Consider the lilies of the field how they grow? they toil not, neither do they spin? ~ Matthew 6:28In a sane world bankers serve a very important function, they provide for the smooth flow of capital enabling people to buy, manufacture, and sell products. Today, small banks and credit unions continue to fulfill this function.
The great megabanks of our times - Goldman Sachs, Bank of America, Citi, and their ilk - contribute nothing to society. Senator Ted Kaufman puts the case well. Some, it is true, keep a toe in their traditional roles (Goldman Sachs is an exception), but the bulk of their activities is in the casino gambling of megabanks where the global economy is their roulette table.
- Credit Default Swaps are a wager that debtors will default, essentially insuring debt. A favored maneuver of megabanks is to bundle CDSs so it is impossible to judge the actual risk and then load up on debts certain to default. It the same as buying 100 life insurance policies on 100 different groups of five people. Each of those 100 groups has the same wino with TB and AIDS. It doesn't matter what happens to the other 400 people, when that wino dies he'll pay off 100 times.
- Shadow Banking, from which CDSs came, is a debt-investor barter system designed to circumvent banking regulations and common sense. As with CDSs, shadow banks were created to disguise risk. Highly leveraged, leveraged beyond the risk any sane compulsive gambler could tolerate, shadow banking made great profits by converting AAA rated debt into lower than junk bond. And keep it all in the dark.
- Too Big To Fail is key component for the success of the megabank gambler strategy. It is really straight-up extortion of a kind Al Capone would have been proud. Megabank success means making billions on insane casino gambling risks. Megabank failure brings the threat of imploding the entire economy, hence the government pays the megabanks billions more for their failures. It's a win-win in that no matter what a megabank does, it wins.
Let's kill all the bankers. ~ Alan Shore, Boston LegalAnd start from scratch.