Testifying at the Financial Crisis Inquiry Commission, Wall Street big bank CEOs just made the strongest case for breaking up the big banks, i.e., themselves. Taking their explanations for the financial crisis at face value, that they just "made mistakes", how can they possibly justify having institutions so large that their mistakes can screw the entire country?
To date, much of the criticism of the size of banks has focused on "greed." We, at www.breakupthebigbanks.com, did not go there, because the stronger case is the one the bankers themselves made today: if a bank is large enough, just mistakes are sufficient to screw up the entire country. No 'malice aforethought' need be alleged. No corruption need be committed.
And, that's the stronger point. Better people, better regulations, better compensation schemes, better enforcement will not prevent mistakes. And, if a bank is too large, a simple mistake can hurt everyone.
But, unless there is an accounting for what their mistakes caused, it is perhaps too easy to give them a 'pass.' They made mistakes. They are sorry.
'Sorry' does not help. Let us unfold what their mistakes caused...
People who have worked all their lives to put away something for their children's college, or their retirement, were wiped out. People whose only investment was there homes were wiped out.
But it is much more. Students entering the workforce following high school, college or graduate school find there are no jobs. Their training will soon get stale. A generation will find itself adrift. The Depression Generation found respite from their experiences in World War II. Anyone asking Lloyd Blankfein if he is signing up for Afghanistan?
Middle-aged workers have seen their jobs wiped out across the board. There is nothing to take their place.
But, it is even much more than that. After 8 years of the disastrous Bush Administration's taxcuts for the wealthy, the country's debt skyrocketed just as the babyboom generation (68 million strong) were set to retire and increasingly draw down from social security, so that there would be reduced opportunities to offset deficits with social security funds.
Now, to keep the country from sliding into a deep recession, the government has to spend money and roll up additional deficits. Reduce that stimulus, and revenues fall even further and obligations of the government rise. Thus, the ability of the government to make the transformative investments required in healthcare reform, clean energy, and education--those items key to our economic future--are sorely constrained.
And, it is even more than that. With a world aflame in hatreds, the financial capacity of the United States to fund key operations--non-military as well as military--is compromised. Thus, the pressures of poverty, of dislocations, of illiteracy, of pandemic diseases multiply and make peace and security even more difficult and more expensive to achieve.
What benefits are there to an economy of big banks whose simple "mistakes" can wreak such havoc?
The Big Bank CEOs made the case for their own break up. Their being sorry just does not .
Go to www.breakupthebigbanks.com, sign the petition. Move your money from big banks to regional or local banks.
Follow Paul Abrams on Twitter: www.twitter.com/pabrams2001