Sunday, April 11, 2010

Too Small To Save

Okay, we understand too big to fail and moral hazard, although I'm still puzzled how Loyd Blankfein at Goldman Sachs believes he is doing "God's work" churning out those obscene pay bonuses to the geniuses who nearly (and may yet) bankrupt us all.  Yes, it was necessary to use taxpayer money (ie. creditworthiness) to bail out the investment banks and "save" the financial system.  But Main Street has seen little benefit, despite the rantings of Larry Kudlow on CNBS.  One would think perhaps, that saving the financial system might include your neighborhood bank in the U.S. - the one people deposit their pay with and then withdraw the grocery money out of.  Yet small bank failures are running at breakneck pace; 140 in 2009, another 42 so far in 2010.  (Our hero, Sheila Bair of the FDIC says that the total in 2010 will beat the 2009 tally incidentally.)  Why is she our hero?  Because she heads the agency that seizes that failed neighborhood bank after business hours on Friday and reopens it on Monday under alternate administration.  She knows the extent of the problem (the FDIC bank watchlist), and knows that new regulations are desperately needed for the financial sector.  Loyd Blankfein and his ilk, meanwhile, just hire more lobbyists to fight regulatory reform.