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We Should Let Bad Banks Fail & Suffer The Consequences Without Stealing From The People To Keep Them Around

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Big banks, as well as big businesses, should be allowed to fail without bailing them out by stealing the money from Americans.  Yet, that is what has gone on for decades in the US because we are told by the fascists in government that their corporate fascist buddies in big business and banking are “too big to fail.”  Nonsense!  Let them suffer the consequences of their actions, namely pimping lawless money to the public.

Peter Jacobsen elaborates on this at FEE.

By now, you’ve likely heard about regulators closing down Silicon Valley Bank (SVB) and now Signature Bank as well.

While I’m not going to go into all the details, the basic story is described well in this article on Seeking Alpha. Essentially, SVB received a large influx of deposits as the Federal Reserve flooded the market with dollars during COVID.

 

From there, SVB went out and bought government bonds to store that money. But then, the Federal Reserve started enacting policies which moved interest rates up. The problem? As interest rates rose, the bonds SVB purchased in the past declined in value.

Bond prices and the interest rate have an inverse relationship. If interest rates increase, you can earn a higher return on financial assets purchased today. When that happens, bonds issued at a previously lower rate must sell at a discount to compete.

So when rates rose, SVB’s assets (composed largely of old lower-rate government bonds) plummeted in value.

Let Losers Lose

The key question now is, what are we going to do about it?

I have a modest proposal—let them fail.

Allowing banks to fail may sound extreme, but it’s really the most reasonable solution. It’s true there will be some costs if the banks fail. Any time a business fails, other investors tied financially to the company lose.

But here’s the rub—people who invest in bad businesses should lose. SVB’s failure is a reflection of the fact that it was a wealth shredder. It took depositors’ perfectly good cash, and converted it into now severely devalued bonds.

Banks that destroy wealth shouldn’t be allowed to continue to do so indefinitely. And when depositors make a “run” on bad banks, they’re performing a public service.

 

At this point, a bank bailout not only would mean the taxpayers will be left holding the bag for bankers’ mistakes—it would mean screwing up incentives in the banking industry even more.

Hazardous Handouts

To see the incentive problem, consider an example. Imagine a world where, no matter the circumstances, the government will pay to fix cars after every accident. What do you think this would do to the number of car accidents per year? It would sky-rocket.

If you never need fear paying a price for crashing your car, why drive carefully? There is still some incentive to avoid serious accidents due to injury, but the point is this system lowers the cost of risky behavior, and therefore lowers an individual’s incentive to be careful. Economists call this a moral hazard problem.

And this is the primary issue with bank bailouts. If the government sets a precedent that all bank failures will be ameliorated by using taxpayer money, banks will engage in risky behavior which they otherwise would not. Why be cautious with depositors’ money if you get a bailout no matter what?

You cannot have a healthy free market when you privatize the profits and socialize the losses. The taxpayer’s wallet, if treated like common property, will be subject to the tragedy of the commons.

 

And I don’t just mean that I’m against a formal bailout to save investors. I’m opposed to taxpayer dollars being reallocated to save the bottom line of anyone involved. Some may worry about small depositors, but the FDIC already insures up to $250,000 (regardless of what I or anyone else thinks about that policy), meaning every depositor who has less than that in their account is getting their money back already.

And for the larger depositors? Business deals have risks. We cannot pay people to ignore that fact. If you want to house more than a quarter of a million dollars in any one institution you should be very careful in picking.

If some individual wants to come along and buy SVB or these other failing banks and try to resuscitate them, I invite them to try. Maybe there is a profit opportunity there. But if the choice is between a bailout and letting them fail, the answer is clear to me.

If they can have the profits, they should have the losses as well.

Article posted with permission from Sons of Liberty Media



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    • beLIEve

      ARTICLES of IMPEACHMENT……AGAINST the THIEVING (FOR-REIGN) BANK$TERS……The FEDERAL RE$ERVE….

      have been placed “on RECORD” :idea: :idea: ….and…..ARE…….. :idea: WAITING TO BE ACTED ON :!: :!: :idea:

      ***

      On May 23, 1933, :idea: CONGRESSMAN Louis T. McFADDEN….. BROUGHT FORMAL CHARGES AGAINST the….BOARD OF
      GOVERNORS OF the FEDERAL RESERVE BANK $YSTEM……. The Comptroller of the Currency AND….The SECRETARY OF
      the UNITED STATES TREASURY…….FOR….NUMEROUS CRIMINAL ACT$…… including but not limited to…….. :wink:
      :idea: CONSPIRACY, :idea: FRAUD, :idea: UNLAWFUL CONVERSION, AND :idea: TREASON. :idea:

      :idea: The PETITION FOR Articles of IMPEACHMENT WAS thereafter REFERRED TO the….JUDICIARY COMMITTEE

      …..AND…..:idea: HAS……YET TO BE ACTED ON.

      SO THIS…….ELECTRONIC BOOKLET…SHOULD BE REPRINTED….REPOSTED…..SET UP ON WEB PAGES…….and…..

      CIRCULATED FAR and WIDE. :idea: :smile:

      ***

      CONGRESSMAN Mc Fadden ON the FEDERAL RESERVE CORPORATION :idea:

      Remarks in CONGRESS, 1934………AN ASTOUNDING EXPOSURE :idea:

      *
      CONGRESSMAN Mc FADDEN’S SPEECH………. :idea:

      …….. Mr. Mc FADDEN, due to his having SERVED AS CHAIRMAN OF the BANKING and CURRENCY COMMITTEE FOR
      more than 10 YEARS, was the best posted man on these matters in America and was in a position to SPEAK WITH
      AUTHORITY of the VA$T ramifications of this gigantic PRIVATE CREDIT MONOPOLY. :idea:
      As Representative of a STATE which was among the FIRST TO DECLARE ITS FREEDOM FROM….FOREIGN….MONEY
      TYRANT$….it is fitting that PENNSYLVANIA the cradle of liberty, be again given the credit for producing a son that
      was NOT AFRAID TO HURL DEFIANCE IN the FACE OF the MONEY BUND :idea:

    • beLIEve

      …..Continued……..IMPEACH the Federal Reserve :idea:

      ……a son that was NOT AFRAID TO HURL DEFIANCE IN the FACE OF the MONEY-BUND. :idea:
      Whereas Mr. Mc FADDEN was elected to the high office on both the Democratic and Republican tickets, there can
      be no accusation of partisanship lodged against him.
      Because these SPEECHES are set out in full in the CONGRESSIONAL RECORD, they carry weight that no amount
      of condemnation on the part of private individuals could hope to carry.

      The FEDERAL RESERVE – A CORRUPT Institution :idea: :wink:

      “Mr. Chairman, we have in this Country ONE OF the MOST CORRUPT INSTITUTIONS the WORLD HAS EVER KNOWN.
      I refer to THE FEDERAL RESERVE BOARD and the FEDERAL RESERVE BANKS…..hereinafter…CALLED the FED. :idea:
      The FED HAS CHEATED the GOVERNMENT of these United States AND the PEOPLE of the United States OUT OF
      ENOUGH MONEY TO PAY the NATION’S DEBT. :idea:
      The DEPREDATIONS and INIQUITIES OF the FED has cost enough money to pay the National debt SEVERAL TIMES
      OVER. :idea:

      “THI$ EVIL INSTITUTION HAS IMPOVERISHED and RUINED THE PEOPLE of these United States, HAS BANKRUPTED
      ITSELF…AND….HAS practically BANKRUPTED our GOVERNMENT. It has done this THROUGH the :evil: DEFECTS OF
      the LAW under which it operates, THROUGH the MALADMINISTRATION OF that LAW…..BY the FED….…

    • beLIEve

      ……Continued………IMPEACH the Federal Reserve :idea:

      “THI$ EVIL INSTITUTION HAS IMPOVERISHED and RUINED THE PEOPLE of these United States, HAS BANKRUPTED
      ITSELF…AND….HAS practically BANKRUPTED our GOVERNMENT. It has done this THROUGH the DEFECTS OF the LAW
      under which it operates, THROUGH the MALADMINISTRATION :idea: of that law BY the FED….AND…..BY the CORRUPT
      PRACTICES OF the MONEYED VULTURES WHO CONTROL IT. :idea: :idea:

      “Some people who think that the FEDERAL RESERVE BANKS are United States Government institutions.
      They ARE PRIVATE MONOPOLIES….WHICH….PREY UPON the PEOPLE of these United States …FOR the BENEFIT
      of THEMsELVE$…AND….THEIR FOREIGN CU$TOMER$…………FOREIGN and DOMESTIC speculators and $WINDLER$…
      AND….RICH and PREDATORY MONEY LENDER. :idea:

      In that dark crew of FINANCIAL PIRATE$ there are those WHO WOULD CUT A MAN’S THROAT….TO GET A DOLLAR
      OUT OF HIS POCKET…..there are those WHO send money into states to BUY VOTES TO CONTROL our
      LEGISLATURES…… there are those WHO MAINTAIN International PROPAGANDA for the purpose of deceiving
      us into granting of new concessions WHICH will PERMIT THEM TO COVER UP THEIR PAST MISDEEDS…AND…..
      SET AGAIN IN MOTION THEIR gigantic TRAIN of CRIME. :idea:

      “These TWELVE PRIVATE CREDIT MONOPOLIES were deceitfully and disloyally foisted upon this Country by
      the bankers who came here FROM EUROPE and REPAID us OUR HOSPITALITY by undermining our American
      institutions. THOSE BANKERS TOOK MONEY OUT of this COUNTRY…….…

    • beLIEve

      ……Continued……..IMPEACH the Federal Reserve :idea:

      “……THOSE BANKERS TOOK MONEY out of this Country TO FINANCE JAPAN IN A WAR AGAINST RUSSIA. :evil:
      THEY CREATED A REIGN OF TERROR IN RUSSIA…WITH OUR MONEY in order to help that war along.
      They INSTIGATED A SEPARATE REACE BETWEEN GERMANY and RUSSIA, and thus DROVE a WEDGE BETWEEN
      the ALLIES in World War I. :evil:
      THEY FINANCED TROTSKY’$ passage from New York to Russia so that he might assist IN the DESTRUCTION OF
      the RUSSIAN EMPIRE.

      THEY FORMENTED…AND…INSTIGATED the RUSSIAN REVOLUTION……AND PLACED a large fund of
      AMERICAN DOLLARS at Trotsky’s disposal in one of their branch banks in Sweden SO THAT RUSSIAN
      HOMES MIGHT BE thoroughly BROKEN UP…AND….RUSSIAN CHILDREN FLUNG FAR and WIDE FROM
      THEIR NATURAL PROTECTORS. :idea: :idea:
      THEY HAVE SINCE BEGUN….BREAKING UP of AMERICAN HOMES….AND….THE DISPERSAL OF
      AMERICAN CHILDREN. :idea: :idea:

      “Mr. Chairman, there should be no partisanship in matters concerning banking and currency affairs in
      this Country, and I do not speak with any.

      “In 1912 the National Monetary Association, under the chairmanship of the late SENATOR Nelson
      W. ALDRICH… made a report and presented A VICIOUS BILL called the National Reserve Association
      bill. This BILL is usually spoken of as the ALDRICH BILL. Senator Aldrich did not write the Aldrich bill.
      He WAS THE TOOL..…IF NOT the ACCOMPLICE OF the EUROPEAN BANKERS…. WHO for nearly
      twenty years HAD BEEN SCHEMING TO SET UP ……A CENTRAL BANK :!: :idea:

    • beLIEve

      ……Continued……….IMPEACH the Federal Reserve

      “…… This BILL is usually spoken of as the ALDRICH BILL. SENATOR ALDRICH did not write the Aldrich bill.
      He WAS THE TOOL..…IF NOT the ACCOMPLICE OF the EUROPEAN BANKERS…. WHO for nearly twenty
      years HAD BEEN SCHEMING TO SET UP A CENTRAL BANK IN THIS COUNTRY and who in 1912 had spent
      AND were continuing to SPEND VAST SUMS OF MONEY TO ACCOMPLISH…THEIR PURPOSE. :idea: :idea:

      “WE WERE OPPOSED TO the ALDRICH plan for a CENTRAL BANK. The men who rule the DEMOCRATIC PARTY
      then PROMISED the PEOPLE that IF THEY WERE RETURNED TO POWER…THERE WOULD BE NO CENTRAL
      BANK :idea: established here while they held the reigns of government. Thirteen months later THAT PROMISE
      WAS BROKEN :evil: ………….. :idea: …and the WILSON ADMINISTRATION….UNDER the TUTELAGE OF……..
      those :evil: SINISTER WALL STREET FIGURES figures………….…..WHO STOOD BEHIND…COLONEL Mandel
      HOUSE :idea: :evil: ……….established here in our free Country the WORM-EATEN monarchical IN$TITUTION
      of the “King’s Bank” to CONTROL US from the top downward, and FROM the CRADLE TO GRAVE. :idea: :idea:

      “The FEDERAL RESERVE Bank DESTROYED OUR old and CHARACTERISTIC WAY OF doing BUSINESS.
      IT DISCRIMINATED AGAINST OUR 1-name COMMERCIAL PAPER, the FINEST IN the WORLD, and it set
      up the antiquated 2-name paper, which is THE PRESENT CURSE of this Country and which WRECKED
      EVERY COUNTRY which has ever given it scope; it FASTENED DOWN upon the Country the…

    • beLIEve

      ……Continued………IMPEACH the Federal Reserve :idea:

      “The FEDERAL RESERVE BANK DESTROYED OUR old and CHARACTERISTIC WAY OF doing BUSINESS.
      It DISCRIMINATED AGAINST OUR 1-name COMMERCIAL PAPER, the FINEST IN the WORLD, and it set
      up the antiquated 2-name paper, which is the PRESENT CURSE OF this COUNTRY and which WRECKED
      EVERY COUNTRY which has ever given it scope; IT FA$TENED down UPON the COUNTRY THE very
      TYRANNY from which THE FRAMERS OF the CONSTITUTION SOUGHT TO SAVE US.

      PRESIDENT JACKSON’S TIME :idea:

      “One of the greatest battles for the preservation of this Republic was fought out here in Jackson’s time;
      when the SECOND BANK OF the UNITED STATES, founded on the SAME FALSE PRINCIPLES OF those
      which are here exemplified in THE FED WAS HURLED OUT OF EXISTENCE. After that, in 1837, the
      Country was warned against the dangers that might ensue if THE PREDATORY INTERESTS after being
      cast out should COME BACK IN DISGUISE AND unite themselves to the Executive and through him A
      CQUIRE CONTROL OF the GOVERNMENT. That is what the predatory interests did when THEY CAME BACK…
      ….IN the LIVERY OF HYPOCRI$Y…AND… under false pretenses OBTAINED the PASSAGE the PASSAGE OF the FED.

      “The DANGER THAT the COUNTRY WAS WARNED AGAINST…CAME UPON US and is shown in the LONG
      TRAIN OF HORRORS attendant upon the affairs of …THE TRAITOROUS and DISHONEST FED. :idea:
      Look around you when you leave this Chamber and you will see evidences of it…

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