Are "Too Big To Fail" Banks Headed For Another Bailout?

If you're of an age, you'll remember what happened about 8 years ago when the housing bubble finally deflated and banks started failing one after the other. Some had long been bastions of financial power, yet they found themselves holding billions of dollars worth non-performing loans and toxic assets.

The-Powers-That-Be decided that these financial institutions were “too big to fail” because if they did it would cause a panic and cause an economic collapse. So they decided to shell out billions in taxpayer dollars to shore up these banks and head off an economic calamity.

Seeing what happened you'd think these banks and financial institutions would learn a lesson and not take on such risks again.

You'd be wrong.

The financial crisis of 2008 happened because the banks were too big, they were too opaque and they were engaging in risky business practices. Where are we now? Many of the banks are much bigger, they’re still opaque and they’re still engaging in risky business practices. This is a recipe for (another) disaster.

“We don’t actually know a lot of what goes on in banking,” Anat Admati, a professor of finance and economics at Stanford University, told Salon. “We don’t have good monitoring of it.”

Admati said a lot of what banks do is deeply buried in vast financial records, so it’s extremely difficult to follow what industries banks are involved in and what they’re doing. She said the banks benefit from this opaqueness, because it means they can get away with risky business practices while no one knows what’s going on.

That is a formula for disaster, and I have no doubt the banks are yet again taking risks they shouldn't because they know the US government will bail them out again. As more than one financial pundit has said, it's a rigged game where profits are privatized and risks are socialized.

That has to end.

If these big banks find themselves in the same position again, then they shouldn't be bailed out...until they've been broken up into smaller entities and all of the chief level officers have been fired and banned from serving as a officer in another financial institution for a minimum of 4 years.

Why four years? Because they'll be able to use their time off to learn about how not to run a bank and shouldn't be involved with them until they can prove they've learned how things should be run.

Endless bailouts of crooked financial institutions does not fill anyone with confidence in our economy because it shows they are nothing more than a con game writ large.