Kill the big banks once and for all?

What good are mega-banks? Who are they good for and could they even exist without overt or virtual government guarantees? Most of them have been used for chop-shops of American industry and issuing financial instruments of mass destruction that no one seems to understand and if they do, they do not seem to be able to explain them to anyone that does not comprehend the financial divining behind them.

If capitalists want to gamble with equity, that is their business , but federally chartered banks, using credit backed by government guarantees have no reason to exist. Gradually withdraw the guarantees and let the bankasaurs sink into the extinction pit.

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Wall Street firms should not be called banks, US official says
Head of government insurer says legal constraints on using the word 'bank' needed to dispel confusion

Andrew Clark Guardian

One of America's top financial regulators has suggested that Wall Street institutions should be banned from calling themselves "banks" in an effort to clear a fog of confusion about the word in both political and consumer circles.

Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), suggested that only commercial deposit-taking institutions, where customers' cash is safeguarded by a guarantee, should be permitted to describe themselves as banks.

"Everything gets called a bank these days," Bair told the annual conference of the American Bankers Association. "Wall Street firms, mortgage firms ... Maybe there should be some legal constraints on who should call themselves banks – maybe only FDIC insured institutions should have that label."

Such a definition would exclude the likes of Goldman Sachs and Morgan Stanley, which do not take consumer deposits but often describe themselves as investment banks. It would also leave out thousands of "mortgage banks" that typically act as go-betweens linking consumer and secondary financial markets.

An annual gathering of banking chief executives, held in Chicago this year, has been greeted with protests organised by unions furious at irresponsible lending, home foreclosures and bailouts.

Several hundred demonstrators wielding placards with slogans such as "stop robber barons" and "hold banks accountable" rallied outside the Sheraton hotel, where the financial bosses were gathering. Amid tight security, activists tried to get into an opening drinks reception on Sunday evening but were kept back by police. Protests were also staged at the Chicago office of Goldman Sachs. The American Bankers Association includes JP Morgan Chase, Bank of America and Citigroup. But it argues that the majority of its members are community banks which should not be blamed for the ills of Wall Street.

"The financial crisis is unfortunately often referred to as a banking crisis," said Edward Yingling, chief executive of the association, adding high-profile failures such as AIG, Lehman Brothers, Fannie Mae and Freddie Mac were not banks.

More than 100 smaller banks have been seized by regulators in the US this year, with the FDIC stepping in to safeguard customers' deposits. Many industry regulators argue that large institutions, too, should be allowed to fail rather than being bailed out by the government.

Bair said the concept of banks becoming "too big to fail" had become a moral hazard following aid to keep firms such as Citigroup and Bank of America afloat, and that the government ought to develop a way of winding down unviable firms in a sensible manner. He added that there was a growing political consensus between Republicans and Democrats on this.