You know that things are getting bad when even the mainstream media starts reporting the obvious. In what I think is a surprising editorial from Bloomberg View, the editors reveal something the too-big-to-fail banks have long hoped we don't notice.
On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase and Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.
So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?
Hmm. This is what many of us have assumed for quite some time. Take away all the government handouts and low or no interest loans and what we have are financial institutions that can barely keep their heads above water! This fact makes the government's lack of prosecution of those who drove the world economy into the ground even more galling than it already is.
By allowing these behemoth financial institutions to grow larger and larger and then not prosecuting them for their gross misdeeds, the federal government is handing them a license to be as reckless as ever. They will continue to invest in risky schemes because they KNOW that, when these deals blow up in their faces, we taxpayers will ride to the rescue to insure they maintain their massive profit margin.
Don't expect this to change anytime soon. Obama has surrounded himself with the kinds of people who love to subsidize Wall Street. Who can blame them? After they "serve" in government for a while, they will return to the very corporations that are receiving the bailouts. Consequently, they certainly don't want to bite the hands that feed them.