Sunday, June 12, 2011

How We Got Swindled: Trade Groups Lobby Against "Too Big to Fail"

How We Got Swindled: Trade Groups Lobby Against "Too Big to Fail"; http:twitter./com/ehschoenberger: face book: Henry Schoenberger

Trade Groups Lobby Against "Too Big to Fail"

Sunday morning, 6/12, the NY Times article "Too Big to Fail" once again addressed the fact that trade groups still lobby against any regulatory requirements for how much cash on hand, or equity behind all the leverage utilized to enhance profits, should be required. And true to form the regulators are going to study this.

Not long ago, but well in the past leading up to our continuing Great Recession, banks were required to have legal reserves on hand to back up all their loans of our savings. And insurance companies were mostly mutuals, more concerned with protecting policy holders than with magnifying profits through the use of leverage based on assumptions that always projected a growth in values. Prudence was their good Sheppard. And this also predated the ability of banks, and insurance company banks to issue "complex securities. Further this was before insurance companies were allowed to invest outside of their core business, and banks were also not allowed to invest outside their core business - for example banks were not allowed to be in the insurance business.

So there are 2 dozen, or more companies, that invest in banks and lending and issue insurance as well as hedge funds that do not want to be part of the too big to fail crowd. Mass Mutual is particularly adamant, however it is instructive to remember how many huge insurance companies failed in the past 10 years and in the past 20 years, as well as consider that Mass Mutual has grown so large by absorbing some of the best "old line" mutual companies that were on the edge of insolvency, like Connecticut Mutual "the Blue Chip Company." Hedge funds failed in the Great Recession, as well as mutual funds, even one that invested in CDs.

We should just accept whatever these truly giant financial institutions say because they are so honest and interested in our well being - as long as they can continue to make too much money from too much leverage at our expense. We should believe the trade groups - nuts!

Do not interpret this blog as being against Capitalism - just against Greed and bull shit, and all the regulators that do not and have not protected us from all the Greed.

There are far better ways to approach protecting our economy from the greed of financial entities invloved in leveraged activities.