Why Crime Pays For “Too-Big-To-Fail” Banks

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April 10, 2013 11:39am NYSE:XLF

banksShah Gilani: There’s a reason why the first few installments of my What Everyone Absolutely Needs to Know About Money series have been about banks.


You need to know the truth about banks.

Why? Because they rob you.

Why? Because they can.

It’s the Willie Sutton bank robber quote in reverse. Willie was asked, “Why do you rob banks?”

He famously answered, while in handcuffs, “Because that’s where the money is.”

But, banks can’t keep robbing the public if they keep shooting themselves in their feet. That’s where central banks come in.

They are the real kingpins keeping their robber minions in pinstripes – instead of prison stripes.

Estimates now are that U.S. banks – the too big to fail ones – will end up paying more than $100 billion in fines, settlement costs, to buy back bad mortgages, to right some of the past wrongs related to the mortgage crisis they caused.

It could end up being more. But they’re all still in business. They’re able to digest these “costs of doing business,” and get bigger. And the banks are making enough profits to want to “reward shareholders” by raising their dividend payouts and buying back their stock.

Then there’s the LIBOR mess. Banks colluded to manipulate the London Interbank Offered Rate. LIBOR is referred to by the British Bankers’ Association (an outfit populated by bankers as a kind of trade group that oversees LIBOR dissemination), as “the world’s most important number.”

There have been some settlements already. Three giant European banks – Royal Bank of Scotland, UBS, and Barclays – have ponied up almost $3 billion to settle matters regarding their involvement.

How much will the big American banks have to pay to settle their end of the scheming manipulation?

Nobody knows. But estimates I’ve seen range from $7.8 billion (I have no idea how the analyst came up with that figure… Thin air?) to more than $125 billion.

The point is that no one knows how much it will cost banks because it’s impossible to calculate how so many people, businesses, municipal governments, and anybody who paid interest based on LIBOR, was adversely affected.

The banks will pay whatever they have to in order to get these matters settled. They’ll all still be in business and able to digest these “costs of doing business.” They’ll get bigger, and make enough profits to want to “reward shareholders” by raising their dividend payouts and buying back their stock.

But the hits keep coming folks.

Now the banks are being investigated for collusion, price fixing, restraint of trade, and just flat out being the criminal enterprises that they are. And for all their hard work in keeping credit default swap (CDS) trading off exchanges – where prices would be transparent and honest.

Then again, who cares about that little corner of the market for that little product?  It’s only estimated to be in the tens of trillions of dollars. They are weapons of financial mass destruction in the shaky hands of speculating shysters.

Okay, that’s a hyperbole. There is a place for CDS, it’s just not where it is now – which is everywhere.

How much will it cost banks? $1 billion? $10 billion? $100 million billion?

Who cares?

The banks will pay whatever they have to. They’ll all still be in business. They’re able to digest these “costs of doing business.” They’ll get bigger, and make enough profits to want to “reward shareholders” by raising their dividend payouts and buying back their stock.

Starting to get the picture?

Banks have become protected criminal enterprises.

They couldn’t do what they do without two things…

Make that one thing, because the one thing really encompasses the two things. I was going to say with they operate under the auspices of their cronies in government – and the Federal Reserve or central banks everywhere. But forget the government stooges. They are beholden to the Fed and central banks, which they long ago sold their souls to.

Without central banks to bail out the banks they would fail. And they should. But they can’t because they are too big to fail – and too big to jail.

Now that’s a business model!

Oh, and why are governments around the world (case in point: the United States) able to run mega-deficits?

That would be because they’re in bed with their cuddly central banker colluders, so they can print money to buy their never-ending, always-spewing bills, notes, and bonds that finance political pandering to the voters to stay in power.

They couldn’t do it without central banks.

Related: Financial Select Sector SPDR ETF (NYSEARCA:XLF)

Money MorningWritten By Shah Gilani For Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially ; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


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