people profit from the current system

By my estimation we have the insane, the willfully blind, and the criminal profiteers and those they donate to opposing the breaking up.

[kenny blankenship]

32. They may be just 6 banks and 13 bankers, but they have 536 accomplices to their theft

and they will get away with it. Make too much stink and you'll be the one in prison.

[anigbrowl]

11. Ahem...accuracy fail

Oligarchy (in Greek, Ὀλιγαρχία) means 'rule by the few'. It is not specific to economics, but could equally be applied to military or aristocratic rule.

No, I am not in favor of 6 banks having indirect control over 60% of GDP. I certainly believe these banks need to be examined from an antitrust perspective and broken up in order to limit their ability to influence government - and I am heartened that the SEC has come out swinging against Goldman Sachs already.

Also, quite aside from their political influence, a small number of firms dominating the banking industry is an economic oligopoly (like a monopoly, but shared between a few), and oligopolies are a Bad Thing. If you like economics, Wikipedia has a not-bad page explaining why: http://en.wikipedia.org/wiki/Oligopoly ...you'll notice that there is no agreed economic theory of oligopoly and this is something of a problem because it makes such markets difficult to regulate (as it's not obvious what effects will take place).

Rather than sitting around to find out, I prefer the approach of forcing large banks to divest (ie break up into smaller pieces) and have a financial industry that is closer to polygopoly (many small firms) than to monopoly (one big firm).

[Blue Meany]

12. This is certainly a problem but I would want to drill down a bit

in those statistics before I took this a face value. I read somewhere that the are derivatives out there amounting to 10 times the GDP of the world. I wonder how much of these assets the banks have are real and what their real value is. Of course I wonder the same about our GDP.

[anigbrowl]

18. Two things to remember about derivatives...

...when you hear they amount to more than the GDP of the world, are that a) a great many of these derivatives extend far off into the future; they are contracts about stuff that may happen in the future, but don't represent claims that can be called in in the present; and b) a great many of those contracts either cancel out or will never be payable and are thus void.

If you think of a derivative as being like a bet, imagine you called your bookmaker and said 'I want to bet $100 that UFOs will land on the White House lawn and conduct a bake sale between now and December 31 2012.' your bookmaker laughs and says 'sure buddy, I'll give you a million to one - if it happens, I'll pay you $100m.'

Well now the bookmaker's outstanding exposure is $100,000,000 (plus whatever other bets he has open) but the chances are that he will never have to actually pay this. Of course, if you worked closely with the President or the Joint Chiefs, he might not be so willing to take this bet, in case you knew something he didn't.

There are many derivatives that work the same way. I really don't expect the price of oil to hit $400 within the next decade...but there's a very slim chance it could. So I could insure against that possibility by taking out an option that would pay out of the price of oil actually went up that high, and I can get that option for very little money because the chance of it paying out is considered quite remote.

On the other hand, if I feared the price of oil would increase by 1% and my business was operating on razor-thin margins, then the option would cost me a bit more because a 1% price change is not very unusual.

So when you hear about 'trillions of dollars in outstanding derivatives', don't think of them as bills which have to be paid, but more like lottery tickets - some of which have a very big chance of becoming payable, and some of which have very little chance. the outstanding amount is what would be payable if every single one of those lottery tickets paid off at the same time, but that could never actually occur (because bets that something will not happen and bets that it will cannot both be correct).

[robertpaulsen]

25. Three words come to mind.

BUST THE TRUSTS!!!

[laughingliberal]

26. Those are the ones I think of. nt

[defendandprotect]

27. k

[sam sarrha]

28. bottom 80% americans only hold 7% of the nations Financial wealth.. .Link>>

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

[Wilms]

29. k&r n/t

[dotymed]

31. I'm not very religious

but how many "horses of the apocalypse are" there? 4? idk...
but this is the 1920's all over again

[dorkulon]

33. "They have assets equivalent to 60 percent of GNP" -- what does this mean exactly?

Are their assets included in GNP, or is this just a measurement of their worth? Are we talking annual GNP vs. perpetual assets?

I just want to understand what this means, and does it actually mean that they control 60% of our economy, or what?

[hay rick]

41. Assets and oranges.

The relevant quote:
"James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product."

GDP is in the $13-14 trillion range. That would make the value of the assets of the 6 large banks approximately $8 trillion. I don't think anyone keeps track of the total value of national assets, but here's a recent estimate: http://rutledgecapital.com/2009/05/24/total-assets-of-the-us-economy-188-trillion-134xgdp/

Rutledge's figure, $188 trillion, is plausible, I suppose- about $600,000 for every citizen. And that puts the assets under control of the 6 largest banks at about 4% of all available assets.

Restating the comparison in terms of assets makes the concentration of financial power sound much more benign than it is. Good recent Krugman artcle on the subject here: http://www.nytimes.com/2010/04/23/opinion/23krugman.html?partner=rssnyt&emc=rss

From the Krugman article: "In the years leading up to the 2008 crisis, the financial industry accounted for a third of total domestic profits — about twice its share two decades earlier."

Whatever the actual size numbers are, and whichever ones you regard as relevant or revelatory, the bottom line is obvious- the elite financial firms are way too large, way too powerful, and way overdue to be reined in.

[TacticalPeek]

34. Link,

please?

[TacticalPeek]

35. That's ok, I found it.

http://www.alternet.org/story/146528/moyers:_six_banks_control_60%25_of_gross_national_product_--_is_the_u.s._at_the_mercy_of_an_unstoppable_oligarchy/

[saulmart]

36. K&R

Moyers will be missed!

[kpete]

38. oh my goodness

YES!

and welcome saulmart, kp

[unabelladonna]

37. what pisses me off more than anything else

is that they produce NOTHING. as infuriating as the oil companies and big pharma are they "make" stuff.the banks just move money around...nothing else. your average bookie is more honorable.

[Greyhound]

39. K&R, I wish these issues would get as much play as celebrity affairs do.

[cleverusername]

40. Link, please?

Link, please?