Breaking the American Bank – Banking Propaganda and Using the American Middle Class as a Credit Card for Wall Street Excess. How About we let the Average American Borrow from the Federal Reserve at 0 Percent and cut out the Loan Shark?
Banks are showing their true colors and what little regard they have for the average American. As they advertise with cute and friendly faces assuring consumers they are looking out for their best interest, behind their backs they send in a locust of lobbyist onto Washington to do everything in their power to gut any sensible financial regulation. The vultures are picking off every piece of what used to be the middle class. This is the model of the new banking and financial system that many will have to contend with. Americans have seen their access to loans and credit contract at the fastest pace in history while banks have now opened up an unlimited credit card with the taxpayer paying the bill for too big to fail. Banks are doing their best to create a narrative that “if we didn’t bailout the banks then the world would have ended storyline” but the vast majority of Americans did not support the banking bailout.
If you want to see how quickly credit is contracting take a look at this:
The chart above merely highlights what you already know. Banks no longer trust the average American. While they based all their bailouts on the idea that taxpayer money was needed to keep banks lending this has been a lie. In fact, banks need the money to plug the hole that their toxic assets are burning on their balance sheets. You can also look at the amount of credit card offers you are getting in the mail to gauge how quickly the market has changed. No longer do banks want to give credit out (that is, unless it is government backed like mortgages which they are all the more willing to lend out).
The U.S. has over 8,000 banks with the large concentration of assets in 10 banks. These banks continue to use bailout funds to plug the problems from the boom years. But this is not in the best interest of average Americans. If Wall Street and politicians were honest, the bailouts would have been labeled as a massive charity to the elite of the country who made disastrous bets over the past decade. The public takes the lumps while Wall Street actually gets richer. While banks don’t want to reel in their spendthrift ways, Americans are pulling back:
Americans are now having to save more and more of their money as is expected in a tough economy. Yet banks are back to gambling in the stock market while shutting down lending to consumers. Banks are playing the poor me card by arguing that with too much tight regulation, they can’t make loans because they are worried about future balance sheet problems. Thanks for telling us after you took the public money under false pretenses! But this is all a political ploy to steal from the working class. With so many people just unable to even service the debt and rising bankruptcies, banks are now going after good customers who pay their bills on time each month just because they are running out of “options.” Don’t be fooled. They are reaping billion dollar profits because they are using excuses to squeeze the golden goose dry. How about we allow the typical American to borrow at the subsidized low rate from the Federal Reserve directly? Why in the world do we need banks to operate as loan sharks in between? What we need is to transform the banking industry into a utility model. A model designed to serve the people, not the banks. After all, why should they get the privilege of borrowing at criminally low rates while everyone else has to pay the interest and subsidize their gambling adventure?
Even after all the correction in the market American households still carry an inordinate amount of debt:
A giant portion of income simply goes to pay off debt. A large part of the debt is interest or money the banks can suck out of the neck of middle class Americans. Banks live off this margin. Take for example a $100,000 30 year fixed rate mortgage at 6 percent:
Principal: $100,000
Total Interest: $115,838
In the end, you are paying more than the initial cost and all that interest goes to who? What purpose does it serve? Banks are delusional and want the public to believe in the propaganda that they need to charge a higher rate because of “risk” in the loan. Are they kidding? We already know that they are being supported by the entire Federal Reserve and U.S. Treasury. They can make the most insane kind of bets and ultimately the taxpayer will eat the bill. And keep in mind many of these banks are borrowing at low levels from the Federal Reserve. Why not allow the public to keep some of that interest? How is this bad? If banks were lending their own money it would be a different story but they are not. They are creating a dishonest narrative and most Americans are not buying it because they operate in reality and not some parallel universe where you can create something out of nothing.
Just think of the billions charged in overdraft fees. This is criminal. Why not just default debit cards to stop once the account is dry? Instead they want people that charge a $2 burger a $39 over draft “convenience fee” for this nonsense. Are you kidding? Most people don’t want this. They find out the hard way and now billions have left the wallet of consumers for this nice little loan shark fee. $39 can buy you lunch for a few days so this is nothing to laugh at when 38,000,000 Americans find themselves on food assistance. The bulk of the billions are paid by the poor. Good job banks for helping your fellow Americans. Yet banks are leeches sucking the productive life blood out of the economy with gimmicks like this. Time to break the banks up and turn them into utilities.
Take for example JP Morgan. They announced a Q4 profit of $3.28 billion. Where did they make their money?
“(Huff Po) JPMorgan’s biggest trouble spots were in consumer banking and credit card lending. The bank’s retail financial services division, which includes its mortgage operations, lost $399 million. That was worse than the final quarter in 2008, when credit markets had essentially shut down because of the collapse of banks including Lehman Brothers.
The company reported increases in mortgages that were charged off, or classified as uncollectible, including prime mortgages, the highest quality home loans. It also reported an increase in home equity loan charge-offs.”
Wait. So mortgages are being charged off as foreclosures remain high. And this has spread to so-called prime mortgages as the unemployment and underemployment rate remains at 17.9 percent. So let us write off mortgages to average Americans. Where in the world did they get those billions? Maybe they made good money in their credit card unit:
“The credit-card lending division lost $306 million during the final three months of 2009. Results would’ve been worse had the bank not had a payment holiday in the period.”
More losses here? So we’ve ruled out credit cards and mortgages which have become the life blood for Americans. We’re running out of places to look for where they can make a $3 billion profit:
“Despite the ongoing problems with consumer banking, JPMorgan is still performing well because of its robust investment banking unit. As long as stock and bond markets continue to improve, the bank will be able to churn out profits and reward its employees handsomely.
JPMorgan’s investment bank earned $1.9 billion during the fourth quarter, while its asset management division generated $424 million in net income.
Fees from financing debt and stock offerings continued to surge in the fourth quarter. Debt financing fees jumped 58 percent to $732 million from the same quarter a year earlier, while stock financing fees climbed 66 percent to $549 million.”
And there you have it. We are financing Wall Street’s wonderful gambling casino once again while the traditional banking model has collapsed. How this isn’t the number one priority for the government and the people to fix is simply astounding. How we have had no serious financial reform after 26 months of the Great Recession boggles the mind.
If you enjoyed this post click here to subscribe to a complete feed and stay up to date with today’s challenging market!Squeezing the Last Drop of Productivity from the American Working Class – 18 Percent National Underemployment and why Wall Street and the Government are Cheering Your Financial Failure.
The American financial press cheered on Friday when “only” 36,000 jobs were lost in February. This if you haven’t noticed now passes for good economic news. The unemployment rate remained unchanged because the actual workforce continued to show a decline yet Wall Street somehow viewed this as positive developments. And why not? The middle class is under assault from every angle. Things are so twisted with propaganda that many Americans now believe that the banking elite are actually looking out for the well being of American workers. As news of the job losses somehow echoed as positive developments, more and more Americans are continually being kicked out of their homes from banks they helped to bail out. Irony has no meaning to Wall Street.
And if we look at the details of the jobs report, it turns out that 17.9 percent of Americans are either unemployed or underemployed or flat out have stopped looking for work:
Source: BLS
This wasn’t the only spin going on in the media. Before the jobs report came out there was a preemptive flow of information trying to justify the job cuts by blaming it on the weather. Yes, now instead of blaming the financial catastrophe on the actual perpetrators in Wall Street who systematically looted the American system and turned our economy into a giant casino that they leeched onto, we are now to believe people are losing their jobs because of the weather:
“(CNSnews) Ahead of Friday’s announcement, Goldman Sachs predicted that the storm might skew the job loss number by as much as 100,000 – a prediction that was embraced by officials in the Obama administration.
“The blizzards that affected much of the country during the last month are likely to distort the statistics,” Larry Summers, director of the White House’s National Economic Council, said in an interview with CNBC. “So it’s going to be very important … to look past whatever the next figures are to gauge the underlying trends.”
If the storm caused a skewing of job loss numbers I wonder how many job losses can be linked to Goldman Sachs and their casino style gambling in the derivatives markets and mortgage backed securities? Then again, people should be happy that the unemployment rate remained steady at 9.7 percent even though more Americans are working part-time with no benefits and many others have simply fallen off the payrolls. This is supposedly the new American dream for the middle class through the eyes of Wall Street who are selling capitalism but living in a world of corporate handout socialism.
There is a new show called Undercover Boss where a CEO goes undercover to work in the trenches with the proletariat. As it turns out, the middle class is being worked to death and as we all know, the CEO can’t even do the job most workers do on a daily basis. Even Henry Ford understood the interworking of the cars he was putting out. In the end the CEO reveals his identity and gives a nice little handout to the worker and all is well in TV land. The check is a token of what CEOs actually make. This is the ultimate reflection of our trickle down economy where those at the top act like sociopaths and rulers of the universe but when it comes to doing the daily tasks of their company, they have no clue. This is the de facto rule running on Wall Street. In fact, CEO pay has grown outrageously over the past few decades as the middle class has gotten poorer:
Source: American Progress
In reality, part-time employment has spread even to poor CEOs making 300 to 400 times the average American worker salary. Poor CEOs and Wall Street executives need time off to enjoy their tax payer funded yachts and all expense hedonism trips to the Caribbean. They would like to convince each other that the money they have is all through their will power and market prowess but in reality it is nothing more than being part of a corporatocracy and buying out the government with an army of lobbyist and insiders. You have to be a self indulgent narcissist to take the economy to the brink of financial destruction in the case of many Wall Street firms and still reward yourself with outrageous bailouts. The fact that average Americans are still not protesting in mass about this tells me that many actually believe what Wall Street is saying. You see this when many would rather blame the working class for the ills of today than focus their energy where it really needs to go.
Wall Street loves this economic crisis. They receive trillions in bailouts yet convince the public that what is occurring today is merely the “market” correcting itself. So as most Americans have more and more troubles keeping up with their daily bills, companies are squeezing every little excess from those currently working. Those that have jobs out of fear will work harder and probably demand less merit increases in the current economy. After all, the head guy is only making 300 times what you make even though he can’t even understand the main function of the organization. So what if the low level guy is selling toxic crap to some homeless person with no income and giving him access to a $500,000 loan. These Wall Street tycoons are big picture thinkers and can’t be worried with the day to day operations of the proletariat unless it means turning it into a caricature for mass viewing and quick TIVO access.
You don’t think productivity actually increased? Take a look at this:
Source: BLS
This recession has been fantastic for productivity. Just look at the above chart. American workers have been doing their part during this recession. After all, now you can hire a cadre of “contract” workers and not have to pay them one cent in healthcare support or even contribute to their pension. Once the job is done you can kick them to the curb. After all, this is capitalism so long as those at the top have managed to setup sweetheart deals and golden parachutes. This is how the top 1 percent makes sure their hold on 40 percent of the nation’s wealth isn’t damaged. And if you think financial institutions deserve this bailout money and their outrageous bonuses then companies like Circuit City or Mervyns would still be around today if that model applied across the board. But this doesn’t apply to the general economy. This applies to Wall Street and somehow the absurdity of it all still goes on. The worst financial crisis since the Great Depression and not one solid reform has been enacted. 26 months of job losses and nothing. Who is running the show?
The rise of the part-time work force is nothing new as we become more and more like Japan. Japan bailed out their financial institutions after their failed stock market and real estate bubbles popped and today, their working class is made up of one-third part-time workers:
“(LA Times) In the world’s second-largest economy, the global financial crisis has forced part-time workers such as Kudo to face a harsh new reality.
Over the last few years, temporary employees have gone from being a rarity in Japan to accounting for one-third of the workforce of 67 million. They enjoy far fewer protections than full-time workers — placing their necks squarely on the layoff chopping block.
By March, the government predicts, 85,000 part-timers will fall prey to haken-giri, or temporary-worker cutbacks — a relatively small number compared with U.S. layoffs but high for a nation where job security has long been a staple.
On Wednesday, embattled Prime Minister Taro Aso made the plight of part-timers a major piece of a proposed stimulus package. Aso pledged to create 1.6 million jobs, partly by turning part-time jobs into full-time ones.”
Japan’s headline unemployment rate is 4.9 percent. Just like our headline unemployment rate, the devil is really in the details. If we continue on this path part-time work may be all that is left.
