STOCK MARKET WATCH -- Wednesday, 2 April 2014

[DemReadingDU]

9. Have the Mega Banks Put the U.S. on Course for Another Crash?

3/31/14 Have the Mega Banks Put the U.S. on Course for Another Crash?
The Answer May Reside in Nomi Prins’ New Book
by Pam Martens

“All the Presidents’ Bankers: The Hidden Alliances that Drive American Power” by former Wall Street veteran, Nomi Prins, is a seminal addition to the history of continuity government between the White House and Wall Street from the days of Teddy Roosevelt and the Panic of 1907 right up through the Panic of 2008 and the Presidency of Barack Obama. (Don’t be intimidated by the 69 pages of footnotes; while meticulously researched, this is a captivating read for anyone seeking clarity on why Wall Street can collapse, get bailed out by the taxpayer, cause a Great Recession and still call the shots in Washington.)

The hefty hardcover deserves instant classic status for two reasons: like no other tome before, it explains through original archival material why the mega Wall Street banks are coddled by Washington and have been allowed to survive a century of public looting – because they are considered an essential financial component of the U.S. war arsenal.

The book also brings into crisp perspective the history of mega banks like JPMorgan Chase and Citigroup, their variously esteemed and despised titans of yesteryear, and why the country is reliving the mistakes of 1929 today.

Prins makes us all insiders as we read the private notes from Presidents scribbled to the historic Wall Street figures of their day. There is enlightening detail provided of the lead up to the 1929 stock market crash and the Great Depression. The foundation was laid, brick by brick, stone by stone, in a manner so identical to the lead up to the 2008 Wall Street crash that it gives one pause as to whether we have yet seen the worst of the aftermath.

The early warning signs were there, just as they were in 2007. Prins writes: “…home prices had softened in 1926, car sales dropped in 1927, and construction would level off in 1928. Inequality had increased dramatically, threatening economic stability. The whole system was buckling.”

And, of course, there was a bubble, over-leverage and Fed involvement. Prins explains: “Even before the bubble of the mid-1920s, there existed signs of trouble brewing in the land of plentiful credit extensions. In November 1923, the Federal Reserve began increasing its holdings in government securities (such as Treasury bonds) by a factor of six, from $73 million to $477 million, in what could be considered the first instance of ‘quantitative easing.’ This keeps rates low, not by setting them explicitly but by forcing the price of bonds up, which has the net effect of driving rates down.”

Prins points out that the “prosperity” of the late 1920s was coming from two sources. “First, as with all banks, money came from deposits – the bigger and more spread out the bank, the more channels for receiving new deposits.” The other source, says Prins, was the Fed, “which kept rates relatively low on loans to banks during the speculative period and required little in the way of reserves, or collateral, to be set aside for stormy days.”

much more...
http://wallstreetonparade.com/2014/03/have-the-mega-banks-put-the-u-s-on-course-for-another-crash-the-answer-may-reside-in-nomi-prins%E2%80%99-new-book/