To understand why bankers love the status quo you have to understand how they pay themselves. Unlike most enterprises, labour actually has more power than capital at the big banks because debt plays such a huge role on bank balance sheets. To make shareholders feel better about this quasi-Marxist relationship, bankers use “return on equity” as a way to justify their compensation.
Category: Economics
Your New Landlord Works on Wall Street
So a bullish outlook for housing would seemingly augur a long-awaited recovery to Main Street. But the more you look into it, the clearer it becomes that it’s not being driven by the typical American families who lost their homes in the economic crash. In fact, it’s being fueled by the banks and hedge funds whose speculation caused that crash in the first place.
Credit Supernova!
Credit is now funneled increasingly into market speculation as opposed to productive innovation. Asset price appreciation as opposed to simple yield or “carry” is now critical to maintain the system’s momentum and longevity. Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance Minsky once warned against.
We’ve Nationalized the Home Mortgage Market. Now What?
They would lobby to reduce the amount of capital they have to reserve for an emergency, and to lower the fees charged for mortgage insurance so they could compete on price. If another crisis hits, lower capital reserves and lower fees would make them far more vulnerable to going bankrupt, leaving the taxpayer to bail them out.
Too Big To Succeed
Put mathematically, the complexity now grows non-linearly. This means, as banks get larger, the ability to risk-manage the assets grows much smaller and more uncertain, ultimately endangering the viability of the business.
Abnormal Capitalist 