The shrinking number of U.S. banks but growing assets – From 12,000+ in 1990 to roughly 7,000 today. The rise of the too big to fail banking system. Are bank hours conducive to the working and middle class?
Some people have a hard time believing that prior to the Great Depression, there was a point in U.S. history where we had over 20,000 various and diverse banks in the country. These banks would boom and bust and with no FDIC insurance, placing your money in a bank was a risky proposition. The Federal Reserve initially was designed to serve as lender of last resort but as time has progressed, it has now been used as a tool to consolidate banking power in the hands of a few. They say that you should never let a good crisis go unused; the banking elite have decided to use propaganda, lobbyists, and coercion to thin out the number of competing banks in the system. We are now facing the smallest number of commercial banks in many decades and the trend seems to be accelerating as every Friday a handful of banks are shut down and big banks continue to grow their market share.
The below chart shows this trend:
From 1990 when we had over 12,000 commercial banks to 2009 with approximately 7,000 commercial banks, the contraction over 20 years has been significant. A 40 percent decrease is large but keep in mind that at the same time, the banking needs of our country have risen. U.S. GDP in 1990 was $5.8 trillion compared to $14.26 trillion in 2009. What you have occurring is the consolidation of banking power with the too big to fail. It is no coincidence that during this time, we have faced two of the biggest bubbles in our history. During the 1990s we lived through the technology bubble and in the 2000s, we had the legendary housing and credit bubble that has knocked our economy to the mat. It would be one thing if the financial quality of most Americans improved during this time but it hasn’t. In fact, over the last decade wages have gone stagnant (negative if you lost your job like millions of others) and we are dealing with high unemployment that is persisting at levels that reflect a minor depression (with a softening name of the Great Recession).
If you think about banking hours, you really can see that banks don’t care much about the working or middle class:
Presumably most Americans work 8 to 5 or 9 to 6, right smack during banking hours. You would think that banks would have hours that were a bit more flexible but in reality, banks make more money outside of the bank and also now through their investing units and gambling on Wall Street. The storefront is merely to create an illusion. Banks have done a good job in this crisis trying to propagate the idea that if no bailouts were given, then all banking in the U.S. would have come to a halt. This is not entirely true. There is a solid amount of capital that would have found its way to people but why would anyone lend money when the government is backing up the biggest institutions and not rewarding prudence? In fact, if we look at the mergers of JP Morgan with WaMu or BofA with Countrywide what we saw was two giant institutions (not necessarily good companies) becoming even bigger and having more access to government money. Well run smaller banks had no chance.
The banking system has become one giant moral hazard. If you stand on the outside looking in, you would think the number one criteria of favoritism is merely the size of a bank. So the incentive isn’t to be prudent with making loans, it is to make as many loans as possible in the shortest amount of time to grow into a too big to fail institution. This kind of system has created incredible risk in our system and we can see that after many decades, it has harmed our economy immensely. Does anyone really think things are better because banks have gotten bigger?
And going back to the data we had regarding banking assets. Let us look at asset growth over the same time that 5,000 commercial banks fell out of the system:
U.S. Banking assets (commercial banks)
1990: $2.5 trillion
2009: $9.3 trillion
At the time that we lost 40 percent of commercial banks, actual assets increased from $2.5 trillion to $9.3 trillion, nearly quadrupling in the same amount of time. And yet, the actual overall financial well being for working and middle class Americans has actually fallen. How is that? Part of it has to do with the incredible amount of asset inflation caused by the banking sector. More and more people went into massive debt while banks kept making money off a growing list of fees, charges, and also making large amounts of money on the margin from taking government funds and then lending it out or speculating on Wall Street. Banks claim that the margin has to do with risk but as we have seen, as long as you reach a certain baking size, the government won’t let you fail so you are at liberty to do whatever you feel is in your best interest even if it hurts the overall economy.
The biggest line item comes from mortgage loans:
Source: FDIC
64% of securitized assets at commercial banks come from mortgage loans including home equity. The next big line item is credit cards (22%). If you really look at it carefully, banks had a deep desire to inflate the housing bubble. This allowed them to increase the overall size of their asset base while forcing Americans to go deeper and deeper into debt. The value of a dollar has fallen at the same time and this is no accident:
Let us recap:
-From 1990 to 2009 commercial banks went from over 12,000 to 7,000
-Yet banking assets went from $2.5 trillion to over $9.3 trillion at commercial banks
-Banking has grown and fostered two of the largest asset bubbles in history
In the end, we really need to examine what we expect out of banking for our country and our economy. It has grown too large and has harmed our economy. The current incentive system rewards bad performance and not much has changed since the crisis started. Time to reexamine the system and radically shake it up.
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Controlling the wealth of America – top 1 percent control 83 percent of U.S. stocks. As a share of personal income mortgage debt ate up 19 percent in 1949. In 2003 it went up to 85 percent. 80 percent of Americans 65 years and older depend on Social Security for half of their income.
Mayer Rothschild was quoted as saying “give me the power of the money and it will not matter any more who is commanding.” Today Wall Street is in full command of our government. The impact of massive lobbying has guaranteed that many of our politicians are bought off and are serving as serfs to their feudal lords on Wall Street. How else can we explain the lack of reform in the financial industry after the biggest economic crisis since the Great Depression? Wealth is massively concentrated in a few hands in America. Just because you have access to debt does not make you wealthy. 83 percent of all U.S. stocks are in the hands of the top 1 percent.
Let us look at the data:
Source: ACS, Lending Tree Report
The above is a clear example of why the recent Bull Run in the stock market made very little impact in the real economy. Unemployment is still extremely high and most Americans still live with the effects of a recession. The housing market is still in disarray yet the boom in stock values has benefitted those that least need it in the market. The notion that stock wealth is evenly disbursed is nothing more than Wall Street propaganda. Look at the above data and you can see why.
Many Americans have been under a spell thinking that they have been getting richer merely because they have more access to debt. Wealth is measured by net worth, not how much debt you have. And Americans are drowning in mountains of debt. The share of debt that now goes to housing and consumer credit is off the charts:
The above chart highlights a clear reflection of the decade long housing bubble. Even though the housing bubble only ramped up in the last decade, the pattern was already taking place for well over 50 years. Back in 1949 the mortgage as a share of personal income only ate at 19.6 percent of income. In 2003 it had shot up to 85 percent. Is it any wonder why so many people were taking on massive amounts of mortgage debt in the last decade? Someone during the housing boom was quoted as saying:
“[It is] weird to be a young person living in Washington, [D.C.] with this sort of housing bonanza, a psycho-frenzy thing going on. It’s just so very tiring. Sometimes I feel like for me, yeah, having a house would be great but it’s almost become something that I feel like we’re being programmed to do, that it is [an unquestioned] part of the American Dream.”
Most bought into this programming and went ahead and took on massive amounts of debt from the banking giants that turned many into debt slaves. No one forced these people to sign but neither did anyone force the banks to make these toxic loans. Yet today, the only group actually getting a bailout is the banking sector. Those that took on those massively bad loans are destined to lose their homes through foreclosure and have ruined credit. What consequence do banks face? They serve the needs of a very small cohort in our population and our government is at their service.
Just look above one more time and look at how much money now goes to home equity debt. This was unheard up until the 1990s. In the last decade mortgage equity withdrawals financed a large part of our economy from vacations, to upgrades, to new automobiles. It was largely one giant façade. The only group that saw their status increase was the top 1 percent. Everyone else saw their quality of financial stability decline:
I’m sure when data is released in September by the Census, the numbers will look even worse. Income on an inflation adjusted level has been falling for well over a decade. Most Americans were deluded into thinking that debt was equal to wealth. Or to be more specific, what they were able to finance with debt. Just because you have a leased foreign car and a large McMansion does not make you wealthy. All it does is makes you a slave to the objects but also the banks that finance the deal. Unlike the banks, you do not have a lobbyist looking out for your interest.
The way out for many is through getting an education but the banking system has now inflated the cost of education. We have for profit schools that provide very little benefit as shown through data but their costs keep going up because they have mastered the ability to take taxpayer loans and push people into their system like a paper mill. The cost of college keeps going up as income keeps going down:
The only way to understand finance is to get educated but the cost of that is going up. So you have an enormous serfdom of those who have very little understanding of finance being subjected to the whims of the banking sector. In the end, the banks have managed to calm the masses and numb their ability to reason because what has occurred over the last few years is the greatest wealth transfer in the history of our nation. It didn’t take a war or coup but simply happened by pure momentum and sheer inactivity. They system is in a deep capture.
Even being in the industry does not keep you from buying into the delusional propaganda of Wall Street:
“I studied finance… I learned about stock investments when I was 18 or 19. I took money that I saved since I was a kid and invested in stocks. It was $10,000. I made it into $80,000 in 2 years in stocks. But I had $150,000 invested because of margin and I lost all of it. Now I’m looking at the real estate market. I’m like, huh. I learned my lesson in the stock market. Should I sell my real estate that has gone up in value by 80 percent?”
This quote was taken at the height of the housing bubble. How many people do you think lost money in the stock market and the real estate bubble? Trillions of dollars were lost yet somehow, the top 1 percent came out ahead. They will argue that they are not as wealthy as before but keep in mind even if you lost money, the cost of other items has also fallen. Money is only as valuable as what you can buy with it. And this tiny group has become all the richer in this crisis. You can now by the yacht for half off while your stock portfolio fell by 15 percent.
For all the back and forth with Social Security, an enormous part of our country depends on it for its income:
A stunning 40 percent of those 65 and older depend on Social Security for over 80 percent of their income. 60 percent of this group depends on it for at least 65 percent of their income. If we look at 8 out of 10 in this group, at the very low end they depend on Social Security for 45 percent of their income! And this makes total sense because stock wealth is concentrated so heavily in the hands of a few. And they want people to put money into the stock market casino? Wall Street is simply looking at eliminating another line item here. Controlling wealth is more important than who controls the government. Rothschild had it right.
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