Editorial: Big banks enabled by ‘Too Big to Fail’

Published 2:27 pm Thursday, February 25, 2010

Thursday, Feb. 25, 2010

It doesn’t matter what regulations are put in place on Wall Street if the captains of our economy are devoid of ethics.

Especially after the gift we gave the big banks in the bailout, further enabling their bad behavior by promising them they’re Too Big to Fail.

Instead of liquidating broke banks and prosecuting insolvent institutions that took us down with them in a giant Ponzi scheme, we bailed them out and underwrote a fresh start that could well lead us back to another calamitous global economic crash.

Thanks to our validation, no lessons were learned and they clearly still don’t get it, as evidenced by the profit and bonus numbers posted by skimming off their own rescue money.

Investment banks such as Goldman Sachs figured out how to make money coming and going.

They sold worthless, bundled securities to unsuspecting pension funds and insurance companies, then actually hedged their bets that many of those same securities would go bust and short-sold the same investments they promoted to others.

It certainly still looked like a Roman orgy at Goldman Sachs, which set aside $16.2 billion for salaries and bonuses – enough for each employee to take home $498,246 at a time the country is broke and almost 15 million Americans are without work.

In fact, the nation’s six biggest banks, gorging themselves as Americans go hungry, set aside $140 billion for executive compensation – pretty comparable to the $164 billion haul they awarded themselves in 2007, before they had to come to taxpayers with their tin cups out.

Goldman Sachs CEO Lloyd Blankfein pocketed only $9 million and we’re supposed to be grateful for this humble act of contrition?

Goldman reported $13.4 billion in profits.

Doesn’t anyone wonder how they got that far back from bailout city in one year in a tough economy?

There’s lots of evidence that they’re back to playing speculative long shots and financial chicken with the same toxic assets, only this time with the full financial support of the federal government.

Big banks took the money borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent.

They took huge sums from the government, sat on it until the government started printing trillions of dollars in a desperate attempt to restart the economy and bought even more toxic assets to sell back to the government at inflated prices and making a killing undoing the mess they made.

In the process, they’re rapidly recreating conditions for another crash, except this time the U.S. government’s cash is depleted.