Support Big US Banks? No Thanks
The best thing that could happen to a single failing US commercial bank is to let it die. No exceptions. And good riddance. They are used primarily to provide a source of immense wealth for the ultra-wealthy. They borrow money from the Fed on the pretext that they will help the economy grow with loans for business expansions, and for new business startups. That’s the story that goes around, but here’s the real low-down: They lend 70 percent of their lendable funds to the ultra-wealthy. Too many are run by greedy, self-centered takers with very little concern for you if you are not a member of the ultra-wealthy club.
This essay is neither a detailed analysis of the issues, nor a complete expose of commercial banking practices. It does tap the heart of a banking problem that calls for urgent changes. Banks are essentially monopolies. Their lifeblood is their nearly exclusive access to money from the Federal Reserve Banks and from each other. Some writers refer to this access as “helicopter” money. They take money, lend it to their ultra-wealthy customers, engage in stock buy-backs, feather their own investment accounts—and voila!--they make money hand-over-fist, and all they need to do to claim opulent salaries and bonuses is meet their reserve requirements, and pass known stress tests. Degree of difficulty? Average management skills.
Since 2010: First, corporate boards pay their executives big bonuses—not for vital services rendered, but for how much wealth they have diverted to their wealthy clients. In 2010, with tax-payer TARP money (Troubled Assets Relief Program), they first paid their top executives $90 billion in bonuses. They also made huge sums of money available to corporations for stock buy-backs. Then they made money available to wealthy investors to leverage those dollars in the stock markets. And last on the list they helped In small businesses and individuals who also pay the higher interest rates on their much smaller loans.
A few noteworthy acts: First there are 4,172 corporate banks (as of Sept. 2022). They had $23.6 trillion on deposit. 70 percent of their lendable funds went to wealth accounts (banks, corporations, and the ultra-wealthy). None of the money contributed to US economic growth. Last is the 30 percent of it that goes to small businesses and to individuals. That division is a much smaller stream. It is too little, too late.
In contrast there are 5,500 credit unions that also borrow from the Fed. As of 3rd quarter 2022 they had $1.76 trillion on deposit. They are not permitted to borrow nearly as much as corporate banks. Yet they make 70 percent of their money available to small businesses and to individuals. That money goes straight into the economy and grows by a spending factor called its turnover rate. This money makes the economy grow, boosts sales, profits, wages, and tax revenues, but with the smaller amount of funds, credit unions carry a disproportionate load in helping a recovering economy.
Comparisons: Credit unions are better run than are corporate banks. They have fewer failures, provide similar services for less, are friendlier, more helpful to depositors, while their average CEO pay as of March 2023 was $86,205. Average bank president’s pay is $124,079, with incredible payoffs to the top CEOs.
Banks Only: Jamie Dimon, CEO of JPMorgan Chase, was paid $34.5 million last year. He has a net worth of $1.8 billion. The reason: For maintaining the status quo of 70/30 in money disbursements from the Fed. Among his lavish non-wealth items is his super yacht, not counted by the Fed as part of his net worth.
Brian Moynihan, CEO of Bank of America, was paid $713 thousand last year, and has a net worth of $90.8 million. He lives in Massachusetts and commutes via corporate jet to his headquarters in Charlotte, NC. When he was handed the keys to the BofA, he was introduced to a roomful of bankers by his predecessor, Ken Lewis, in relative silence. Lewis ran back to the podium and injected “It’s OK. He’s one of us!” The room exploded with a huge sigh of relief.
American National Credit Union CEO, Jim Nussle, a lawyer and former head of the White House Office of Management and Budget, is paid an annual salary $230,000, and has a net worth of $589,000. No perks, no buy backs, no bonuses, no corporate jets, and no luxury yachts. But with exquisite management and banking skills.
Conclusion: Credit Unions get my endorsement for acting in the common good, for their dedication to the American worker, and for having the potential to rescue the American economy from corporate banks with our help. If they could borrow equal amounts from the Fed, direct loans to individuals and small businesses would increase dramatically, large numbers of people would move accounts from commercial banks to credit unions, GDP would grow, the economy would surge, profits would increase, wages would rise, savings and wealth accounts would increase, the government would collect more in taxes, our national debt would fall, our dual inequality gaps would narrow—and all these changes would come about mainly via competition—the lifeblood of a market economy.
What you can do...
Are you in favor of creating more wealth and sharing it with fellow Americas? If so, then please forward this message to 50 of your closest friends, legislators, universities, and small businesses; to business and finance departments of universities. Also contact:
Ron