Andrew Ross Sorkin of the New York Times said some bankers and hedge fund managers are upset with President Obama. Sorkin claims it’s because these people thought Obama was one of them, but they feel he has turned on Wall Street by passing economic reforms that they think affect their bottom line.
However, Sorkin reported that Daniel Loeb, who manages about $3.4 billion dollars at his firm Third Point Partners did admit that:
“Many people see the collapse of the subprime markets, along with the failure and subsequent rescue of many banks, as failures of capitalism rather than a result of a vile stew of inept management, unaccountable boards of directors and overmatched regulators not just asleep, but comatose, at the proverbial switch,” he wrote. “It is easy to see why so many people have concluded that the entire system is rigged.”
So What Does Mr. Loeb Recommend to Prevent Another Economic Collapse?
What is surprising is that Mr. Loeb seems to understand that there was something wrong with dealings of some on Wall Street that resulted in the economic collapse in 2007-2009. However, what specific suggestions does Mr. Loeb offer President Obama and Congress to prevent another economic meltdown due to abuses of Wall Street traders and bankers gone wild?
Does Mr. Loeb expect Wall Street bankers and hedge fund managers to regulate themselves? History proves that self-regulation on Wall street does not work. Of course, there may be some folks who are upstanding hedge fund managers or bankers, but it is clear that there were many other people who greatly contributed to our current economic woes and President Obama is looking for ways to prevent history from repeating itself.
However, even though the U.S. helped these banks stay afloat with the Troubled Asset Relief Program (TARP) coined as the “bailout”, the major banks are mostly hoarding their money to invest in other things than jobs and the economy. They want to increase their profits and they do not seem to care about helping the Mom and Pop small businesses that just need money to expand their business, create jobs and stay afloat.
Since the big black hole of the derivatives melt down with the packaged synthetic collateralized debt obligations of various mortgages, banks tightened up credit. They developed new higher standards of creditworthiness of individuals and businesses so ridiculously high that few people and companies meet their standards for loans.
Here are the big banks that benefitted most from the Economic Recovery Act:
Partial List of Bailed Out Banks:
- Wells Fargo & Co.: $25 Billion
- Bank of America Corp.: $25 Billion
- JPMorgan Chase & Co.: $25 Billion
- Citigroup: $25 Billion
- Morgan Stanley: $10 Billion
- Goldman Sachs Group Inc.: $10 Billion
President Obama invited top bankers to the White House in December 2009 for a discussion about how they could help Americans. What happened?
President Obama on Meeting with Bank CEOs
December 14, 2009
President Obama stated in the above video:
My main message in today’s meeting was very simple: that America’s banks received extraordinary assistance from American taxpayers to rebuild their industry, and now that they’re back on their feet we expect an extraordinary commitment from them to rebuild our economy. That starts with finding ways to help creditworthy small and medium-sized businesses get the loans that they need to open their doors, grow their operations and create new jobs.
This is something I hear about from business owners and entrepreneurs across America: that despite their best efforts, they’re unable to get loans.
Short-term gains are of little value to our banks, if they lead to long-term chaos in the economy.
The majority of wealth in the U.S. as Robert Reich, Former Labor Secretary, writes about in his blog has shifted to the top 1% of Americans. In fact over 23% of the wealth of this country is concentrated in just the top 1%!
They Worked Hard for their Money, Right?
Some people will say, “Well, these people who amassed 23% of the wealth in the U.S. worked hard for their money.”
Yes, and no.
How much did crazy speculation and possible deceptive practices play in accumulation of some of this wealth?
Will They Ever Stop Whining and Hoarding Money?
The bankers need to get over themselves and start seeing their part in making or breaking the economy. The U.S. voters will not be happy with another banker bailout and it is time for the banks to give back to the American people for helping them stay afloat. When they do, in the long run it will be good for them. They need to forego their immediate greedy economic gain for the longer term interest of a better economy for all.
Credit Card Rate Increases by Banks from 7% to 30%
CITIBANK jacks up Credit Card rates to 30% – for no reason
Citibank Raises Credit Card Rate to 29.99%
Banks like Citicard got around the Credit CARD Act by raising interest rates from 7% to 29.99% on their cardholders before all portions of the new law came into effect. The problem is that the U.S. government bailed out the banks and then the banks punished average consumers for the bank’s own risky abuses of the economic system. Banks like Citicard caught up in the real estate derivatives bubble basically stuck it to their customers as a way to recoup their losses. (According to the New York Times Charles O. Prince III, Citigroup’s CEO in 2007 learned that Citigroup had $43 billion dollars in mortgage-backed securities.) That’s not exactly a helpful way to prevent a further economic collapse when average people are struggling with job losses, possible foreclosures at the same time they are paying down their debt.
Here’s what Citibank does to their good customers!!
Also, companies like Citicard decided before the full implementation of the Credit CARD Act to get rid of locked-in low-interest credit card users of 7-9% interest rate because they could. Citicard changed its terms of creditworthiness for cardholders, even those who paid their monthly bills regularly and on time! One wonders if there were other reasons that Citicard got rid of cardholders. Could it have possibly been because they did not like the fact that long-term cardholders of 10 years or more had low interest rates and with the new Credit CARD Act, they would be limited in how they applied various interest charges and other fees? Mmmm?
As the stories of those in the above videos prove, many folks had their credit limits slashed overnight in some cases without warning before the full implementation of the Credit CARD Act.
Will Credit Card Rates ever go down again? And will banks start increasing lending to small businesses? Will pigs fly? It could happen….