If we’re a ‘free market’ economy, why do we keep protecting so many businesses and promote monopoly? Well, I suppose the practical answer is that businesses who can afford to do so will rent-seek via K Street and politicians looking for donations will happily give them whatever they want. The bigger question is why do we keep politicians in office that DO this to us? Why do we put up with policy makers that continually keep corporations safe from the economic Darwinism implied by capitalism while we pay for all their negatives like externalities, restricted output, and high prices? Can we just say, for once, that the real welfare queens in the economy are the bonus class and these kinds of corporations? They suck up the public funds like a bunch of leeches at a Louisiana picnic. Today’s news just provides us this ongoing example from the banking industry. It’s from WaPo and David Cho. Go read Banks ‘Too Big to Fail’ Have Grown Even Bigger; Behemoths Born of the Bailout Reduce Consumer Choice, Tempt Corporate Moral Hazard for a really good example of market failure. It makes me want to socialize the lot of them! I mean, if we’re going to continually subsidize them and give them monopoly status, we might as well have a stake in their assets.
The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.
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.”
I really hate going to the mail box these days. I am now banking with Capital One not by choice but by merger. I now have a trading account with J.P. Morgan, not by choice but by merger. My mortgage is miserably serviced by Wells Fargo, not by choice but by secondary market transaction. Each day, I find myself to be a customer of a behemoth bank with whom I would not choose to do business voluntarily. It takes me forever to get out of customer service automated voice response hell to try to figure out how to close my account so I can go elsewhere. An expedition to Patagonia would be easier.
“Be not afraid of greatness; some are born great, some achieve greatness, and others have greatness thrust upon them”
“And some have greatness handed to them on a silver platter by their government”