Wall Street and Washington

Following the previous post, someone forwarded us a few links.

On July 20, Secretary of the Treasury Timothy Geithner wrote an opinion piece in the Wall Street Journal.  A key quote:

"All financial crises are caused by too much leverage, and by reducing leverage, we have taken the most important step toward diminishing the risk of future crises. We have forced the largest financial institutions to take less risk and to hold much stronger financial cushions against the commitments they make. Our banking regulators have reached global agreement on new capital standards that require the world's largest financial firms to hold roughly three times more capital relative to risk than before the crisis."

Note that Geithner targets the "largest financial institutions," but the Frank-Dodd legislation hits ALL banks.  "Reducing leverage" and increasing "capital relative to risk" sound good to the public (count FDIC Exposer among them before we started digging into this mess) because the media and regulators focused on Wall Street's excesses. 

The unintended (or perhaps intended?  For those of you who tend toward conspiracies.) and unseen consequences, however, are the destruction of community banks.  While the legislation appears to give more control over Wall Street, in effect it concentrates power in these enormous entities as they absorb community banks.

These ever-growing monsters are not the result of capitalism at its finest.  Through "regulation" and close ties between Wall Street banks and government officials (see "Government Sachs" here and here), they become quasi-government entities.

The thousands of community banks in this country don't have the luxuries afforded to Wall Street or the funds to fight the FDIC.  Where the government effectively turns a blind eye while Wall Street gradually meets the regulations, the FDIC doesn't give community banks a fighting chance.  One by one, they are taken down and sold off to "too big to fail" corporations.

Some of our sources see a conspiracy to socialize the banking system in the government's determination to create a Socialist state.  FDIC Exposer doesn't buy into it, but we all agree that the end result is irreparable harm to our country.  One community bank on its own has zero power.  Politicians claim to fight for small businesses and Main Street, but up until now it's only been talk.  What FDIC Exposer wants is for community banks to stand together to keep our communities intact.  We know politicians will never do it for us.