As Bank of America (NYSE:BAC), J.P. Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) , Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) have grown even more “too big to fail” in the eyes of many industry watchers, the trend seems to be that we are missing what the real lessons of bailing out these gigantic financial institutions really are.
For example, with Lehman Brothers and Bear Stearns, I’m hearing commentators saying the lessons to be learned there are they shouldn’t have been allowed to get so big that they allegedly had to be able to bailed out to save the financial system … an unproven assertion.
Others of course have been saying the lesson to be learned is that the government should have stepped in and saved Lehman Brothers and Bear Stearns. Both of these ideas are wrong, and if we continue to assume that these are the lessons, we’ll in reality not learn the real lesson, which was they should have all been allowed to fail, and the market left to sort it out.
Consequently, the new focus in on breaking up the “too big to fail” financial institutions in order to prevent the same thing from happening again. This still misses the point. The bailouts shouldn’t have happened in the first place, and if the markets had been left alone, we wouldn’t be in the place of working through this at all.
I say this because the market will determine the size of banks under a true capitalist system, and if one fails, the remaining banks can battle over taking over assets and deposits, with the better-run banks being the winners. That’s how it should work, and nothing else should be added to it. It’s simple.
But because we continue to miss the real lessons that needed to be learned, government officials and self-important pundits like former Federal Reserve Chairman Alan Greenspan call for the breaking up of large banks as if they’ve someone now acquired some financial wisdom. It’s odd because Greenspan is a large part of the problems we now face because of his monetary policies which directly led to our current economic circumstances; with his policies of low interest rates and easy credit.
By this I don’t mean that breaking up banks isn’t a good idea, what I’m saying is the government shouldn’t have any say in that, the free market would take care of it if it was left alone. But now that they’ve interfered and created these monstrosities using taxpayers’ dollars, they’re looking at correcting their mistake. It’s ludicrous, but there you have it.
Government interference in places it doesn’t belong always creates unintended consequences, and we already have it with this huge banks and financial institutions which wouldn’t be big, but in reality would have failed. That would have been the best thing to happen, again, as the well-run banks would have picked up the healthy pieces left over and a stronger banking system would have emerged as a result.
The problem with the tactic of using the official story or narrative of the government, is they leave out this part of the story and attempt to get us to enter into their version so we forget or neglect the real story that never happened, and the true lesson we should have learned, which is capitalism didn’t fail, it was interfered with in order to make it look like the government must have a role in it in order for it to survive. Historically this has been called fascism, which is the marriage of capitalism and government.
The real lesson that should be learned from this is capitalism is under attack, yet it’s not just by the government, but huge financial institutions who are using it to achieve their own ends, which is to outrageously tap into the financial future of our children and grandchildren in order to play with their money at their expense and risk, and not the banks.
Breaking up something you helped create into a monster is bizarre at the least, and a side show to take the focus of what the real tragedy was: an attempt to degrade true capitalism in order to make it looked like it failed.
There is more purpose behind the attack, but it’s a huge salvo in moving forward with other agendas we’ll see concerning a number of areas that affect our lives which politicians and leaders around the world hope to manage and limit our freedoms in. This has only just begun, with capitalism being the scapegoat they use to launch from.
