Merkel's Smack Talk, Too Bigger to Fail, and Bagging on Greenspan's Easy Money: EU Edition
Okay, perhaps I'm reading a little too deep into Merkel's words but it seems as though Germany's fearless leader took her fair share of jabs at TBTF and homicidal maniac Alan Greenspan's easy money policy of yore. Frankly I couldn't be happier.
The leaders of Germany and France took aim at the banking sector on Monday, pledging to check banks' power and push for limits on bonus payments at a Group of 20 summit next month.
Chancellor Angela Merkel said bonus payments to bankers were "rightly driving a lot of people crazy" and that she and French President Nicolas Sarkozy wanted the G20 summit in Pittsburgh on September 24-25 to make progress on financial regulation.
"No bank may become so big that it could get into a position where it could blackmail governments," Merkel told a joint news conference with Sarkozy in Berlin.
Germany and France regard financial market excesses as being the root cause of the global economic downturn and want tighter regulations to prevent a repeat of the biggest financial crisis since World War Two.
"We want to see things changed in Pittsburgh," Sarkozy said. "These excesses cannot be allowed to be repeated as if nothing ever happened."
Merkel said Germany and France would propose that the European Union take a joint position to Pittsburgh, and called for the bloc to press for the full implementation of agreements that G20 leaders reached in April.
At their April meeting in London, the G20 leaders agreed to extend regulation and oversight "to all systemically important financial institutions, instruments and markets" including systemically important hedge funds.
Merkel believed a consensus could be found on dealing with bonus payments, drawing on new rules made by France and Germany.
She said G20 leaders would also discuss "exit strategies" from the fiscal and monetary policies they have used to blunt the impact of the economic and financial crisis.
"We must take care that, on the one hand, we act correctly with regard to the recession and the economic crisis but on the other hand we mustn't make the same mistakes again that led to this crisis," she added.
"After 9/11 the loose monetary policy in America was not withdrawn and this bubble was able to arise," she said.
If anyone else has an alternate interpretation of this I'd love to hear your thoughts but sounds like shit-talking to me.
Perhaps Merkel wasn't taking a jab at Goldman Sachs specifically after all...
J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.
A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.
"It is at the top of the list of things that need to be fixed," said Sheila C. Bair, chairman of the Federal Deposit Insurance Corp. "It fed the crisis, and it has gotten worse because of the crisis."
Regulators' concerns are twofold: that consumers will wind up with fewer choices for services and that big banks will assume they always have the government's backing if things go wrong. That presumed guarantee means large companies could return to the risky behavior that led to the crisis if they figure federal officials will clean up their mess.
Um where are the regulators who are concerned that America cannot possibly take one more financial assraping? Point me to where those folks are.
Let us not forget that these too bigger to fail banks are, in fact, illegal as banks are not allowed to hold more than 10% of the nation's deposits. JP Morgan hits it on the dot at 10%, Wells Fargo at 11% and our friends over at Bank of America take the cake with 12.9% of all deposits in the United States.
Supersize me, bitches!