Sunday, September 18, 2011

Will banks drain $5 trillion from the US economy???


I could hardly believe my eyes when I read it, but an article in Business Insider suggests that the big banks - and big bankers - will drain no less than $5 trillion out of the US economy by 2020. Here's an excerpt.

For the American economy – and for many other developed economies – the elephant in the room is the amount of money paid to bankers over the last five years. In the United States, the sum stands at an astounding $2.2 trillion.

Extrapolating over the coming decade, the numbers would approach $5 trillion, an amount vastly larger than what both President Barack Obama’s administration and his Republican opponents seem willing to cut from further government deficits.

That $5 trillion dollars is not money invested in building roads, schools, and other long-term projects, but is directly transferred from the American economy to the personal accounts of bank executives and employees.

Such transfers represent as cunning a tax on everyone else as one can imagine. It feels quite iniquitous that bankers, having helped cause today’s financial and economic troubles, are the only class that is not suffering from them – and in many cases are actually benefiting.

. . .

In other words, banks take risks, get paid for the upside, and then transfer the downside to shareholders, taxpayers, and even retirees. In order to rescue the banking system, the Federal Reserve, for example, put interest rates at artificially low levels; as was disclosed recently, it also has provided secret loans of $1.2 trillion to banks. The main effect so far has been to help bankers generate bonuses (rather than attract borrowers) by hiding exposures.

Taxpayers end up paying for these exposures, as do retirees and others who rely on returns from their savings. Moreover, low-interest-rate policies transfer inflation risk to all savers – and to future generations.

Perhaps the greatest insult to taxpayers, then, is that bankers’ compensation last year was back at its pre-crisis level.

. . .

So the facts are clear. But, as individual taxpayers, we are helpless, because we do not control outcomes, owing to the concerted efforts of lobbyists, or, worse, economic policymakers. Our subsidizing of bank managers and executives is completely involuntary.

. . .

The largest, most sophisticated banks have become expert at remaining one step ahead of regulators – constantly creating complex financial products and derivatives that skirt the letter of the rules. In these circumstances, more complicated regulations merely mean more billable hours for lawyers, more income for regulators switching sides, and more profits for derivatives traders.


There's more at the link.

If these figures are correct, it means that even if we lop $5 trillion off the Federal deficit, the economy won't be much better off, because just as much will be siphoned off by the banksters! How sick is that? And what can we do to stop it? There must be something!





Peter

7 comments:

Noons said...

Tar and feathers, Peter.
Nothing else will work...

perlhaqr said...

Rope.

Shrimp said...

There is a reason Thomas Jefferson feared/hated banks as much as governments. Both are corrupt, and both will enslave.

Billll said...

Absolutely, all those people in the banking industry should be required to work for free, right?

Let's see, $5T/8years, /(number of people working in banking or finance) = average income of someone working in finance. I don't have the number of people to hand, but I'm sure it's more than just a few.

Someone please do the rest of the math, then let us know what the real numbers are.

Chris said...

@Billll: If the banksters were actually earning the money instead of using their lobbying influence to get the money transferred to them by variations on "stimulus" or "quantitative easing", I'd almost agree with you. But when they get the taxpayers to bail out their bad judgement, but keep the profits when they guess right, I have a major problem with that. Given that there is a revolving door between firms like Goldman Sachs and the upper levels of the federal government, and that all the bailing out seems to have gone into bonuses and dividends, I think that you have misstated the issue.

Morris said...

If you haven't seen it, I'd encourage people to get hold of and view a video called "The Money Masters". Quite an eye opener as to just how unethical if not downright illegal bank activities have been since the 1800's.

Banksters is a pretty good description.

Noons said...

Nothing like real numbers to destroy any vague statements of "freedom of employment".

Source: http://www.bls.gov/oco/cg/cgs027.htm

1.8 million employees. That's US banks, worldwide. Of course, in the US it's a lot less.

But let's assume it's all of them.
Now, let me see: 1,180 million are clerks. Same source.

That leaves around 600000 for higher salaries.

But let's be generous, here: let's divide 5 trillion over 8 years by 1.8million.

That's 350000/year (round numbers) for EVERY SINGLE employee - or else arithmetic has gone the way of the dodo.

And we all know those 1,180 million clerks make 300 grand a year, don't we?

Let's not go into public purse bail-outs and other such incredibly stupid ideas.

Sorry, but I stand by what I said:

tar and feathers.

There is no other way!