Too Big To Fail: first think government, then banks
Weeping and gnashing of teeth regarding TBTF banks is all the rage. Especially with the revelation that JPMorgan was additionally TBTBT (too big to be truthful) on its way to losing over six billion dollars:
Details of JPMorgan Chase’s multibillion-dollar trading loss — brought to light by a riveting and devastating report from the Senate Permanent Subcommittee on Investigations — demonstrate what a sham that is. Bankers aren’t acting cautious and chastened. Risk managers aren’t in the ascendance on Wall Street. Regulators remain their duped and docile selves.
The bank’s risk managers defended the traders and pooh-poohed the flashing red signals. The bank gave incorrect information to its regulator. Top executives then made misleading statements to shareholders and the public. All the while, the regulator served its typical role of house pet.
It’s great to have a house pet when it’s supposed to be a house pet; not so great when the house pet is supposed to be a regulator.
Similarly, it’s great to have a riveting and devastating report, but will the Senate take any action—which works—to change TBTF? Like making the TBTF banks quit playing with house (taxpayer) money when they lose? Consider a minor variation on the old rule: subsidize risk and you’ll get more of it…
The fact that TBTF is a wicked problem with no solution on the horizon means that legislators are unwilling to consider an issue with far more profound implications, our TBTF federal government.
We now have a federal government that’s literally (not Biden-speak) creating money from thin air (well, from electronic transactions), a government that will be absolutely unable to fulfill its safety-net promises (without rationing, massive inflation, default, and eventually, all three), and a government which is approaching full-fail mode on national security, respecting private property, and the rule of law, that is, the Constitution.
In the meantime, we have an army of political posers like Dianne Feinstein and her bureaucratic enablers who manage to tie up the Senate for days on end on ‘assault weapons’ (isn’t every weapon, by its nature, an ‘assault weapon’?). And when all’s said and done, Senate Majority Leader Harry Reid won’t even include Feinstein’s legislation in the basic bill. (Begin sarcasm font) But that’s OK because the bill itself is unlikely to ever see the light of day for a Senate-level vote, regardless. (Close sarcasm font)
As it regards our TBTF government, the solution is simple. Houston, we have a spending problem. (And as it regards our TBTF banks, the issue is one of risk and accountability and not spending.)