The non-socialist way to fight Wall Street

I was really surprised to read the Huffington Post and see the exact same solution to the banking bubble that I suggested among friends and family months ago: Americans should move all their money out of inflated Wall Street banks and invest it into smaller community banks.

Wall Street has chalked up record profits over the last year – primarily because of the 15 garbage trucks of cash Congress delivered in the form of an $850 billion bailout.  Congress justified this 0-percent-interest, no-strings-attached loan by claiming that it would encourage big banks to lend more money and the crumbs would eventually trickle down to Main Street.

Unfortunately, Wall Street did not increase lending, but instead cut its lending by more than $100 billion, jacked up interest rates on responsible customers who pay their credit card bills on time, and went straight back to placing high-risk bets on the unregulated derivatives market, a market that is impossible to explain or understand – unless you work for the mob.  In an effort to show off how oblivious they are to the rest of society, they even went ahead and awarded their most irresponsible CEO’s huge truckloads of cash bonuses, winning them the 2009 Most Shameless Industry of the Year Award.

Had we let those banks fail, it would have eroded our financial industry to the ground – but only in the short term.  In the long-term, smaller, more responsible banks would have inevitably absorbed those assets, picked up the pieces and helped rebuild the economy on a stronger foundation – the way the free market is supposed to work.

Smaller banks are now struggling to survive as newly leveraged Wall Street pulls every string at its disposal to absorb as much liquidity as it can before the economy hits its inevitable double dip – which is when these CEO’s will likely abandon our debt-ridden country and move to the Philippines with their newly padded retirement funds.

Socialism whistle blowers argue that we cannot tax these untouchable titans because that would discourage people from wanting to succeed.  They also argue that we cannot regulate the derivatives market for fear that it will anger the free market Gods, who will then kill every first-born child with a trust fund.

So if we can’t tax them and we can’t regulate them, the only way to punish these inconsiderate pirates is to take our money back from them, reinvest it in our own community banks and rebuild Main Street ourselves.

But… that’s probably not going to happen.

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2 comments

  1. Hey Andy read the non-socialist way to fight Wall Street. Thought it was a really interesting proposition. I feel that we made a mistake bailing out the big banks. We have a capitalist economy. One principle of capitalism is that if a business messes up, it’s their fault and they pay the consequences. This harsh reality ensures that well managed companies survive; prices are kept low, and the consumer rules. In bailing out companies that were managed poorly, we have interrupted the balance of our economy. I agree that we should invest our money in local banks, they understand local their local economies better than some guy in a $4,000 suit in a high-rise corner office on Wall Street. On top of this, a lot banks (including small banks) made a lot of irresponsible loans in the 90’s (pushed forward by Clinton Administration Legislation). Some of the blame lies with the banks that approved people for loans that they couldn’t afford to pay back (especially if the adjustable interest rate went up), and some of the blame lies with Americans living outside of their means. We, as a people, need to understand what we can and cannot afford.

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