Be careful what you wish for. That’s my modest advice to some bankers and their government regulators who want to ease up on bank oversight.
An article in the Wall Street Journal last week reported that several banks around the country are dropping the Federal Reserve as a regulator. The actions so far seem innocent enough, and perfectly reasonable in the examples mentioned, but they did conjure up some bad memories of how the housing bust – and subsequent global financial crisis – got started.
Here’s the story.
According to the Journal, Little Rock-based Bank of the Ozarks in June opted to ditch its holding-company structure, which means it is no longer regulated by the Fed. Now, as a bank only, and not a BHC, it will be regulated solely by the Federal Deposit Insurance Corp.
Saving money from having two layers of regulation was the main motivator for the bank. George Gleason, the bank’s CEO, said, “We didn’t really need to be regulated by both.”
The bank, which has about $21 billion in assets, is the largest bank to make such a move, but it’s not the only one. Continue reading "Let's Not Relive The Past The Hard Way"
The Banking sector is heavily represented in this week's finance sector reports, with all of the sector's big guns like J.P. Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Goldman Sachs (NYSE:GS) coming out with results this week.
Total earnings for this sector as a whole are expected to be up +19.3% from the same period last year. So, on paper it all looks rosy, as they say. Currently the Trade Triangles are in long positions in the major bank stocks that are reporting earnings this week. Continue reading "Big Banks Report Earnings This Week"
By Jeff Thomas, International Man
The above quote is from William Gouge, commenting on the Panic of 1819. The panic had been caused when the First Bank of the United States had first expanded the money supply dramatically by offering loans, then contracted the money supply by tightening its requirements for new loans, causing a crash.
This is a useful quote, as, in its simplicity, it states the very nature of crashes brought on by irresponsible banking practices. In every case in which this occurs, it is possible through the complicity of the government of the day.
The origin of this syndrome goes back to Mayer Rothschild, a very clever fellow who, in the late 18th century, offered financial benefits to politicians in Germany in trade for political support for whatever activities his bank might practice. Rothschild was a long-term thinker; his method involved the offering of regular emoluments to politicians without their having to provide him with anything immediately. Then, when he needed a large favour, he would call it in.
Movie buffs may see a similarity between Rothschild's method and the deals made by Don Corleone in The Godfather. "Some day - and that day may never come - I'll call upon you to do a service for me."
Rothschild created boom-and-bust cycles which were highly profitable for his bank, but depended upon the support of the government when the "bust" part came along. Continue reading ""The Bank Was Saved, and the People Were Ruined""