Should We Blame Bank Examiners For Slow Job Growth?

By Simon Johnson.  My written testimony to House Financial Services, Subcommittee on Financial Institutions and Consumer Credit is here.

With unemployment back up to 9.2 percent, in the numbers that came out last week, the hunt is on for an explanation of why job creation has been so slow since the financial crisis of 2008.  Some House Republicans think they have found a specific culprit: bank examiners.

In the view of Representative Bill Posey (R.) and a number of his colleagues on the House Financial Services Committee, bank examiners are clamping down on otherwise perfectly healthy banks – and forcing them to inappropriately classify some loans as “nonaccrual” (meaning less likely to be paid back).  Mr. Posey has therefore introduced a bill that would direct examiners to regard all loans as accrual, as long as payments are still being made – and a hearing was held last Friday to discuss the merits of the matter.

I testified at the hearing and was not supportive of Mr. Posey’s legislation.  On the subsequent panel of witnesses, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) testified – as the relevant regulators – and they were even more forcefully against the proposal.

George French, on behalf of the FDIC, said in his written testimony, “This proposed legislation would result in an understatement of problem loans on banks’ balance sheets and an overstatement of regulatory capital.”

The big issue is “regulatory forbearance” – meaning whether regulators should look the other way when banks get into trouble, allowing them to be nicer to their borrowers and hopefully manage their way to recovery.

The problem with such forbearance is that it has a long history of leading not to recovery, but rather to much bigger problems.  The Savings and Loan crisis, you may recall, began not as a major crisis but rather as a relatively small problem at some Texas mortgage lenders. 

Congress responded to the complaints of these thrifts, which argued they had been poorly treated by various other changes in rules – and the result was legislation that gave these savings and loans enough additional rope (and forbearance) to hang themselves.  The end result was that over 1,000 people went to jail and the taxpayer had to pay several hundred billion dollars to clean up the final mess.  (Recommended summer reading for all members of Congress and everyone else: The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry, by Bill Black.)

The core problem today is that while community banks were not the main driving force behind the financial boom and bust, in some states they made some very bad decisions.  Among the congressmen who spoke on Friday, I heard strong voices from Florida (Mr. Posey’s state), as well as New Mexico and Georgia.  In all of these places, thinly capitalized community banks made very bad bets on real estate – often commercial real estate.

The regulators made it very clear in their testimony that the rules have not changed – and they continue to apply the same accounting principles as before.  The principles are straightforward and reasonable – a loan cannot be classified as accrual if you do not expect it to be repaid in full.

Allowing banks to classify failing loans as accrual will overstate their financial results and make it look like they have more capital – i.e., greater shareholder equity – than they really do.  The problem is that some of our community banks do not have big enough loss absorbing buffers – that is the role that bank equity plays; shareholders take the loss and (hopefully) prevent creditors from having to take any kind of hit.

If we still had any kind of free market in banking, you would expect to have equity funding – as a percent of total assets – of at least 30 percent.  But, since the advent of deposit insurance in the 1930s, retail banks have been happy to fund themselves with much less equity relative to debt – because the government is providing effectively a subsidy to debt. 

Bankers are paid based on their return on equity, unadjusted for risk.  As Professor Anat Admati of Stanford University has been arguing, this is a big part of all our banking problems.  (See her letter to the JPMorgan Chase board of directors: http://www.gsb.stanford.edu/news/research/admatiopenchase.html.)

The small banks have a legitimate gripe but it was not the focus of Friday’s hearing.  The country’s mega banks – for example the six largest bank holding companies – received a great deal of regulatory forbearance, as well as much more government support.  In contrast, the smaller banks have received very little – the Troubled Asset Relief Program did make capital available to them on potentially advantageous terms but, on the other hand, perhaps taking that capital signaled that management thought there was a deeper problem.

The right approach to strengthening small business lending in communities across the country is to encourage community banks to raise more equity (i.e., more capital).  If they are unable or unwilling to do this, for example because of the so-called “debt overhang problem” – meaning that their debts to existing creditors weigh too much on new investors— we should allow and encourage new entrants. 

Banking licenses could be made more readily available to well-capitalized entities with strong management teams and a proven commitment to serving local business.  Existing community banks, as well as the politically powerful Independent Community Bankers of America (ICBA), are unlikely to welcome such moves.  But they would help small business and job growth.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire column, please contact the New York Times.

30 responses to “Should We Blame Bank Examiners For Slow Job Growth?

  1. And I thought it was just the 30-something MBAs who had trouble remembering their history.

  2. @ Simon, you are at your very best, encapsulating what “regulatory forbearance” is really about: turning a BLIND EYE to insolvent banks, and letting these absolutely overstate the income statement with phantom income to fool shareholders, and other interested parties. These institutions by law need to be shuttered and orderly dissolution commence forthwith.

    I am relieved someone has the *cojones* to face down the PHONY prevaricators in the Congress, with something I call truth.

    Mr. Posey’s suggestion is ludicrous and harmful on its’ face. What, a borrower makes a single payment or two within the accounting period, and because of this performance, the financial institution gets to regard the loan as “good”, and accrue income on the non-performing months? This contravenes every revenue recognition principle in the good GAAP world, as there is no reasonable expectation of realization, etc., and thus booking the income is deceptive, dishonest, and intentionally misleading. The need is Real transparency, not more cloaking, as Posey’s dictum would have it.

    But, what else is new?

    I say: Close the ZOMBIE BANKS!!

  3. jeff simpson

    Blaming bank examiners is a tactic to divert attention from the true cause, which is a switch of economic activity from the productive to the parasitic.

    What our financier-captured government fails to realize (or acknowledge) is that job creation occurs when firms have reason to hire, i.e., when the demand for additional personnel exists. No amount of tax incentives will cause an employer to add employees if the additional labor is not needed. In 1960, 25.3% of GDP was from manufacturing; in 2010, that number had, thanks in large part to globalization and outsourcing, dwindled to 11.7%. Finance and insurance, on the other hand, went from 3.7% in 1960 to 8.4% in 2010. Financial and insurance products do not increase our standard of living, but making stuff does. It is time to reintroduce tariffs in trade to protect and encourage domestic manufacturing.

    My source was http://www.bea.gov/industry/gpotables/gpo_action.cfm

  4. Desi Girl - Doing Gods Work

    On simon, simon, I don’t understand your compulsion to lie every time you put pen to paper, “Bankers are paid based on their return on equity, unadjusted for risk”.

    This is 2011. The bad actors are gone – the market took care of them. Wake up buddy!!

  5. As “Goose” says in “TOP GUN” at the officer’s bar………”ahhh, jeekers………you crack me up………” :)

    Too funny, but keep at it, we need a good chuckle.

  6. One of my favorite liberal economists, Robert Reich, provides a political analysis of the kabuki theater vis a vis the “debt”:

    http://robertreich.org/post/7574312657

  7. Great post, Simon!

    Slightly off-topic.

    Question: Where is Ms. Elizabeth Warren in regards to her “Most Qualified Person Status” appointment?
    As a sidenote,… Obama is without a doubt the worst president since Carter, and as an Independent,… I will do all in my power to help Mitt Romney get elected! (JMHO)

    Thankyou Simon and James

  8. “If we still had any kind of free market in banking, you would expect to have equity funding – as a percent of total assets – of at least 30 percent. But, since the advent of deposit insurance in the 1930s, retail banks have been happy to fund themselves with much less equity relative to debt – because the government is providing effectively a subsidy to debt.”

    Great and important point about how much of this is the result of a government provided safety net. Basel has long been a scam to just provide cover for reductions in banks capital.

  9. Moses Herzog

    One of your best posts Simon

    Bill Posey—Republican—what more is there to say??? Bought and paid for Notice that American Bankers Association (ABA) has given $19,500 to Posey’s PAC. One of his top 10 contributors, along with the National Association of Realtors, who threw in another $23,500. Surprise surprise.
    http://www.opensecrets.org/politicians/contrib.php?cycle=Career&cid=N00029662&type=I

    Well I guess it’s the old TBTF bankers’ stand-by excuse. When you can’t manage your own bank properly and keep enough capital on hand to cover loans—blame it all on the regulators. I mean that’s what the average taxpayer does when they can’t pay off their loans right??? They call up all the people they owe money to and they say “Oh, you know it was those darned ‘regulators’ again!!!! That’s why I can’t pay my mortgage or my credit card bill , the damned ‘regulators’ done did it to me again!!! They put a gun to my head and forced me to buy that new refrigerator even when I was ‘upside-down’ on my car!!! I hate it when those dadgum regulators do that!!” Oh what a fantasyland that would be……

    Hey Bill Posey!!! You are the scum of the Earth!!! They should change the term “pond scum” to “Posey scum” in honor of you!!! We don’t want garbage on bank balance sheets that taxpayers have to pay for!!! Go stick your “Posey scum” head in the nearest drainage ditch.

  10. @ Simon “Should We Blame Bank Examiners For Slow Job Growth?”

    Of course not! We should blame the regulators for it.

    The small businesses and entrepreneurs, the most dynamic elements of the economy and who could provide us with the next generation of jobs are odiously being arbitrarily discriminated against by bank regulators who favor bank lending to the triple-A rated and to the government, the latter to such an extent that sometimes I ask myself whether the Basel Committee outsourced the drafting of Basel I-II-_III to Fidel Castro in Cuba.

    If there really is a stimulus that could do the economy much good that would be, temporarily at least, to drastically reduce the capital requirements for the banks when lending to small businesses and entrepreneurs. That it would be unwise in view of the recent crisis? Absolutely not! Small businesses and entrepreneurs, precisely because they are viewed as more risky, have never ever been excessively lent to and much less caused a crisis. That dishonor belongs entirely to either fraudulent bankers, or excessive bank lending to what is not perceived as risky. That is what the loony regulators ignored and still ignore.

    @Simon “The big issue is “regulatory forbearance” – meaning whether regulators should look the other way when banks get into trouble, allowing them to be nicer to their borrowers and hopefully manage their way to recovery.”

    Come on, the problem does not start when the loan goes sour, it starts when a bad loan was booked. If the banks when booking that loan needed little capital because the regulators said so, because the credit rating were good, why on earth should it have to later, counter-cyclically, need to increase capital.

    @Simon “thinly capitalized community banks made very bad bets on real estate – often commercial real estate”

    And why do you think it was so? It was because the regulators allowed the banks to have less capital when doing this kind of business than when lending to the small business or entrepreneur.

    @Simon “But, since the advent of deposit insurance in the 1930s, retail banks have been happy to fund themselves with much less equity relative to debt – because the government is providing effectively a subsidy to debt.”

    What are you talking about? It is the regulators have been happily allowing the banks to use less equity!

    PS. Loony bank regulations explained in an apolitical red and blue! http://bit.ly/mQIHoi

  11. Boone Pickens’ Business Plan – which no one says WON’T work – needs one billion a year for five years.

    No money in D.C. for *energy* policy to benefit USA for the next century – well, because *government* should not be in the *energy* business according to a bloviator on RATigan’s show…

    RATigan is a cable show about business, right?

    And that crap – *government* should not get involved in *energy* business – is over the top doo-doo hurling info…

    It’s slow to herd cats – gotta just keep inching the four walls in to lock ’em down….

    One thing is absolutely certain – people have made up their minds that D.C. can’t make any more decisions that will trickle down to ruin ALL USA citizens NOT in D.C.

    Just the other day, I heard about how 1.1 BILLION in the stimulus package went to the Brookings cabal:

    “Our analysis of funds allocated in the legislation found that nearly 90 percent of the $1.1 billion will eventually be spent on two main types of activity: developing and synthesizing comparative effectiveness evidence, and improving the capacity to conduct comparative effectiveness research.”

    Uh, no one before Stimulus Package (too many jokes, too fast flashing across the brain) ever collected data about *effectiveness* and sent it in to the FDA….??!! Whoa. Now that’s sumptin’, eh?

    ONE BILLION $$$ to retool transportation of all those health veggies and fruit across 50 states…shoot, I’m “investing” in that *plan* :-)

    Koch, meanwhile, still funding Ork raids on PP clinics in Kansas…

    Y’all need an us vs. them for 2012?

    Koch vs. Boone

    Bain is Romney’s albatross….”we don’t KNOW how to create jobs” no freekin’ duh – nothing like getting the number down to a chosen 144,000 and getting Orrin to keep repeating that the POOR aren’t paying enough for *god’s work*…

  12. Singing Around the Campfire

    @ Annie, $$$ 1.1 Billion to Brookings? OMG, that’s a lot for hot air and horse puckies.

    Unless and until REAL things are added to infrastructure, we’re going to keep on going down, down, down….and Gold Sacks apparently is well aware of this augering-in trajectory of USA.

    It canned 1,000 jobs of USA workers and hired homologues in Singapore.

    now, wouldn’t it be sweet if they moved ALL their butts, lock stock and barrel outta here, and did god’s work away from people who actually believe in ONE?

    What a disaster, I had no idea things would get so rotten everywhere one cares to look.

  13. “Amazing how the mention of the word “money” pushes all the irrational buttons in the modern psyche. Let me point out a few obvious facts:
    Gold is an essentially worthless metal, good only for pounding into shiny trinkets because it is so soft. The fact that humans have assigned great value to it for a brief portion of their history as a species doesn’t alter the fact of its use value. If you insisted that I exchange a 100# bar of the stuff for a good horse 250 years ago you’d likely get a haircut, and not the kind that banksters are trying to avoid in 2011.
    I live in one of the few places left where I can supply my family with a year’s supply of meat with three or four bullets. Once commerce grinds to a halt, try to do that with a 100# bar of shiny metal. And I damn well won’t trade my bullets for your gold.
    Paper currency actually has more use value than gold: at least you can use it to start a fire and roast your venison.
    Currencies, whether they consist of shiny metal, paper, or giant stone discs only have value to the extent that people accept them in exchange for something that they want or need. Gold only differs from paper money in its inherent scarcity and longer history of illusory assigned value. The US dollar or the Euro can become the Argentinean Peso, or the Reichmark of the future under the right circumstances, and those events are no longer unthinkable.
    Which brings us from the past and possible future to the present fractional reserve banking system. The most basic fact that few people seem to be able to grasp is this: In a fractional reserve banking system, MONEY does not exist until it is lent into existence. Until that point it is merely an accounting notation in the central bank’s ledgers. When a retail bank makes the decision to lend money to build a house, fund business operations, or loan money to a drug cartel, the central bank credits the retail bank’s account to fund the loan and the money enters the money supply (i.e. becomes MONEY in circulation rather than virtual money) paying the salaries of carpenters, office workers, or the guy selling nickel bags on the corner. Loans are not made because the retail bank has accumulated deposits as myth would have it: they are made because the bank has located a willing, “qualified” borrower. The Treasury can print all the paper and coins it wants, but short of dropping them from a helicopter or adding people to the federal payroll, in a fractional reserve banking system the currency doesn’t enter the money supply until it is loaned out. As the newly created MONEY circulates through the real economy it creates additional jobs and economic activity. That was called the multiplier effect back in Econ 101. It could also be called debt slavery with complete accuracy.
    Interest is not the “free market” cost of money, but rather the price of allowing banks to administer the system, construct fancy buildings, gamble in the derivatives market, and pay their executives multi-million dollar bonuses. It also is the mechanism by which the FED tries (ineffectively) to manage the economy and control the rate of inflation/deflation through the discount rate.
    Unfortunately Bernanke, Geitner, Obama, and the howling pack of crazies that populate the Republican Party could care less about stimulating activity in the real economy as long as their benefactors can receive huge executive bonuses and fund their re-election campaigns. Why else would politicians pour trillions into the pockets of their bankster overlords, enabling them to continue to sit at the world financial system casino tables? They can’t be dumb enough to not know where the money goes and how little stimulus effect QE2 and the Bush Billionaire tax cuts really have.
    The clamor for austerity turns rational policy exactly on its head unless the goal is for Europe and the US to become the new third world and undercut Chinese wage rates.
    Rational policy would do just the opposite of austerity: Eliminate fraudulent asset valuation on bank books, nationalize the bankrupt institutions, return to progressive income tax levels of the 1950′s and distribute the nation’s wealth in a fair manner, institute a national single payer medical system, eliminate predatory private health insurance companies, change prescription drug research and development to funding through universities and research institutes and abort the big Pharma drug pushers, legalize all recreational drugs, put the cartels and the CIA out of the street drug business and clean out the prisons, and last and most important, change the Department of War to the Department of Defense by closing all overseas bases and cutting the Pentagon budget in half initially and then halve it once again. We need employment and a 21st century infrastructure, not austerity.
    Revenue shortage? Hardly. There is plenty of money in the richest country on earth to put people back to work and begin preparing the country for the next century. The money not spent lining the pockets of the bankster and military cabal could fund a 6 million man/woman WPA to build the energy and transportation systems of the future (like China is starting to do), provide free education like Cuba does instead of saddling college graduates with debt slavery, wean ourselves away from unsustainable petroleum based agriculture, rehab our housing stock to cut energy use in half,—– there is no shortage of things we could be doing if we had a vision of the future and the collective will to seize political power back from the ruling class that has stolen it and American democracy from the people”. Crazy Horse

  14. @ beene

    Ref: “The Creature from Jekyll Island” by Edward Griffin (A Rothschild,… and too a lesser extent Rockefeller Production?)

    http://www.bigeye.com/griffin.html

    PS. This was/is the beginning of the end for a once (USA?) great country? But wait,… there’s time to squash this abomination if enough, and I mean a whole-lot of conscienceous/ knowledgable patriotic intellectuals getting the word out, making the general populus aware (dire consequenses) how debt can, and will, eventually enslave and destroy a democracy from within – a quiet coup!
    Kinda like Russia or China, or any other Totalitarian existing in the past or present espousing a Utilitarianism Infalibility Doctrine! (JMHO)

  15. to #14: I locate the beginning of the end either with the Powell memo, or perhaps the Clinton impeachment circus. Nailed down by Bush v. Gore, and shrinkwrapped by post 9-11 grab for executive power under the GWOT cover

  16. earle, not a libertarian, but am against fractional banking.

    The URL you posted did not function.

    You may not enjoy this post by crazy horse but expressing my opinion very well.
    http://www.nakedcapitalism.com/2011/07/the-politics-of-fed-policy.html
    Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s, spoke at the University of Texas in 1927 and revealed:

    “Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.”
    Sir Josiah Stamp

  17. Brenda Vinall-Mogel

    In talking to a supply line person who works at larger company and looking at the US Census Bureau’s Manufacturing and Trade Inventories and Sales report that came out yesterday with almost 20 years of raw Manufacturing numbers, we are building more with less people. One factory I talked to was down about 9% in labour. Now some of the work has been moved to smaller businesses who then may have hired, but these smaller businesses have been having a hard time gaining loans especially when commodities rise to buy raw material to make product for the larger companies. These larger companies have then bought material for their small business suppliers to make parts even when these smaller companies have a guaranteed income ( I believe there was even an article about other companies doing this in the WSJ). While banks and others are impeding loans and possibly contributing to the decline of jobs, the basic data shows we are making more with less people. Marginal or unskilled workers have been removed and not called back. While there does not seem to be much appetite for government, small business loans could be backed by the government much like Farm Service Agency loans. Or we could do what Per Kurowski says and treat all loans with equal risk. (We with our AAA rating, and many other countries right now, stand at the brink of default with our leaders in place. Are we any better than a small business?)

    While I am writing, Danial Henninger of the WSJ in his article The Disappearing Recovery was blaming the recovery on imitating European policies for markets, taxes, and welfare for a lower GDP trend. Using a lecture from Bob Lucas. Until Germany joins Greece in debt issues this argument should be ignored.

    I have been saying since January 2009, we need to look at the age of the population of struggling countries and birth rates. I will again use Sweden and Finland as an example. In the late 80’s early 90’s both countries had similar economies and issues. If you take banking out of the formula, Sweden has a baby boom, much like the US at this time, and economies got better. Finland and those without a second wave of children did not. Now we have a issue where we have more 20 something’s those who were born looking for work and their grandparents holding on to jobs longer with little retirement savings. I Love my parents and I think their is MUCH wisdom to be gained in business from the forgotten generation/early baby boomers, which is why I mentioned here last August/early Sept. we need to work on a joint hire or mentor program to get and keep both groups working and we need to provide small business loans so older people who have a hobby/idea can turn it into a business. Not all, but many young like the steadiness of a job from someone else while they start their families. It is working for another who does not work that brings economies back only if you have not exceeded expenditures on things like housing, student loans, cars, etc. I do not care who stays home with children, but when we had more people either in school or staying at home as care givers we had a better economy, but we also had a long period of perceived need/convenience items that changed living styles in the home and provided work, which added to this economic boom. Our last real perceived need item was the micro chip/ home computer and everything that goes with it including gaming. Now every thing we are making is an improved replacement item of something we already have including going green. I will also say here it must be personal/family need items that move an economy forward not government or large ticket items or the 1800’s would have had a better boom period then it did.

    I have so much more to say, but we have a thunderstorm going on right now and I do not want to retype what I have written.

  18. Brenda, the balance of trade in real goods not financial products is the only part of the USA’s economy that since 1980 is in worse shape than the deficit of today and is directly to free trade instead of fair trade.

  19. @ Lil’D

    Indeed,… but I’ve firmly (JMHO) believed this went back to the McCarthy Era {{a friend of Joeseph Kennedy, and admired to some degree {in a special way(?)} by his children}},… and being as radical as (not my opinion but by the Oligarhy Press?)the he was at the time, should he had been isolated and ostragated as a wing-nut? Sooner rather than later, American’s will be asking the same radical questions – rethinking this past, in our own times present! The US Senator Mr. Joseph McCarthy (GOP/Wisconsin) was nobody’s fool other than the press that painted him that way.

    Ref: http://en.wikipedia.org/wiki/McCarthyism

    There have been a myriad of US conflicts, however you lable them (terrorism or deliberate) from Korean, Viet Nam, S. America, etc,.etc., etc.,! But remember this: America was suspisciously caught with its guard down for no apparent reason,…knowing quite well an attack on the WTC was eminent?

    Regarding the Powell memo: “when a strategy is implimented, the infiltration (he/she/group?) of a singularity has but one objective; as a perfectionist training tool of oneself evolving with the flow; focusing and pursuing the propagation of one’s mission to that of a finite-honed detailed criteria; masking their deception into non-essential amicable discourse; always their eye’s on the prize with the perfectionism of modern tunnel-vision academia; making of a one track objective, that of a stalwart side note disregarding all negativity as a given, obscured in opaqueness with mission creep not an option”

    @ beene
    Sorry about the link. Mmust be Googled,… becoming to controversial to keep up?

  20. I agree with you that many banks are thinly capitalized. Remember most banks run on a high risk low return operating model. Most banks are leveraged 10-12 to 1 (deposits to capital) and make a gross margin of 4-6%. Given those parameters, would you invest in a bank? (especially after the last 3-4 years of losses)

    Government regulation typically increases costs of doing business which cuts in to profitability further. The pendulum has been swinging toward more government regulation since 2007. I agree that more capital would be nice. But, the market is not providing that, so banks have to earn any capital they get. With loan quality issues still looming and the low interest rate environment, the outlook for banks is still grim. There will be further consolidation and the government will have to provide loss share arrangements to induce banks to assume troubled loan portfolios.

    Given these issues, I think the possibility of new banks starting is unlikely. Who would provide the capital? I think we will see further consolidation, more government intervention will increase operating costs and a low interest rate environment will have a negative effect on bank’s ability to increase profitability.

  21. TonyForesta

    Exactly Woop. And the answer to your query Mr. Johnson is Qui! The banks, the regulatory entities, the predatorclass, predatorclass oligarchs, and the socalled government are various horns, fangs, venoms, and shells of one slithering reptile. If there were actually any legitimate bank examinations on the TBTF institutions, – they would prove insolvent, and be dismantled through a resolution trust like entity. Sadly the reptile is predatory and coldblooded. Laws, standards, rules, ethics hold no influence in the conduct of the reptiles operations. The reptile is bent on feeding the reptile singularly and exclusively, and will devour any threat to the reptiles supremecy and stability. Sadly much of that food is America’s and the worlds poor and middleclass who are expected to pay exhorbidantly more for less, (healthcare, bacon, canned food products, education are a few of myriad examples,) and at the same time endure the burdens and hazards significantly fewer rights, freedoms, privileges, and entitlements. In short, the people are forced to burden and hazard massive core cost of living outlays imbedded in the system, and endure far fewer, much smaller support or saftey nets from the socalled government. This twisted coldhearted fascist reality is the result of 30 years of concerted gop dismantling of the Constitution, US manufacturing, the middleclass, language, and America and rabid enrichment and massive redistribution of wealth and resources to the richest 1% of population, the predatorclass.

    Until and unless these institutions, (TBTF den of vipers and thieves, regulatory agencies, bank examination agencies, the entire US political system, et al) are completely destroyed, and born again into new more law abiding, more ethical, more responsible, and more equitable institutions – the future of Amerika is doomed to continued robbing and pillaging of the poor and middleclass to feed the insatiable appetites of the reptiles in the predatorclass.

    Tear it all down. Reset!!!!

  22. TonyForesta

    Via naked capitalism http://www.nakedcapitalism.com/2011/07/the-debt-ceiling-debate-as-viewed-from-europe.html

    “Sources:
    •IT’S OFFICIAL: The Whole World Thinks Republicans Are Dangerous Maniacs Threatening Everyone – Business Insider”

    It’s only the den of vipers and thieves in the predatorclass and the dim and ignorant wingnuts in redneckamerika that view the gop as doing godzwork, loving thebabyjesus, and concerned about the future of America.

    The rest of the world and hopefully larger numbers of real Americans recognize that the gop in it’s current incarnation is a fascist regime bent on enriching the predatorclass and predatorclass oligarchs, controlling and distorting information, and depriving, controlling, and enslaving the remaining 99% of the population.

    The gop is an evil and ruthless pack of hobgobblins insipidly destroying the future of America’s poor and middleclass, and threatening to shatter the stability of the entire world, in order to elevate and secure the already untouchable and imponderably wealthy richest 1% of the population – the reptiles in the predatorclass.

    In a world where there are no laws, – there are no laws for anyone predatorclass biiiaaatches!!!

  23. Moses Herzog

    This was the tipping point for me voting for President Obama in 2012. If he is not even willing to appoint her, or go to battle for the middle class, as of today, I’ll be looking for another man to vote for.
    http://www.bloomberg.com/news/2011-07-15/obama-eliminates-warren-as-consumer-head.html

    I don’t think I can view Obama as a “great” leader as of this news. Maybe an ok guy, but not to be compared to the great leaders like FDR or Churchill. I’m not sure who I am directing this Walt Whitman poem to, Miss Warren, as she is the true victim in this charade, or my current nation’s leader, in whom I am very very severely disappointed in today. I feel in spirit, the way I envisioned Obama, in spirit, Obama has died.

    “O Captain! my Captain! our fearful trip is done;
    The ship has weathered every rack, the prize we sought is won;
    The port is near, the bells I hear, the people all exulting,
    While follow eyes the steady keel, the vessel grim and daring:
    But O heart! heart! heart!
    O the bleeding drops of red,
    Where on the deck my Captain lies,
    Fallen cold and dead.

    O Captain! my Captain! rise up and hear the bells;
    Rise up—for you the flag is flung—for you the bugle trills;
    For you bouquets and ribboned wreaths—for you the shores a-crowding;
    For you they call, the swaying mass, their eager faces turning;
    Here Captain! dear father!
    This arm beneath your head;
    It is some dream that on the deck,
    You’ve fallen cold and dead.

    My Captain does not answer, his lips are pale and still;
    My father does not feel my arm, he has no pulse nor will;
    The ship is anchored safe and sound, its voyage closed and done;
    From fearful trip, the victor ship, comes in with object won;
    Exult, O shores, and ring, O bells!
    But I, with mournful tread,
    Walk the deck my Captain lies,
    Fallen cold and dead.”

    “O Captain, My Captain” by Walt Whitman

  24. Moses Herzog

    A large percentage of middle class (and poor) America supports you and would “go to bat” for you Miss Warren. Wherever (U.S. Senator Massachusetts??) you felt your skills are best used.

  25. Sorry about the link :-(

    Ref: “The Creature from Jekyll Island” (Griffin)

    http://www.bigeye.com/griffin.htm

  26. Ref: “Non Reform of the Rating Agencies”, by Johathan Macey

    http://www.nakedcapitalism.com/2009/12/non-reform-of-the-rating-agencies.html

    PS. Checkout “tunneling”

    ps2. Please note that after the `EnRon’ scandal in the UK – they banned political parties from relying on business/corp. donations. Hence forward they are to be financed/funded by the state. what’s going on America?

  27. As long as regulatory forebearance is relative- these arguments can be made. While I certainly agree that strong capital requirements improve the overall stability of banking, the regulators must show the same degree of regulatory exhuberance on all banks not just the “non-Big 6”. Until we see some action on any of the Big 6 who have operated outside (some would say without) regulation for 10+ years now, you can’t expect the smaller guys to accept regulation without a fight. Banking legislation is so often written with the input of the Big 6 who are able to suggest conditions (some say loopholes) favorable to themselves while effectively serving as a kind of tax on smaller banks that they see as competition. The smaller (non Big 6) have had to watch the government support these virtually unregulated giants trash the economy while they have no likelihood of such support even if they do follow the regs.

  28. earle thanks for the updated URL. Enjoyed the 5 videos; but if I did not miss or forget was the fact that when money is created all taxpayers are paying interest on the new money?

  29. @ Guest

    Bringing back “The Glass-Steagall Act” would show the world that ( overwhelming empirical-data) mandatory securities (Cross-Listing/ Country) regulation works. If not, capital will continue to flow out of America,… and what capital that was flowing into America from soverign’s, will sooner rather than later find greener pastures. (JMHO)
    It seems the United States can’t get it’s “Fiscal-Auto-Pilot” out of reverse?

    PS. When Geithner leaves – why not put Mr. Paul O’Neill in charge,…and appoint Mr. Larry (Lawrence) Lindsey his counterpart to run the Fed.? When you actually look under the soiled mattress covers,..Obama’s got the entire Bush#43 team, working his pathetic administration. Why not get/ give a couple (a few good men, with integrity!) qualified guys that were ostrasized for speaking the truth about the War & Bush Tax Cuts(?) their rightfully earned jobs back? Yea, their Gopper’s,…big deal! Integrity must count for something today?

    Thakyou Simon and James

  30. GAO recently came out with a report on this very issue of examiner actions, community bank lending, and CRE. This is a link to the summary, which links to the full report: http://www.gao.gov/products/GAO-11-489.