Some have been heralding the breakup of British banks Royal Bank of Scotland Group (LON:RBS) and Lloyds Banking Group (LON:LLOY) as a road-map to deal with the alleged issue of “too big to fail,” in relationship to huge banks in general, and large American banks in particular.
The story centers around the British government forcing the breakup of the two companies in exchange for continual funneling of taxpayer funds to them.
It seems to me that there is absolutely no proof that there is such a thing as “too big to fail” being a reality in the first place, as it will never be known because of governments pouring money discriminately into some banks, in a way that their and others’ thesis can’t be proven.
What governments around the world, including the U.S. government, have been attempting to do is keep the focus off of their interference in markets and the horrid consequences of that, so consumers and constituents believe the free market can’t survive without the government shoring them up. In other words, it’s just a grab at furthering socialism under the guise of governments seemingly protecting the people from capitalism gone array.
The truth is capitalism wasn’t given a chance because the governments were ready, willing and prepared for this moment in order to take over large swaths of industry in order to further their socialist agendas.
So now that the UK is leaning toward dismantling their large banks in order for them to continue receiving bailout funds, doesn’t that contradict what I’m saying? Not at all. What the British government is saying is the banks were too big to fail and so they had to step in to save the markets. Breaking up the big banks doesn’t take away from that assertion as to being the reason they interfered in their markets in the first place.
What that does is, again, take the focus off of why the British government, and by extension, the American government, don’t allow the markets to sort everything out. The answer from governments around the world is: they were “too big to fail.”
The problem with breaking up banks by force with any government is that it’s the government doing it in the first place. They simply have no right to step in with the barrel of a gun and make these decisions. This is all another way of continuing to interfere in what is at its core a market decision that consumers should inevitably decide, and no one else.
So if breaking up banks is a government decision, as it is in the case of Britain, as far as saying they get no more taxpayer dollars unless they do, nothing has changed in that regard concerning markets; it’s just more interference from governments which simply transfer the focus on to another issue because of the public outcry concerning the interference and long-term financial cost to taxpayers in the first place.
The point being missed is there shouldn’t have been a bailout in the first place. That’s what is being attempted to be glossed over as things move forward in the banking industry. If things get foggy, such as with the breakup strategy for large banks, it gets people to follow along as if its a genuine and truthful narrative unfolding before them, rather than realize its a move by governments to increase dependence upon it by the people residing in their countries, and to set the stage for expanding the interference in the future under the guise of similar, unproven assertions that free markets and capitalism need the government to survive.
The struggles of the banking system were the perfect arena for their latest experiment, as its complexities keep people from really understanding the motivations and reasoning behind it all.
Having said all of this, the other side is that the huge banks have willingly entered into these arrangements, as it has created even larger banks, as the government discriminately allowed those they decided should fail, while rescuing others, who are now saying they really didn’t need to be rescued in the first place. See the tangled web that is extremely difficult to follow for those of us watching the industry, let alone those that are clueless as to the why and how of all of this, other than they’ll have to pay for it for a long time to come.
In the end, much of this is related to creating a narrative most people enter into, whereby the assumptions related to one aspect of the earlier part of the story are assumed to be true, because if they weren’t, why would the story continue to unfold as it is.
The other side of it is people, for the most part, forget the way the scenario unfolded in the first place and embrace the current part of the story or narrative as the inevitable way it had to work out, thus allowing the various governments to continue on largely unchallenged as they enlarge themselves at the expense of their taxpayers and free markets.
