Banker's Roulette

Sorry for the recent light posting; I've been out on the road in the wilds of Western Wyoming with some dog sleds and a bunch of crazy dog-mushers. Things should be back to normal soon.

But while I'm here...

I read a comment about bank bailouts somewhere today in which the commenter seemed to perpetuate a a false belief among people-namely, that, as odious as the bank bailouts were, they were necessary because people had their life savings in those banks, and bailouts were necessary to make sure those banks didn't fail.

This, of course, ignores the fact that consumer deposit accounts were already insured by the FDIC to the tune of $100,000, and that the bailouts had nothing to do with that. Banks, in fact, pay insurance premiums to the FDIC for that guarantee, and are required by law to do so.

The real issue is that the federal government is now also guaranteeing the solvency of entities which may or may not be banks (AIG, of course, was not a bank), but which are involved in things that have nothing to do with what we consider to be normal retail banking. These entities, which have recently discovered that you, the taxpayer, will be required to pay for their losses, are now betting huge sums of money on extremely risky trades. Those trades often seem ok for a year or two. During that time, the banks will make lots of money, and executives will pay themselves billions of dollars in bonus. Eventually, though, the luck will run out, as it did a year and a half ago, and the banks will go bust. At this point, the taxpayer will pay off the bet, and the executives will just keep their bonuses. Oh, and guess how much they pay for that guarantee?

Nothing. Zero. Zilch.

They get it for free, because they have put a gun to the government's head by making themselves so big that if they fail, they will destroy the whole economy.

It's as if the bankers are playing Russian Roulette- only they're holding the gun to your head instead of their own. Every time they get lucky and the gun doesn't go off, they get a million bucks. You get nothing. Eventually, of course, you end up with your brains against the wall, and at the that point, the game is over. The bankers pocket the cash and go home.

Sound fair? I didn't think so.

Remember that the next time some Republican (or Democrat) talks about how important it is that we don't regulate these banks because we don't want to do anything to mess with the "free market."

How free does that sound to you?