Its Too Late

2013 March 3
by drdog09

To break up the big banks. Here is a stunning list of econs that are recommending that this occur —

Stunning List of Economists, Financial Experts and Bankers Say We Need to Break Up the Big Banks
Posted on March 1, 2013 by WashingtonsBlog
Top Economists and Financial Experts Say We Must Break Up the Giant Banks

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:

Nobel prize-winning economist, Joseph Stiglitz

Nobel prize-winning economist, Ed Prescott

Nobel prize-winning economist, Paul Krugman

Former chairman of the Federal Reserve, Alan Greenspan

Former chairman of the Federal Reserve, Paul Volcker

Former Secretary of Labor Robert Reich


That is only a partial list. I have been saying for a long time that the TBTF’s should have anti-trust applied to them. First gently by letting them do so voluntarily. But if they resist then the full brunt of the law should be applied.

Here’s the kicker. It may already be too late. Banks up until the last 15 years filled two primary roles. 1) providing bridge funding for projects and work in progress when a really large job came in to the business. 2) Servicing the Jumbo RE loan market with private financing. Since the elimination of Glass-Steagal Act the TBTF’s have found it more lucrative to pursue derivative based opportunities than plain ole retail banking.

Well in the first case sites like Kickstarter are turning that on its ear. Traditionally businesses of any size perceive a market (tested or not) and gin up a widget to match. All the while these businesses require capital to tool and produce the widgets before they sell the first one. Then go try to sell it. That is a high level of risk with no guarantees. Think the 1958 Edsel. A Kickstarter project on the other hand lays out at best a functional prototype as a capital outlay. Any successful Kickstarter has always had a working model. Possible buyers of the widget then make a commitment to buy. If the funding goal is reached the monies are forwarded and the business makes the widgets. Three things are occurring here in one project. A) Other than the prototype, the entire offer is a marketing study. The business will know whether they have a flop on their hands or not without making the upfront production commitment. 2) The terrible weight of attempting to acquire the working capital for cost of goods in process is eliminated. The customer actually becomes the banker for the firm. That is what should have the bankers scared to death. 3) There is no guessing for how many widgets to make. The customers are determining the scope of that question through their prepurchase commitments.

In the latter case, simple retail loan servicing, also has an alternate venue. One example is Prosper which is one of many. A prospective borrower completes a series of questions. They also provide whatever supporting documentation to the proposal that would help their cause. Then individual members like you or me would buy into the request in increments of typically $100. If the request is funded then the monies are escrowed, the loan paperwork is generated, and the checks start rolling into you as per the loan agreement. This is peer-to-peer banking, much like the old concept of the community S&L. (Think George Bailey, Its a Wonderful Life.) This too should scare the banks. By the way, if you are an investor, the AA rated prospects are returning 9.28%.

The reason the banks don’t appear freaked by either of these concepts is scale. So far the Kickstarters have been chump change, 99% are less than a $1m. Fact most are under a $100k. But the thing is what works as a $100k Kickstarter can do the same at $30-40m. It has just not been tried yet. Propser is the same way. Most of the loan origination comes from people looking to implement a kitchen redo or a consolidation loan. Have not seen a 1st mortgage origination thru them to date. Prosper currently has less than half a billion in loans in transaction. Some of the TBTF banks have that much in play in a single loan. But these barriers to scale could change quickly and when they do the traditional banking sector better watch out. Such systems will beat the pants off the old stogies.

32 Responses leave one →
  1. 2013 March 3 7:41 am
    drdog09 permalink

    The TBTF’s will die on their own, which I should have made clear in the posting. The fact is the TBTF’s are like junkies dependent on the largess of Bernanke. When the well dries up, and it has to, they are doomed. We down here in the bottom of the feeding pyramid need to look for alternative methods. Hence I highlighted Prosper and Kickstarter. The best help, is self-help.

  2. 2013 March 3 10:09 am
    Mr Evilwrench permalink

    The TBTFs have gotten too big for their britches. They’re not so much interested anymore in doing what they were created for, now that they’ve found things where the profit is made from movement of money rather than actual investment. Just to provide what people and businesses need, a new generation of financial services must evolve. Watch out, though, they get big enough to show up on the radar, and those with political clout will try to smack them down.

  3. 2013 March 3 10:59 am

    I was in McAllen, TX the other day and saw a bumper sticker on a parked car that read, “I miss Chicago.”

    So, I broke the window, stole the radio, shot out two tires and left a note that read, “I hope this helps!”

  4. 2013 March 3 11:18 am

    Mutley watering his master


  5. 2013 March 3 12:58 pm
    justrand permalink

    We’re in Chicago today…so far so good! 🙂

  6. 2013 March 3 1:09 pm
    gnqanq permalink

    They (U.S. Government & Others) have used these Too Big Too Fail banks as a dumping ground for toxic debt. This is what THEY don’t want the public too know. Thus why they keep pumping up these banks. Sooner or later this bubble is going to go BUST.

    It would be better the sooner this happens to restart and let all of the bad debt go away. Yes some creditors (and some innocent people who bought the BS) would be destroyed in the process but better for the overall economy to get this behind us.

    If and this is a BIG IF, if they don’t change their ways and go back to sound financial practices (which I doubt due to the FSA) we will be right back in this mess in another 20 years.

    But of course I expect the worst and can see Mad Max on the horizon too.

  7. 2013 March 3 4:24 pm
    drdog09 permalink

    4, Too bad it is not Moochelle…

  8. 2013 March 3 4:53 pm
    drdog09 permalink

  9. 2013 March 3 7:42 pm

    So much for another great white hope

  10. 2013 March 3 8:08 pm
    Wylie E. Coyote permalink

    This is a trope…..we only have “big banks” because we have Central Banking!

    Right now we have price fixing of interest rates by the Feds and massive currency inflation (see previous feature post)

    We need to get rid of the Fed first and return to a decentralized, free-market banking systems with competing privately issued currency and let the consumer decided which provides the best value for savings/loans and which bank provides the soundest currency for holding value

  11. 2013 March 3 8:08 pm
    Wylie E. Coyote permalink

    “Liberal argument: A disarmed America is a peaceful Nation.

    Sure it is. That’s why Nazi Germany was such a fun spot for a party. A disarmed America is a turkey on the day before Thanksgiving. It’s fat, it’s rich and it’s defenseless.

    I can’t fault Obama and his Democratic accomplices for their tireless efforts to keep the so-called “gun control” debate squarely in their political crosshairs. After all, as long as they can keep if not the general public, then at least their media accomplices and the poorly informed voters on whose necks they stand focused on one of the most exceptionally divisive issues of our time, they won’t have to explain themselves regarding their wars on the energy industry, the economy, the unborn or even their own diplomatic corps. As I’ve said before: Manufactured crises are perfect tools to keep the poor, huddled, liberal masses frozen with fear and hatred, and there’s hardly a more perfectly tailored fearmongering campaign than one in which the government can use dead children to sow mistrust among the public. By turning guns into menacing killing machines, the Democratic elite can turn gun owners into menacing killers. To be sure, what sort of soulless monster would dare suggest his Constitutional rights trump the lives of our Nation’s future — other than abortionists, of course. Thusly, while proponents of the Bill of Rights defend their basic freedoms against an onslaught of righteous — albeit wrongheaded — fury, the real issues of the day, from violence to economics, disappear behind a wall of promises, demands and Vice President Joe Biden’s bizarre rape-prevention tips.”

  12. 2013 March 4 5:21 am
    drdog09 permalink

  13. 2013 March 4 5:23 am
    drdog09 permalink

    “A disarmed America is a turkey on the day before Thanksgiving. It’s fat, it’s rich and it’s defenseless.”

    Well 2 out of 3 ain’t bad. But scratch the rich bit, we lost that somewhere around 2004…

  14. 2013 March 4 5:26 am
    drdog09 permalink


    How odd of an assessment. If I be in the boonies there is not much need for auto anything unless you are really into hunting elephants or bears. The one place you would need it most the good doctor says no. Sheesh.

  15. 2013 March 4 5:55 am

    4 IP,

    Maybe that watering will help her grow some boobs!

  16. 2013 March 4 5:56 am

    Mitt blames loss on GOP pirmary season.

    Second look at Santorum???

  17. 2013 March 4 6:17 am
    drdog09 permalink


    Ha, Ha!

  18. 2013 March 4 6:55 am

    #6 yup it’s why we should have let some of them crumble instead of TARP back in 2008, should have taken the hit then and let many of them fail instead we’re all now paying for it.

    #17 – ha ha

    Got there in one piece.

  19. 2013 March 4 6:57 am
    drdog09 permalink

    19, Excellent.

  20. 2013 March 4 6:59 am

    #19\21 – Indeed.

  21. 2013 March 4 7:33 am

    Keep in mind this in about par for the course for the “rebels”, you know ones people in the Obama administration want to aid. 🙄
    I see Biden offered up another 250million to Egypt after being snubbed.

  22. 2013 March 4 7:35 am

    That un-Islamic ringtone… yeah that can get you killed too. 🙂

  23. 2013 March 4 7:43 am

    One for the dog–>

    Riding a bike…err now that’s bad for the environment too according to a WA state rep, he also supports taxing bicycles. 🙄

    If you assumed this rep was a Democrat, you’d be wrong.

  24. 2013 March 4 7:47 am

  25. 2013 March 4 8:02 am
    drdog09 permalink


    Heh. Still life in us old IT dogs. I have seen 1,2 other designs like this but he seems to have conquered the temperature control problem. Lyman now needs to come up with an open source grinder so that soda and milk bottles can be recycled. One person was working on it but I have not seen anything new in at least a year.

  26. 2013 March 4 8:03 am
    drdog09 permalink

    Looks like somebody did not like the bike tax idea. Looks like either the DB has been hacked or just overloaded.

  27. 2013 March 4 8:18 am
    drdog09 permalink


    That could turn into an interesting court battle. Why would schools be interested in releasing scholastic records? Money. All these startups are going to dangle money in front of schools for the data. Then of course repackage at a markup.

    Well lets see here. A fair amount of the curriculum and class plans come from the DoEd. Being government sourced would tend to make the output thus derived ineligible for profit making directly. Then there is that pesky bit of since this is the kids and teachers efforts should they not also be compensated? 13th Amendment has that `involuntary servitude` in it ya know. An nothing can be more involuntary than pulik skchool.

  28. 2013 March 4 8:29 am
    drdog09 permalink

  29. 2013 March 4 10:19 am



  30. 2013 March 5 5:24 am

    30 – Yeah I heard about that on the radio last week, pretty f’d up.

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