Discussion Theme: The Banking System 5/19 at 3PM
Please join us Saturday, May 19th from 3-4PM for a discussion on the U.S. banking system. John Halasz will offer a brief compressed account of the workings of capitalist banking and credit, how it generates credit/debt without quite depending on a prior pool of savings/loanable funds. Additionally, we’ll look at how, even though banks compete with each other, they are tightly inter-connected and leveraged as a system and individually. Finally, John will explain how they operate through maturity transformation, borrowing short and cheap, and lending longer term at higher rates.
This trifecta creates a banking system that is prone to runs, panics, and financial crises, which requires supports and regulations to work “properly.” When credit and debt out-run the productive and income-generating capacities of the real economy, the banks find new ways to evade their regulatory capital requirements through off balance sheet vehicles and lending to leveraged financial businesses outside the scope of official regulations, thus further leveraging the financial system (and loading the real economy with debt) through what has been called the “shadow banking system.”
Jay Moore will then briefly discuss the rising concentration of U.S. banking over the last 30+ years and the post-crisis/post-bailout policy of “regulatory forbearance,” a.k.a. extend and pretend. Heather Pipino will then briefly introduce legislative efforts to form a VT state-owned public bank. May a lively discussion then ensue!
For your consideration here are some background materials:
A business news article on how the largest banks post-crisis are dominating business lending: http://online.wsj.com/article/
A commentary by Simon Johnson, a former IMF economist, on the recent Obama administration “settlement”, (i.e. coverup), with the major banks for malfeasance in mortgage servicing: http://www.project-syndicate.
An earlier longer article by the same fellow on the bank bailouts and the capture of the political system by Wall St.: http://www.theatlantic.com/
A chart of the consolidation of the 4 largest U.S. banks today since 1990: http://www.
And an article on a state owned public bank: http://www.ilsr.org/how-state-
Feel free to add further informative links in the comments section below.