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| Point 2:
In layman terms I believe that FDIC insured banks should be prohibited from dealing in businesses outside the scope of banking. I like rules such as repossessed property must be sold within a short period of time unless special extensions are granted by regulatory oversight because it prohibits banks from operating in other theaters. Banks have enough inherent power over the economy already without granting them additional powers to venture into other areas such as the sale of securities, the creation AND sale all derivative protucts (not including the purchase of such products fpr safety and soundness purposes), real estate, insurance, engaging in futures trading, etc.
So many of these peripheral businesses are allowed to thrive in big banks at the holding company level or on a subsidiary level. Makes no sense to me. So basically, you have the FDIC come in and to this clean cookie cutter safety and soundness examination on the bank (only) giving the TBTF bank (merely one component owned by the holding company) a clean bill of health, when the holding company, for instance, is originating junk, pressuring the rating agencies to give them high ratings and sell them at tremendous profits.
Banks have a tremendous advantage over other businesses. Namely, FDIC insurance grants them the ability to borrow money from depositors at extremely low rates of interest and reinvest that money at higher rates of interest. IMO that is enough of an advantage to insure that banks can remain solvent and viable in the face of other financial companies that choose not to become a bank but may have a more diverse portfolio of investment products to choose from. FDIC insured banks should be very limited in scope because the power that banks have to control the entire economy is so great the way it is. My sense is that the investment bankers – JPM, Citi, Wells Fargo, Goldman Sachs, etc. – and the FED are all in bed with each other. They likely collude, look out for one another, are extremely politically connected, and control today’s economy to point where not much happens without their fore-knowledge. Ever consider US Treasury auction sales and the news media? Well, please note that the good news typically comes out prior to such auction sales because each and every one is a referendum on the borrowing ability of the US Treasury. After the auction is when the baggage tends to come out. So, yeah, I think they have way too much power already and tend to fleece average investors because of their power. That is precisely why I do not do much in the way of owning or trading stocks. The odds are highly stacked against small investors without such knowledge and power.
As for individual depositors at our bank you must realize that bank depositors by nature tend to be conservative, and therefore, do not know or want to know much else but the safety of the FDIC insured bank and are also very reluctant to make any changes even in light of the recent Cyprus debacle. That is why the TBTF’s, the FED, and the US Treasury, will defend the status quo banking system at all costs. I am very convinced that in their minds the ends justify the means. They are not to be trusted in my mind. I will tell everyone who cares to hear my opinion that they should consider non-counter party risk assets such as gold as an investment and tell them the reasons why. Bottom-line is that I am not asked these questions very often as most of our customers still assume that banks are the safest investment out there. Perhaps to their peril. But, I am not afraid to share the opinion that I just shared with you if they care to listen.
Edited by Iowegian 3/26/2013 07:53
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For Iowegian and others Re: Banker conversations.
