Review - 13 Bankers, by Johnson and Kwak
Ever get the feeling that the mega-rich secretly control the American government? Or perhaps even not-so-secretly? I’m sometimes told, often by people who love conspiracy theories, that an oligarchy of the well-to-do are actually the ones calling shots not just in Washington and around the U.S. – but also abroad in multinational banking operations.
It all sounds somewhat true. I say yes, it’s true that the mega-rich have a lot more clout than many people give them credit for, but secretly controlling governments of the world? Please. I mean, the rich usually become mega-rich with time, and with all their capital, hold more sway on daily operations within a society. That much is true. So if a group of wealthy individuals shared interests, they could then share their collective power to sway operations on a global scale. So, intrigued, I usually ask these people who these masked figures actually are (or simply who they could be). Usually no one can ever name names, tell me who these people work for or with, or even what their goals are.
You likely see it too: bills of an obvious and common-sense nature arbitrarily held up in Congress. Legislations that benefit the top 2% of the populace at the cost of the bottom 98% being voted in without question. I get it; the politicians are being paid off by big business. So who are these businesses? Who’s doing the paying? How did they collectively lead the American economy to ruin and prosper in the process?
13 Bankers, I’m pleased to say, addresses these questions. As well, Johnson and Kwak discuss how the Federal Reserve operates, its role in America’s current financial crisis, too-big-to-fail banking organizations which have wrought untold chaos upon the American economy – and how both of these are going nowhere with another inevitable economic collapse on the way.
Main Thesis / Main Idea:
Because of loopholes within financial sector regulation, megabanks within the U.S. and abroad have grown to unimaginable heights – and with their success, have willingly brought on an unprecedented financial crisis and secretly control government from behind the scenes.
Simon Johnson promoting 13 Bankers.
Ideas Addressed:
--Does an oligarchy of rich bankers secretly rule over the federal government?
--If so, who? And which companies?
--Who benefitted most during the housing bubble and subsequent financial crisis in the U.S.?
--Are deregulated, laissez-faire monopolies good for the economy? In the short and long-term?
--How did some megabanks yield record profits while others folded?
--Is there another economic collapse coming to America in the near future?
Full of statistics – and everything is sourced!
The evidence and its compilation are well-provided and clearly articulated.
Excellent structure and writing.
Full of cool history!
Occasionally complicated for those without a background knowledge of economics. But it's not their fault...this is economics.
Glosses over the fact that people willingly took on debt during the housing bubble.
Has the Obama administration simply guaranteed another, much larger financial meltdown in the future?
Did bank executives consciously take excessive risks because they expected taxpayers to cushion their potential losses?
Favorite Quote:
“…when an existing economic elite has led a country into a deep crisis, it is time for change. And the crisis itself presents a unique, but short-lived, opportunity for change.”
“The alternative is to reform the financial system now, to put in place a modern analog to the banking regulations of the 1930s that protected the financial system well for over fifty years. A central pillar of this reform must be breaking up the megabanks that dominate our financial system and have the ability to hold our entire economy hostage. This is the challenge that faces the Obama administration today.”
Right now, America is barely surfacing from one of its worst recessions since the Great Depression. Many economists were predicting that with the housing bubble and subsequent financial crisis choking out the dollar back in ’08-09 that Depression 2.0 was well at hand. Couple this with the infamous bank bailouts of those years (and during the years following) -- and you’ve got a system-wide quagmire that sees the same rich oligarchs and decision-makers still holding the same positions despite their proven track-record for laying waste to the economy.
That’s the truth: the same inept bank managers who were running their investments into the ground were rescued, kept their positions, and amassed bigger-than-ever bonuses during years of economy-wide stock-plummeting.
“The public was furious at the recent news that American International Group, which had been rescued by commitments of up to $180 in taxpayer money, was paying $165 million in bonuses to executives and traders at the division that had nearly caused the company to collapse the previous September.”
The common reality.
This is the recent history we all have. A financial crisis that sees failing banks, slipping industries, closing businesses and a monumentally record-high unemployment rate. Falling banks that need to be bailed out by the government just so that everyone’s money can come out unscathed and not have the American economy come crashing down. So how – if these banks have gone to the brink of bankruptcy and must be bailed out by the federal government with taxpayer money – how were these failing banks winners during the financial crisis? How were JPMorgan Chase and Goldman Sachs reporting record profits during those times?
Portrait of a Bank
For those who want a quick primer on exactly what banks do and how they profit, Johnson and Kwak provide an excellent summary. They portray banks realistically: as corporate businesses and not simply places to leave your money while you’re not spending it. For anyone who has never just pictured exactly what banks do; they exist as businesses that receive constant submissions of cash from customers who have savings accounts and mutual funds. They then take that money, invest it into some industry, and pay back the customer a very small portion of the proceeds.
As a means for finding lucrative short-term cash-flows with which to invest, banks have continually been at war with the government to deregulate their industry. The authors provide a foundational history of Bank Wars within America that are at once entertaining and also clairvoyant for issues of the present.
Basically, investment bankers are bankers like J.P. Morgan, who would receive money from people and invest it into industries. These investments may include powerful control of shares or simply buying companies outright. Earnings are then distributed top-down.
The clear and present danger to banks everywhere, therefore, should be making bets on a failing industry and losing everyone’s money. Making poor bets and losing money on investments – other peoples’ money – and not being able to pay back account withdrawals should be the biggest fear for any bank manager….but what if that manager could count on the government to send him a bunch of free money should the unthinkable occur? What if his bank were so large that its failure will cripple the economy? No sane political candidate wants their name tied to widespread economic meltdowns and misery. Picture yourself as that political candidate, and then picture this: nobody getting their money back, loans for small businesses coming to a halt, investments not being made in new and emerging industries. The economy grinding to a near-halt. Would you rather have a mess like that tied to your name, or would you bail out the bank and simply hope to curb this issue in the future with a renewed promise for regulation? Keeping in mind, bailing them out only empower bank managers to make riskier moves that might pay off in larger dividends, much more often, with the consequences of failure neutralized.
That’s where we’re at now. Except that the U.S. federal government has already chosen the latter.
The Fifth Branch of the Government
I call megabanks the fifth branch of the government (right after the media, which I see as the fourth branch) because they’re basically a rogue federal entity in America at this point. Sure, the other branches attempt to keep their fifth-branch cousin in check, but ultimately – can they? With the government attempting to keep banks in check, how is it that American megabanks slowly wrested political control and influence? How did they start calling the shots and buying big favors?