Big Banks Fail

In the Wall Street Journal on Tuesday morning, Charles Calomiris, a leading banking expert, published an op ed entitled “In the World of Banks, Bigger can be Better.”  It begins,

“Legitimate concern about the risks to taxpayers and the economy posed by banks that are “too-big-to-fail” has prompted some observers, among them Simon Johnson, former chief economist of the International Monetary Fund, to favor draconian limits on financial institution size. This is misguided. There are sizable gains from retaining large, complex, global financial institutions—and other ways to credibly protect taxpayers from the cost of government bailouts.”

And the article goes on to make the detailed case for keeping intact our largest banks – in contrast to the recently expressed views of two former Federal Reserve chairs (Paul Volcker, Alan Greenspan) and – late Tuesday – the current governor of the Bank of England (Mervyn King), who are calling for these banks to be broken up in some fashion.

Professor Calomiris, to his credit, emphasizes (in his second paragraph) that we cannot currently deal with the failure of large cross-border financial institutions and this huge hole in our regulatory structures has helped and will help large banks to press for bailouts. But he also insists “the challenge of coordinating the efforts [when a bank fails] among different countries’ regulators can be met through prearranged, loss-sharing arrangements that assign assets to particular subsidiaries based on clear rules. This would make it possible to transfer control over the assets and operations of a large international financial institution in an orderly fashion, in case of its failure.”

Theoretically, he may be right.  But how far are we from being able to implement such a process?

The G20 should have taken this on as an essential priority at Pittsburgh, but it did not.  The IMF has for years pushed the European Union or at least the eurozone to adopt the kind of framework that Calomiris advocates, but to little avail.

Perhaps this is due to bureaucratic inertia.  More likely it is, once again, the blocking power of big banks.

In any case, once this hurdle is overcome, we can talk in more detail about the Calomiris arguments that big firms need big banks (odd, because big firms can go directly to securities markets), that the latest banking mergers created great value (possible, just not generally what most research finds), and that the rise of banking-as-derivatives-trading over the past 30 years has had big positive effects on the rest of the economy (strange, as there is no supporting evidence in the literature).

Competition between banks is good – on this Calomiris and I agree.  We differ with regard to whether allowing large quasi-monopoly banks to dominate the landscape (e.g., Goldman Sachs and JP Morgan Chase today) is helpful to competition in any sense.

We should also throw into the mix three additional considerations.

First, the expected costs of allowing “too big to fail” banks to continue to operate are huge.  The Calomiris benefits might be positive, you need to weigh these against what we have just seen: a huge recession (and the risk of worse), a big increase in government debt (perhaps 40% of GDP, when all is said and done), and almost 6 million jobs lost.  Calomiris wants to assume these away, with an “immaculate regulation”, but this is simply implausible. 

Second, the big banks definitely create some private benefits – mostly for the insiders, in the form of upside (e.g., bonuses) when times are good.  The costs are born by society and not just by people who lose their homes – it’s businesses all across America that have lost income, fired people, and are now struggling to stay afloat.  This is not only unfair, it is inefficient.  Excessive risk taking by big banks generates massive negative externalities.  You can either price this appropriately (and good luck with imposing that tax) or break up the banks – down to a size where we know the FDIC can handle bank failures (see the latest failed bank list).

Third, our big banks have demonstrated an unmatched ability to take over regulators and to convince politicians that a dangerous financial structure is good for America. These same people will almost certainly render ineffective whatever new regulations you put in place.  More broadly, how can you run a well-functioning political system when a few large banks are so powerful?

The key insight at the heart of breaking up Standard Oil in 1911 was that it was too big to regulate.  That breakup may have been good for competition; it was certainly good for democracy.

As Nicolas Trist – secretary to President Andrew Jackson – said about the incredibly powerful privately owned Second Bank of the United States, “Independently of its misdeeds, the mere power, — the bare existence of such a power, — is a thing irreconcilable with the nature and spirit of our institutions.” (Schlesinger, The Age of Jackson, p.102)

 By Simon Johnson

A slightly edited version previously appeared on the NYT’s Economix; it is used here with permission. Please ask the New York Times if you would like to republish the entire post.

96 thoughts on “Big Banks Fail

  1. Suppose there are roughly N possible positions on an issue, and that only one of these views N0 is “correct” i.e. — consistent with the facts/data and their reasonable interpretation, and historical experience.

    I have found that there is always somebody willing, however perversely, to argue all the other, incorrect positions in N against all logic, experience, etc.

    And that is what we have in this case. Simon’s position on TBTF banks is clearly correct, yet Mr. Calomiris goes to extraordinary lengths to show that Red is, in fact, Green, and that all the rest of us are colorblind.

    Regardless of his motives, men of bad faith in Finance who can saddle us with their losses and otherwise collect rents from us can point to Calomiris’ arguments and say “See! You need us!”

    And thus theft finds its justification.

  2. I’m tired of brochure-speak and generalities. I’d like to hear, precisely, what specific, irreplaceable “complex global financial services” that, say, Bank of America offers a multinational corporation. Does it have more compliance expertise in non-FINRA jurisdictions? Is it able to place new debt issues more efficiently than an actual Eurozone institution? Give me a specific, step-by-step example.

    This is all very funny to me, because I am often sitting in meetings at various financial organizations where they talk openly about how lame their “global” offering really is, and wonder how to gloss over their gaps for sales purposes. In other words, the banks don’t even believe this b.s. themselves.

  3. “In The World of Banks ,Bigger Can Be Better”

    Absolutely, Just Ask Canadian Bankers.

    1. Market Concentration

    Canada has a highly concentrated banking market; for example, the largest six banks account for more than 90 per cent of the assets in the banking system. Formal measures of concentration in banking (such as the Herfindahl-Hirschman Index) are typically in a range that points to what economists would interpret as a medium or high degree of market concentration. (Bank of Canada Review, Summer 2007)

    2.More Stable Retail Depository Base

    A relatively high share of bank’s funding is depository – transaction, retail, rather than wholesale funding. Wholesale funding is more unstable – subject to rollover risks in uncertain market conditions. Small retail deposits are more sticky than large deposits. “Anecdotal evidence suggests that a higher fraction (than in the U.S.) of Canadian deposits are….transaction accounts and small deposits,…..One likely reason for Canadian banks’ firm grip of deposit supply is their ability to provide one-stop service in mutual funds and asset management. Unlike in the U.S.Canadian banks have been historically universal banks, and there is relatively less competition for household savings from other alternative investment vehicles.”(IMF WP/09/152)

    3.Fewer Mortgage Choices, Higher Mortgage Interest Rates

    “…the Canadian mortgage market is relatively conservative….Mortgages with a loan-to-value ratio of more than 80 percent need to be insured for the whole amount (rather than the portion above 80 percent as in the United States). Mortgages with a loan-to-value ratio of more than 95 percent cannot be
    underwritten by federally-regulated depository institutions. To qualify for mortgage insurance, mortgage debt service-to-income ratio should usually not exceed 32 percent and total debt service 40 percent of gross household income. Few fixed-rate mortgages have a contract term longer than five years.”(IMF WP/09/152)

    4.Relatively High Profitability and Low Risk

    “Domestically, Canadian banks average return on equity over the last 5 years has been 14.2%. This represents the third largest ROE across all sectors of the Canadian economy. However, Canadian banks are significantly less risky than most other sub-sectors of the Toronto Stock Exchange. Given their lower risk we would have expected the Banks to earn lower returns than other industry sectors.”
    (Bain & Company Report, December 2003)

    Click to access wp09152.pdf

  4. The Wall Street Journal reports bonuses at “major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year -“.

    Why are we, the taxpayer, still on the hook to buy their toxic debt, guarantee some of their loans and bonds and give them TARP $? In what small business, like mine, do the owners have huge bonuses in the face of debt on their books? In what small business are we allowed to off load our debt into special purpose vehicles and pretend that it does not exist?

    It seems as though they should use their bonuses to pay their debts and save for a rainy day, after they return their loan guarantees, TARP $and pay take the losses on their toxic debt.

  5. It all resorts to the person and culture. What did Canadian Banks CEO’s have: common sense and risk averison. Canadian Banks had leverages 18-1, where US Banks had 26-1, or worse. Besides Canadian house value didn’t fluctuated so much as in the US. In Canada, when you’re belly-up it’s your problem, in the US it’s the bank’s problem (which if it’s to big too fail, isn’t really a problem, issit?)

    Besides, Regulators are always one or two steps behind and usually lack the nerd’s brain to create derivatives.

    Only rigourous regulation changes can save the financial market from another crisis, as it’s in the (investment) banksters genes to create bubbles.

    Simon Johnson and William K. Black deserve our respect and support against the Wall Cheat hyena’s.

  6. This post sure sums it up.

    I would only add the big picture fact that these big banks have had how many decades now of doing things their way. The benefits were supposed to not trickle but flow to everyone. This was supposed to create an America of a few super-rich, many rich, and all the rest in middle class comfort with good, fulfilling, secure jobs.

    The pormise of the latter was the only reason to tolerate the existence of the former.

    So where’s this outcome? Where’s the omelette? Where are all these stable, secure, fulfilling jobs? Where were they before the crash?

    Now that we know this promise was always a lie, what rationale can these mercenaries come up with for why the existence of these macroeconomic drunk drivers, these psychopaths, should be tolerated?

    Every piece of garbage argued by this bank cadre cited above doesn’t even touch upon these, the real questions.

    (Again, all this was the question even before these criminals perpetrated the crash.)

    Buzzzzz. Time’s up. It’s been up for a while now, quite a while.

    We know for a fact that the promises of globalization and financialization were always delusions at best, and in most cases vicious lies.

    And now it’s way too late for these vile, evil people to demand yet more chances. By now anyone still arguing for the propagation of a system which has proven to be both practically unsustainable and morally vicious, is simply a villain.

  7. In a nutshell: if big banks have all those advantages, they certainly ought to be profitable. The basic facts seem to negate the whole thrust of the article. Big banks are on life support; we are carrying them, not vice-versa.

    They can, however, afford a lot of ink.

  8. fwm,
    Your very narrow view of crediting all of Canada’s success in banking to large bank size, is tunnel vision type thinking and manufactures more false perception. Canada’s banking success is related to better regulatory oversight and other factors particular to Canadian banking. I encourage readers to peruse this New York Times story written by Ian Austen.

  9. At risk of sounding like a broken record, Simon only undermines his credibility when he says things like “quasi-monopoly” banks. The biggest banks are huge, and they are demonstrably too big to fail, but they are nowhere near a monopoly. The sheer number of them that got bailed out is more than ample evidence of that.

  10. The problem I have with this “too big to fail” discussion is nobody defines the meaning of “fail.” Does that mean the banks have to remain operational (in some sense) to prevent a calamity? Does it mean the banks have to continue in their current form with the same boards/senior management? The goverment could have a bunch of chimpanzees run these banks and –by definition — they would do no worse. You don’t see zookeepers rewarding monkeys with extra bananas when they misbehave. We can’t undo the past but we can tell the banks what we intend to do in the future. Given that the banks still haven’t dealt their bad loans, I would like the Obama administration to say — clearly and unequivocally — that the next time the banks hit us up for money the banks become ours. The government can continue to provide the liquidity to keep the banks functioning. But we get it all.

    Then we can do what must be done –clean up the books. Just as in the saving and loan bailout, the government has the capacity to hold on to the assets until they (partially) recover. There is simply no good reason to give bankers gobs of money for failing.

  11. Oligopoly I think is the best term. I think the main point Professor Johnson is making is that competition is slowly being expunged from the system. Loss of the “market mechanism” is unhealthy for society and the American saver/depositor/consumer.

  12. I am sick of hearing about the need for “comprehensive reform.” Calomiris, this administration and previous administrations, along with the Congress of the U. S. seem to think that the only way to fix a problem is with sweeping reforms. More often than not, this approach exponentially increases the possibility for unintended consequences which bring about the need for more of the “hair of the dog.” We do not need to apply chaos theory to every multivariate problem. We all know that there were multiple causes for the crisis, as there have been for all the crises in history. Discrete analysis calls for discrete actions (plural)—Volcker et al. are recommending only one step. It’s a start.

  13. the Calomiris arguments that big firms need big banks (odd, because big firms can go directly to securities markets)

    And how do you think those “securities markets” work? I’ve got news for you, professor: the major banks play a huge role.

    Also, attributing 100% of the costs of the recession to a small number of banks is, to be perfectly honest, delusional. But Simon has shown absolutely no regard for truth in his bizarre arguments thus far, so I suppose I’m not surprised.

    Finally, notice how Simon cites a study from 1994 as his evidence that “the latest banking mergers” didn’t create great value. Again, no regard for even minimal accuracy.

    Seriously, just go away.

  14. Please see this article which has a look at the underlying reasons of World War I and how eerily similar the Wall St.-Washington connection is starting to look. Mr Calomiris is looking through rose colored glasses.

  15. Mark or anyone else,

    Didn’t the U. S. experience record growth in GDP during the decade preceding Gramm-Leach-Bliley (the repeal of Glass-Steagall)? Is this fact, if correct, irrelevant?

  16. Many contributors to this blog have suggested we are shedding too much heat and too little constructive light on the problems discussed. This is as good a time as any to offer my own freehand suggestion: a single act of Congressional responsibility capable (I think) of returning finance to sanity. This represents only one morning’s work and may require some tinkering by those in the know. In any case, I offer it now. Feel free to tinker away:

    Title _____ Derivatives Transactions Involving United States Participants

    Whereas it has been determined that failure to tax, regulate and account for derivative transactions by United States Participants has produced unearned windfall gains, catastrophic losses, serious financial disorder, widespread corruption and dysfunction in financial markets, and has so endangered production and employment in the United States and solvency of the Federal Government as to require this Congress to take notice thereof,

    Now, therefore, in the hope that it is not already too late to avoid complete social disintegration and chaos, be it enacted by the Congress of the United States, an Act to require registration of and payment tax upon Derivatives Transactions involving United States Participants.

    Section 1. Imposition of Tax. There is hereby imposed upon each United States Participant in a Derivatives Transaction now outstanding or hereafter initiated a transaction tax in an amount equal to one percent of the Notional Value of such Derivatives Transaction. The transaction tax shall be paid to the United States Treasury on or before the date the Derivatives Transaction is required to be registered under this Title.

    Section 2. Derivatives Reporting Authority. There is hereby established a Derivatives Reporting Authority to be composed of one Reporter who shall report to the President of the United States. The Reporter shall be of a person of good moral character fluent in the English language with advanced university training in mathematics and no prior experience in any bank or investment bank. The Reporter shall serve during good behavior and receive a salary of $250,000 per annum. He shall have as much clerical and technical assistance as may be reasonably required and shall be responsible for publishing on the Internet the complete contents of all Derivatives Registration Statements filed pursuant to this Title and the full text of any public complaints concerning the taxes reported and the intelligibility of such Registration Statements. He shall have no other duties whatsoever.

    Section 3. Registration. All presently outstanding Derivatives Transactions involving one or more United States Participants shall be registered with the Derivatives Authority no later than December 31, 2009. Future Derivatives Transactions shall be so registered on the later of December 31, 2009 or five days after the initial booking of such transactions. Each United States Participant shall be responsible for the registration of any Derivatives Transaction to which it is a party.

    Section 4. Registration Statements. Every Derivatives Registration Statement shall disclose the taxes paid on the Derivatives Transaction, the identity of all United States Participants and other parties involved in the Transaction, the Notional Amount of the Transaction, the exact variables and formula for determining any valuation or settlement of the Transaction and such other information as the Derivatives Reporting Authority shall require in order to make the potential financial impact of the Derivatives Transaction on any United States Participant intelligible to the average investor, accountant or securities lawyer.

    Section 5. Representation by Company Executives. Every financial statement and report filed with the Securities and Exchange Commission shall contain a representation by the Chief Executive Officer and Chief Financial Officer of the reporting entity that all Derivative Registration Statements theretofore required to be filed on behalf of the reporting entity and each of its subsidiary corporations and affiliated entities has been filed as required.

    Section 6. Derivatives Valuation in Financial Reports. Every United States Participant the financial condition of which is or may be affected by a Derivatives Transaction now outstanding or hereafter initiated shall take the Current Value of such Transaction into account on its balance sheet and income statement in any report filed with any United States Government Agency or Authority. A reporting entity shall be free to make any responsible claim with respect to its derivatives exposure in footnotes to its financial statements.

    Section 7. Penalties and Offenses. Every United States Participant which is party to any unregistered Derivatives Transaction shall be guilty of a criminal offense punishable by fine in an amount equal to the greater of $10 million or 25% of the notional amount of such transaction. Any person who knowingly falsifies any Derivatives Registration Statement or representation required under this Title may be imprisoned for ten years for each such offense. A United States Participant which under reports or fails to pay any tax imposed by Section 1 shall incur a three hundred percent penalty on the difference between the tax properly payable and the tax paid, if any.

    Section 8. Enforcement. The United States District Courts shall have jurisdiction to decide any claim based upon violation of this Title. Any citizen of the United States shall have standing to commence legal action against a United States Participant to recover penalties imposed hereunder. In any such legal action: there shall be no jury trial, a successful plaintiff shall be entitled to one third of any recovery for the benefit of the United States, each party shall be responsible for payment of its own legal expenses, United States Participant defendants shall file with the court a complete record of all Derivative Transactions with respect to which a claim is being made. The court in its discretion may limit disclosure to in camera document inspection and impose sanctions against any plaintiff or attorney responsible for frivolous and non colorable claims or defenses. It shall render in each case a written opinion concerning valuation of the affected Derivative Transaction for tax purposes.

    Section 8. Definitions. For purposes of this Title

    United States Participant means any bank or bank holding company regulated by the United States or any State and any issuer of securities registered with the Securities and Exchange Commission. Any United States Participant having either a direct or indirect, absolute or contingent, liability for payment or loss, or opportunity for receipt or gain, from an ongoing or hereafter initiated Derivatives Transaction shall be deemed a party to that Derivatives Transaction (and liable for registration thereof and payment of tax thereon as set forth in this Title)

    Derivatives Transaction means any transaction the value of which (or the gain or loss from which) is or may be affected by one or more independent variables such as interest rates, currency rates, index values, stock prices or other variables or parameters capable of independent fluctuation over the passage of any interval of time. The term Derivatives Transaction shall not include any transaction which is completely closed and finally liquidated prior to the date it would otherwise be required to be reported under this Title.

    Notional Value means the maximum principal amount against which any formula involving any parameter or variable is applied to determine gain or loss in a Derivatives Transaction. The Notional Value of all Derivatives Transactions shall be determined in US dollars regardless of the currency in which a transaction may be framed. Current dollar exchange rates shall be applied to transactions involving foreign currencies.

    Current Value of any Derivatives Transaction in the case of any United States Participant takes into account the equivalent dollar amount (at current exchange rates) which such participant would be required to pay or receive in order to terminate the transaction as of the date valuation is required for reporting purposes.

  17. America has 10X the population of Canada. So a “large” Canadian bank will still be a fraction in size of a TBTF bank like Citigroup.

    Furthermore, large Canadian banks have demonstrated greater prudence than their American counterparts. (According to a World Economic Forum index, Canada has the “soundest” banking system in the world.)

    So may be a weak argument that, Canada has large banks, so TBTF in the United States is justified.

  18. I watched the Frontline documentary on Brooksley Born. It strikes me that a large part of the American economy is a casino operation. The “dark pools” for derivitive trading.

  19. Brooksley Born tried to save us from teetering on the edge of abyss. She is an American Heroine. There should be National Parks named in her honor. Either that or the men who attempted to bully Brooksley Born should be lined up with their faces turned to the side so she can spit on their cheek.

  20. Good start — and how about “shall be imprisoned” in section 7…rather than “may be imprisoned.”

  21. “In the World of Banks, Bigger can be Better.”

    This kind of stuff is best left contained to the faculty dining room. Once in the wild, it can cause mass confusion.

    Sorry, but it’s not OK for risk to be massively concentrated in the form of a small number of mega-banks.

  22. I hate to say it, but Calomiris is right. All the “economic growth” of the past thirty years was the illusory witchcraft of big banks.
    You might ask yourself though who needs this kind of growth.

  23. Imprisoned? How about something about ill-gotten gains shall be clawed back to the point of surgical extraction of the excess…

  24. If the value of these mergers is so evident, then perhaps you can point out a single source identifying it precisely? (just one)

  25. Well, since a fundamental tenet of chaos theory is extreme sensitivity to initial conditions, it’s just a matter of finding the right butterfly in Australia to flap its wings at the right time.

  26. I think he means that once they run all the little banks out of business or swallow them whole (like they are doing), they’ll be a monopoly

  27. According to the first rule of Corporate Mis-Management Science, advantages are to be used for the looting of your company to the detriment of its profitability and shareholders.

  28. You’re absolutely right. Now, how do we get enough of our fellow citizens furious enough about this to demand that the system be changed?

  29. It is now coming to light that big banks are experts at hiding and facilitating illegal (as in the kind that normally produces civil and criminal liability) activities.
    Many large multinational firms need this kind of assistance to remain supremely profitable.

  30. “Sorry, but it’s not OK for risk to be massively concentrated in the form of a small number of mega-banks.”

    Who have already proven themselves to be feckless and unrepentent beyond belief.

  31. That’s the _real_ benefit of being so big. Small businesses can’t just pay themselves millions of dollars in the face of mounting an overwhelming losses.

  32. The first thing that jumps out at me is $250,000 for the math guy. After the fed gets through with the next round of printing that might be minimum wage.
    Also, no offense but the math guy should speak Russian…that will weed out a lot of bad mathematicians.

  33. Put another way,

    Just because Canada has “big” banks does not mean US-TBTF is justified.

  34. I’m looking at section 8 now and whoa!
    No jury trial? In camera document inspection? Special sanctions for plaintiffs? No awards of attorney’s fees to successful plaintiffs? Only citizens can bring it? Only 1/3 the damages!?
    Are you trying to kill this thing already?

  35. This fuzzy heady article is a prime example of proof by assertion while beating a straw man. It is not the size of the major banks but rather their activities which caused the damage. They operate a crooked casino and pretend to be in the lending business. Their financial services involve enabling tax and regulatory evasion and fictitious financial reporting. Tax and regulate their derivatives business and you won’t have to bother breaking them up. They will collapse from dead weight.

  36. Some Additional Observations:

    Don’t confuse my comments above with an endorsement of too- big -to -fail.

    The IMF study revealed the following:

    Canadian banks had below average capital ratios, and less capital compared to US banks that failed.

    “Capital ratios of Canadian banks were generally in the third (from the highest) quartile of
    the sample: below average, not particularly strong, but high enough to avoid insolvency
    problems on minor losses.Interestingly, a high level of capital by itself did not make banks immune during theturmoil. A number of large banks appeared highly capitalized before the crisis, but
    quickly exhausted capital buffers as a result of significant exposure to troubled assets or
    questionable acquisitions.”

    Equity over total assets, end-2006

    Canadian Imperial Bank of Commerce CANADA 4.1 %
    Royal Bank of Canada RBC CANADA 4.3
    Banque de Montreal-Bank of Montreal CANADA 4.8
    Bank of Nova Scotia (The) – CANADA 4.9
    Toronto Dominion Bank CANADA 5.7

    Citigroup Inc USA 6.4
    Washington Mutual Inc. USA 8.5
    JP Morgan Chase & Co. USA 8.6
    Bank of America Corporation USA 9.3
    Wells Fargo & Company USA 9.5
    Wachovia Corporation USA 10.3
    Capital One Financial Corporation USA 16.9

    Key Factor: Retail Depsitory Funding

    “We found that ample retail depository finding was the key factor behind the relative resilience of Canadian banks during the turmoil..”

    “A number of broader structural factors have likely contributed to the Canadian banks’
    stable retail deposit base and lower risk-taking.
    The Canadian banking sector is dominated by six large banks with an integrated nationwide
    branch network. The national franchise is highly profitable and valuable, and banks
    are keen to preserve it, thereby avoiding excess risks that could compromise the
    franchise. Customers value the capabilities of a nation-wide bank branch network, and
    the demand for it serves as a barrier to the contestability of Canadian banking services
    especially in deposit and debt card products. Limited external competition reduces
    pressures to defend or expand market share, again reducing incentives to take risks.
    Retail funding supply and retail loan demand appear well-matched in Canada, reducing
    banks’ need to engage in wholesale borrowing or lending activities. Larger corporations
    typically borrow directly from capital markets, or from syndicates that include and are
    often led by foreign banks, possibly because a higher capital requirement increases local
    banks’ cost of capital and reduces their competitiveness in the syndicated loans market.
    Finally, the Canadian mortgage market is relatively conservative, with a number of
    factors contributing to the prudence of mortgage lending (see Kiff, 2009). Less than 3
    percent of mortgages are subprime and less than 30 percent of mortgages are securitized
    (compared with about 15 percent and 60 percent respectively in the United States prior to
    the crisis). Mortgages with a loan-to-value ratio of more than 80 percent need to be
    insured for the whole amount (rather than the portion above 80 percent as in the United
    States). Mortgages with a loan-to-value ratio of more than 95 percent cannot be
    underwritten by federally-regulated depository institutions. To qualify for mortgage
    insurance, mortgage debt service-to-income ratio should usually not exceed 32 percent
    and total debt service 40 percent of gross household income. Few fixed-rate mortgages
    have a contract term longer than five years”

  37. By the way, you can get a math PhD without ever taking so much as a basic course in probability or statistics. There are mathematicians (admittedly, mostly old ones) who even think of probability and statistics as some kind of voodoo. On the other hand, a purely statistical education could omit key elements of training needed for this task as well.

  38. Even “oligopoly” is a stretch. Try taking a minute to name all of the banks you can think of. It’s more than an oligopolistic few, even if you limit yourself to banks that engaging in the more exotic lines of business (including investment banking).

    Perhaps “competition” is slowly being expunged, but aside from the effects of the Bear, Lehman and Merrill meltdowns, it s a pretty slow leak indeed. And those three are only resulted in a relevant change in the number of competitors in investment banking.

    But if its savers/depositors/consumers you are worried about there are literally hundreds of banking choices, and Fed regs that last time I looked (awhile ago) limited any bank from holding more than 10% of U.S. deposits.

  39. I didn’t see any mention of “calamari” in that wall of excellent words.

    How in the world are we going to collect good ideas and line items for a new agenda if we don’t tag the comments? Doesn’t have to be “calamari” but perhaps we can settle on at least a good tag-word that can be easily searched?

    I do like calamari though.

    It takes people like you valuable time and effort of thought to produce these comments. Let’s add value by archiving them properly, otherwise they’re just words on an old post by the end of the day.

  40. Example:

    1. Stabilize current situation
    2. Create fool-proof vetting system for new government administrators
    3. Educate a new class of administrators
    4. Nationalize all businesses in the United States with a market cap or “value” above $10M
    5. Create minimums and maximums for wealth. Basic food, healthcare, education, shelter, etc. for every living person in the country. Net worth and income limits.
    6. Safeguards to prevent nepotistic apparatchikism


  41. If you tag things mentioning goldman with

    and my computer knows that #calamari is a sub-category of #squid
    there will be some strange linkages

  42. Ok Uncle Billy Cunctator, you asked for it!
    Start a collaborative folksonomy somewhere and let us know. Otherwise tagging turns into chaos.

  43. Looks like we have some folk in the boat who are prepared to fish or cut bait. Chattering intelligentsia please stand clear.

    May we have the following folded into your great draft act? The legalese I attempt is truly the work of an earnest but untrained legal draftsman.

    Some additional outcomes for consideration:

    1. Derivatives contracts not meeting requirements of this Act are deemed unenforceable contracts and attempts by parties to evade this will be sufficient basis for legal argument to render a derivative contract otherwise legal, void or unenforceable concerning rights of the offending party..

    2. All parties must correctly account derivative contracts on balance sheet. To do otherwise will be deemed a ground for that party to lose contract rights if challenged

    3. All derivatives must be accounted on balance sheet at mark-to-market valuation without exception. Any attempts to evade this responsibility must be reported immediately to the market and stakeholders.

    4. Foreign parties must agree to be bound by this Act or have their derivative contract rights deemed unenforceable.

    5. Basel III to mirror this Act within 1 year.

    6. Banks and financial firms accounting derivatives contracts as assets are required to carry sufficient capital to underpin inherent risk. This must be reported to market.

    7. Banks and financial firms will be in breach of this act if they are party to a derivative contract which would put their capital level in breach of required level as defined by US Treasury. Breaches will constitute basis for action against bank staff with finnes levied and possible jail terms. Banks and financial firms may be fined up to 10 times the notional value of each derivative contract which causes this offence to be in place.

    8. Level trading field: All trades to be via a public exchange (no dark pools) Off-market deals to be publicly recorded within 1 day.

    9. All asset valuation exposures must be cleared and dividend payments covered before any bonus payments are allowed.

    10. All banking and financial firms are to adopt the following prudential strategy.

    10.1 Operations will at all times be legal and ethical
    10.2 Clients are not to be exploited to generate profits
    10.3 Stakeholders are to be reasonably rewarded for their investments before any bonus payments are made
    10.4 Bonuses to be calculated with regard to similarity to dividend payments. Assign a publicly stated notional worth to each bonused position thereby enabling same value calculation as for shareholders.
    10.5 Bonus payments contravening this act are to be immediately recoverable. Subsequent operating performance which renders bonus payments illegal to be recoverable for 5 years from last payment of a particular payment.

  44. UBC
    Are you serious about points 4 and 5? Point 6 ‘nepotisitic apparatchikism’, care to explain using webster’s dictionary words?

  45. nota:

    Sorry, attempt at cute occluded intent.

    4&5: Yes. If we’re too greedy and too stupid to be able to educate and grow children into capable self-governing participants, we need to take responsibility for it. This is my idea of the golden mean — not extreme marxism, and not a sick semblance of the capitalist ideals. A floor and a ceiling. No need to deny our innate predatory core though… instead of accumulating assets to establish self-worth, invent a better medicine or make a more functional chair. We can even create prizes to award such behavior.

  46. Here is the “Yakkis Bill for regulating derivatives,”
    1.) Any contract that falls under the heading of “derivatives” must be labelled as a “derivatives contract”
    2.) Anyone who signs a “derivatives contract” will be personally liable in the event of a breach of contract.
    3.) Anyone who signs a “derivatives contract” shall keep in clearly identified bank deposits the entire sum (s)he might be liable for.
    4.) Signing a “derivatives contract” creates a presumption that the signer has full knowledge of all risks involved.
    problem solved.

  47. You seem to have missed the fact that Calomiris has also been “captured” intellectually by the large money interest. Regardless of his own personal economic or reputational interest, he is trapped in the mindset fed to him by the oligarchy. Perhaps he feels that he will somehow be included in the club if he goes on, or perhaps will secure funding for his pet projects, or perhaps doesn’t even make such a calculation.

    But to engage with him intellectually is fruitless.

  48. IC. The original intent was to keep it simple — anything that a commenter might want to flag as a possible action item in a larger plan should be tagged as #calamari.

    I guess “plan” needs to be defined a little though…

    Master Plan? Stop-gap plan? Financial reform plan?

  49. A little off topic…

    Politico ran a story today about the Consumer Financial Protection Agency (a “win” for Obama)… there were 5 comments – 2 negative, 2 neutral, 1 positive.

    They also ran a story about Beck, Limbaugh and the GOP (real original, I know). There are over 2500 comments, mostly from people who blame the Marxists/Fascists (???) for destroying our country.

    It is far easier to manipulate a fool than to help one.

  50. A cartel is a different kettle of fish, and Simon does not seem to be complaining that the banks have agreements between them that restrict output and/or increase prices (i.e., a cartel). He complains that they are too big.

  51. “3.) Anyone who signs a “derivatives contract” shall keep in clearly identified bank deposits the entire sum (s)he might be liable for.”

    Not that is undermines your goal, but the whole point of some derivatives contracts is that this amount is potentially infinite.

  52. Sorry Jake,
    My post later down the line omitted to name you as the author oof the powerful starter set for legislation. Sorry about that.

    Incidentally derivatives look a lot like insurance policies. Are derivatives a ‘smart’ way to avoid insurance contract rules? Also derivative parties apparently are not required to have an ‘insurable’ interest which appears to render a derivative a gambling tool! Wouldn’t the whole scene be better structured and more manageable if parties had to have an insurable interest equivalent?

  53. My guess is that taxing and demanding registration of derivatives contracts would make them simply disappear. Their only real ‘client’ purpose is manipulation of financial statement results, tax evasion and regulatory arbitrage (evasion). A one percent tax (2 if both parties are US Participants) on the estimated 600 trillion notional amount of outstanding contracts would retire the entire US National Debt and eliminate the need for all income taxes. [It would also cause the money supply to evaporate since there would be no more Treasury securities to serve as Fed reserves.] Only hedge funds would still have any reason to book derivatives contracts with dealers. They would probably all go broke on the day the legislation passed and their credit lines would evaporate. End of new plutocratic class, leaving only stogy residual WASP coupon clipping plutocratic class which at least maintains nice gardens, preserves tradition, etc.

    I have always wondered why insurable interest rules do not preclude enforcement of synthetic CDS contracts. I suppose Phil and Wendy Graham are at the bottom of that.

  54. The Frontline documentary on Brooksley Born is fascinating.

    It suggests the American financial industry is essentially an unregulated gambling casino operating at an immense scale. (With counterparts in Europe.) The epitome of Alan Greenspan’s ideology writ large.

    The Genie doesn’t want to get back into the bottle.

  55. Masses of us are moved by 2 to 4 word sentences. ‘Too much government, swift boated, Obama is a socialist, public option, you know the litany. Simon Johnson’s statement that banks were ‘too big to fail’ finally made it into the mainstream in the last year. Books now hold that title. I think the phrase ‘too big to regulate’ goes even deeper into the issue and forces us to face that our nation is being steamrolled by the few ‘to bigs to regulate’. The size of banks effects far more than competition, consumer rights and other capitalistic virtues. We are being reduced to serfdom in comparison to the bank bonus receivers. Simon has used the term oligarchy for a long time now, and it is finding it’s way into the popular mind. When people realize that he is talking about a few people becoming kings, maybe some will quit paying homage.

    The health care battle seems to be turning on the simplicity of shifting phrases from the ‘public option’ that has death panels to ‘medicare for all’ that has an inarguable feeling of safety to it. It took care of grandma, so it could take care of me, so the thinking goes. A timely turn of the tide hopefully, and very much because of a simple reframing of the idea, thanks I guess to Rep. Anthony Weiner, D, NY.

    ‘Too big to regulate’ is one more profoundly powerful phrase that can lead the thinking (a generous term) of all of us. As unsettling as it is to face, political leaders, and that is all there is between the mass of American citizens and the oligarchs, respond to these simple sentences just like anyone else. ‘Too big to regulate’ is one more step to which Simon has held the lantern, leading deeper into the conflict that banks are just too big.

    I have not been able to tune into baseline for awhile and I have really missed it. Jack Chase and Notabanker, your points are well taken. Such regulatory prose is the meat of enforcing the needed changes. With Prof. Johnson leading the way maybe, just maybe it will become apparent that if you can’t regulate it, you have to shoot it. The biggest banks must be broken down into manageable chunks. And as a veteran of the phone monopoly break-up and reconsolidation, the smaller the units, the tighter the constraints, the better. Because the oligarchs always resurface.

  56. A chilling observation. I see this so often and it makes me ill. I constantly encounter people who are familiar with Beck, Limbaugh and company but do not know who their political leadership are. It makes me feel like I am a cootie magnet. Sadly it IS far more easy to manipulate a fool than to help one. But…, to paraphrase author James Michener, there but for the grace of an affordable public university system, go I. Great revolutioneries recognize that is the fools — for whom they are dying.

  57. Minority criminals don’t scare me; they get sent to jail for their crimes. It’s the white criminals that scare me, seeing as they get elected to public office or run large multinationals.

  58. Actually, I don’t think you would even need to be so heavy handed. If you got rid of certain classes of derivatives like cds’s, and heavily regulated a few allowed vanilla interest rate, currency, and commodity ones, you could probably have a workable system.

  59. You are crediting Simon with TBTF? As best I can tell, this phrase goes back at least to the mid 80’s, and was popularized, interestingly, just a little bit before TSHTF, with the publication of “Too Big To Fail” by Gary Stern and Ron Feldman of the Federal Reserve, by way of the Brookings Institution. Interestingly, Paul Volcker wrote the forward. The authors themselves appear to trace the useage of the phrase back only to an attorney in 2001 Minneapolis, who was trying to convince the Fed to bail out a broker-dealer that they contended had been distressed after 9/11, and required a bailout.

  60. Allowing banks to grow to such monstrous proportions is somewhat analogous to raising a bear cub. While the bear cub is small enough to control, it’s benefits outweigh it’s risks. Sure it might bite you, but it won’t kill you. However, once the bear cub is fully grown it no longer provides the same benefits and it’s bite becomes deadly. So what do you do with the bear? You can’t release it into the wild because it will only circle back to what it knows (taking over-sized risks), which will eventually result in harm to the public. You can’t cage it in a zoo (over-regulate it) because the bear will not thrive. Unfortunately in cases where people keep bears as pets, the best answer is to shoot the bear (or break it up in the case of TBTF.) And usually law enforcment takes this step after the bear kills it’s owner. Hopefully the severe mauling that the bear gave our global economy will provide enough impetus for the federal government to act. If not, I’m sure the next time around the bear will be a much more effective predator.

  61. Its far much worse than you think Simon.

    It’s a mistake to think that these banksters are merely good guys, at good institutions, who simply got too big and then “captured” our government. In truth, these big banks are multinational criminal operations, who thrive because of the so-called “war on drugs”. 500 billion to a Trillion dollars a year in “dirty money,” is laundered by big banks. So you see, the Drug Lords have captured the banks. And the big banks have captured the world’s governments. The US relies on these banks to launder the dirty money, so America doesn’t collapse.

    James Petras, Professor of Sociology, Binghamton University, said in the article “US Bank Money Laundering, Enormous by any Measure”: “There is a consensus among U.S. Congressional Investigators, former bankers and international banking experts that U.S. and European banks launder between $500 billion and $1 trillion of dirty money each year, half of which is laundered by U.S. banks alone. As Senator Carl Levin summarizes the record: “Estimates are that $500 billion to $1 trillion of international criminal proceeds are moved internationally and deposited into bank accounts annually. It is estimated that half of that money comes to the United States”.

    “Over a decade then, between $2.5 and $5 trillion criminal proceeds have been laundered by U.S. banks and circulated in the U.S. financial circuits. Senator Levin’s statement however, only covers criminal proceeds, according to U.S. laws. It does not include illegal transfers and capital flows from corrupt political leaders, or tax evasion by overseas businesses. A leading U.S. scholar who is an expert on international finance associated with the prestigious Brookings Institute estimates “the flow of corrupt money out of developing (Third World) and transitional (ex-Communist) economies into Western coffers at $20 to $40 billion a year and the flow stemming from mis-priced trade at $80 billion a year or more. My lowest estimate is $100 billion per year by these two means by which we facilitated a trillion dollars in the decade, at least half to the United States. Including the other elements of illegal flight capital would produce much higher figures. The Brookings expert also did not include illegal shifts of real estate and securities titles, wire fraud, etc.” source:

    Just an example of how the drug lords have captured even our “legitimate” corporations: Laundering also occurs via trade, and US companies gladly sell to foreign buyers and accept the dirty money in exchange. From PBS’s Frontline: “The companies become involved when international money brokers, working in league with drug traffickers, sell cheap American dollars, proceeds of the drug trade, to Colombian importers of appliances, cigarettes, liquor and other products. They use those dollars to buy legitimate goods in the United States from top US companies and their distributors. The money brokers often pay for the goods in strange ways, like wire transfers from unrelated third parties, which should set off some kind of alarm among the legitimate companies, according to the US Department of Treasury.”

    And who is the beneficiary of all these illegal dollars? The banksters. It’s their business.

    Again, Jim Petras: “The complicity of the state in big bank money laundering is evident when one reviews the historic record. Big bank money laundering has been investigated, audited, criticized and subject to legislation; the banks have written procedures to comply. Yet banks like Citibank and the other big ten banks ignore the procedures and laws and the government ignores the non-compliance. Over the last 20 years, big bank laundering of criminal funds and looted funds has increased geometrically, dwarfing in size and rates of profit the activities in the formal economy. Estimates by experts place the rate of return in the PB market between 20-25% annually. Congressional investigations revealed that Citibank provided “services” for 4 political swindlers moving $380 million: Raul Salinas – $80-$100 million, Asif Ali Zardari (husband of former Prime Minister of Pakistan) in excess of $40 million, El Hadj Omar Bongo (dictator of Gabon since 1967) in excess of $130 million, the Abacha sons of General Abacha ex-dictator of Nigeria – in excess of $110 million. In all cases Citibank violated all of its own procedures and government guidelines: there was no client profile (review of client background), determination of the source of the funds, nor of any violations of country laws from which the money accrued. On the contrary, the bank facilitated the outflow in its prepackaged format: shell corporations were established, code names were provided, funds were moved through concentration accounts, the funds were invested in legitimate businesses or in U.S. bonds, etc. In none of these cases – or thousands of others – was due diligence practiced by the banks (under due diligence a private bank is obligated by law to take steps to ensure that it does not facilitate money laundering). In none of these cases were the top banking officials brought to court and tried. Even after arrest of their clients, Citibank continued to provide services, including the movement of funds to secret accounts and the provision of loans.”

    Good old Citibank. Too big to fail, and needs a bailout, so that it can continue to launder drug money. Where would we all be without it? The US is dirty, through and through, because of it.

    Again, Jim Petras: “And the importance of laundered money is forecast to increase. Former private banker Antonio Geraldi, in testimony before the Senate Subcommittee projects significant growth in U.S. bank laundering. “The forecasters also predict the amounts laundered in the trillions of dollars and growing disproportionately to legitimate funds.” The $500 billion of criminal and dirty money flowing into and through the major U.S. banks far exceeds the net revenues of all the IT companies in the U.S., not to speak of their profits. These yearly inflows surpass all the net transfers by the major U.S. oil producers, military industries and airplane manufacturers. The biggest U.S. banks, particularly Citibank, derive a high percentage of their banking profits from serving these criminal and dirty money accounts. The big U.S. banks and key institutions sustain U.S. global power via their money laundering and managing of illegally obtained overseas funds.”

    So you see, it’s no wonder that we have strong drug enforcement laws, we need illegal drug money to keep the banks afloat. Who makes those drug laws? Congress. Who pays the congressmen’s campaign bills? The Banksters. Where do the Banksters get their money? The drug lords. By extension, Congress is essentially in the business of selling drugs. It’s a circle jerk. Legalize all drugs and the bribes, the crooked politicians, the slush funds, and private banks would go away. Too Big to Fail? Ridiculous. Too Filthy to Fail, more like it. And you, me, everyone in the USA, we’re in bed with them, IN BED!

  62. Simon, simple solutions: (1) Campaign finance reform, (2) reinstitute Glass-Steagall, (3) require that all derivatives be traded on the OTC market, and, to the extent of value/risk, require capital holdings by the banks sufficient to cover any potential losses. This would do the trick, along with the CFTC, and a law for disassembling these megabanks including international cooperation.

    of course this is only obvious, but then again, since Washington has already been fully coopted (note that neither Summers, nor Geithner have publically responded to the Vollker, etal, suggestions, although they are made by the most financially sophisticated voices available. Nothing, thusfar from Congress, either. I think that they all think that if they ignore this it will all go away, but then I am sure that the world is watching for responses.

  63. “not extreme marxism, and not a sick semblance of the capitalist ideals”

    Orwell the Great argued for it incessantly and to me all his pieces in which he lobbied seriously for Socialism are not up to his so often impeccable consideration of the limits of real life

    of course I am all for that we go on to wreck our brains on how it can be done but when even Saint George couldn’t figure it out then it must be a tough one

    (after all he had done extensive “field studies” himself so knew a lot more of what he was talking about than probably any of us. see Wigan Pier and Down and Out)

    – btw one of the best Orwell-sites on the net was or is this one – an indication that there were some people who also wanted to figure out the balance? And now they’re getting revivals of “the good ol’ times” Orthodox Church, Stalin, Tsar …

    and before somebody gets up in arms: Orwell was as anti-communist as you can possibly be – see Homage to Catalonia

  64. iTunes store growth
    blogosphere growth
    obesity growth
    haggard models growth
    religion growth
    and brand-new as of yesterday hunger growth

    PS. but also great increase in reliability and longevity for all kinds of stuff from washing machines to cars

  65. animals tend to switch to dangerous with the onset of puberty and with some species castration helps …

  66. freedom fighter, where have you been all my life?! I’ve been harping on this for months. Not a single blogger or journalist has written about this, aside from the stray veiled reference.

  67. To me, it is fairly obvious: the citizenry will not give an [EXPLETIVE DELETED] unless and until the bread and circuses get cut off. So long as the citizenry have hot wings and Dr. House or whatever it is that they watch, the Republic remains safe.

    The same can be said about the alleged new American propensity to save and not live beyond ones means. The citizenry will continue to borrow and continue to spend unless and until noone will lend them more money.

  68. Well, in mathematics, if it is worth thinking of, a Russian person has probably already thought of it.

  69. No lie Genie don’t want to go back in that bottle, and them bankers don’t want to be putting him in there.

    Without the Genie, bankers face having to work harder for less money. Far as the banks be concerned, he can stay out and be making he self useful and [EXPLETIVE DELETED] fighting commies and [EXPLETIVE DELETED].

  70. Believe it or not, that antitrust laws are typically not terribly concerned about going from something in the neighborhood of 10,000 banks to 9,900.

  71. You forgot two key pieces of the story:
    *U.S. control of 95% of the world’s illegal opium production through occupation of Afghanistan
    *Rampant drug abuse by the banksters with expensive drug habits

  72. @ Jake –

    Wrong. Size matters, as far as being able to influence the executive powers, just as large planetary bodies exert gravitational pull. The larger the body, the bigger the pull.

    We’re currently going through this same diatribe here in Switzerland with Credit Suisse and UBS.


  73. I have been puzzled by the term “Too Big Too Fail”. Isn’t this in direct contradiction to the market economy we have, in which firms are allowed to prosper and perish. We don’t live in a dictatorial regime, do we? So now some firms are saying, we are so important that we should escape the rule of the market. This is not an economic concept, this is a political concept. Government can’t fail. But exactly because of that, we need balance of power. These big banks do not convey to me any balance of power. Nobody can own enough shares to monitor what the executives are doing. The bigger they get, the less shareholders can do anything to them.

  74. “A bear on ice skates attacked two people during rehearsals at a circus in Bishkek, the capital of Kyrgyzstan, killing one of them, Kyrgyz officials said Friday. In the incident, which happened Thursday, the 5-year-old animal killed the circus administrator, Dmitry Potapov, and mauled an animal trainer, who was attempting to rescue him.”

    Well, hopefully the federal government figures this out soon because putting ice skates on the bear (or dabbling in setting executive pay) will only enrage it.

  75. What do you call sometihng too big to fail that is allowed to get even bigger?

    “(Fatal) tumor” comes to my mind.

    I read the first comment and then my attention started to wander. Come on. Lessons are to be learned – and you don’t have to go back to ancient Greece. Or back a few hundred years. Or decades. Or years. A near catastrophe nearly occurred and the aftershocks are continuing. Does anybody think that it was merely due to what Greenspan called a “flaw in the system”?

    To whoever is reading this – consider these things:

    1. What happened starting around 1999 up to 2008? And why.
    2. What happened after? And why.
    3. What’s happening now? And why.
    4. What have #1, #2, and #3 taught us – and you?

    Personally I think the idea that firms like Goldman Sach’s could get even bigger is petrifying. I’m disgusted at Obama for letting make off like bandits and not stopping them from getting bigger and stronger. Yeah, sure, getting bigger and stronger benefits them. But can anybody really say with a straight face that gigantic financial institutions will be a benefit to anybody else? If you think that you can – do me a favor and come back to this thread in 5 or 10 years time for a bitter laugh at yourself.

  76. The following is from Fox business news:
    Consider the government’s 36% stake in Citigroup, a result of a conversion last February to common stock of some $25 billion in preferred Citigroup shares purchased by the U.S. Treasury in an effort to keep the banking giant afloat during the darkest days of the financial crisis.
    Some thoughts:
    Oue money was changed from a recoverable loan to a no-obligation stock purchase! Was this supposed to be smart?

    US Treasury probably now sees Citigroup stock as a dead loss. Ability to sell this stake on the market is ?? I suppose Treasury could ask GS to find buyers? Hahahaha.

    Any cleaning of our financial Augean stables risks revealing true bank health followed by bank collapse? How many other banks at risk? Keep the MtM and other truth revealers blocked. Don’t rock the boat. Ask GS for guidance and assistance.

    What then? Ohh help who can take Citigroup off Treasury hands? Well, Goldman Sachs may just offer to help. They will buy the good parts and we retain the rubbish?

    So the President’s advisory team are probably saying ‘don’t change anything, just talk stuff’ Their plan is to wait until things turn up in dollar terms as pumping dollars into the economy must result in higher dollar numbers all round? Inflation, well actually just a recasting via devaluation as fiat currency dives. Hahaha how about that Beijing? Oh so sorry.

    Now what would we expect banks to do in his scenario? Probably ensure their own survival and position themselves for the new economic model!

    Maybe this is why President Obama is looking like suspended animation when it comes to applying the fix?

  77. Minor reinforcing correction: once BLS announces its benchmark payroll revisions early next year, the number of jobs lost thru September will have been over 8 million, not almost 6 mn

  78. Simon, as an interesting aside, the second bank of the US is now (although it has changed names many times) JP Morgan Chase.

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