Does Congress Have the Courage to Break up the Banks?

Miller On The MoneyIt’s time to go back to the trust-busting days of yesteryear and break up the big banks. Does congress represent the people or special interests?

Consumers lost when the Glass-Steagall act was repealed in 1999. It created banks, “Too Big to Fail”, with billions in taxpayer bailouts and mind-boggling fraudulent activity.

Joseph Stiglitz, Nobel Prize winner in economics sums it up well:

“Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities)….

Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. (That’s why) … the government agrees to pick up the tab should they fail.

Investment banks … have traditionally managed rich people’s money-people who can take bigger risks in order to get bigger returns.

When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risk taking.”

The repeal created a small number of huge investment banks. CNBC tells us 5 biggest banks now own almost half the industry.

The $7 trillion in assets of the 5 biggest banks (JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and U.S. Bancorp) were almost 45% of the industry total at the end of 2014. 6,504 banks divvy up the remainder.

Despite the 2010 “Wall Street Reform and Consumer Protection Act”, regulators warn the 5 top banks are “Still too Big To Fail.” In a letter to JP Morgan regulators warn, “The current arrangement could pose serious adverse effects to the financial stability of the United States.”

It does not warn of dire consequences for the bank and stockholders, but rather the “financial stability of the United States”.

Criminal activity is the norm

The big banks have resorted to a wide array of criminal activity to boost their profits and bonuses.

CNBC has been tracking them and tells us, fines reached $150 billion. The graph below highlights the wide spectrum of illegal activities:

Miller On The Money

By late 2015 the tally rose to $204 billion. Here are some recent headlines:

  • Another day, another $185 million: Wells Fargo fined for opening fake accounts.
  • JP Morgan Adds $2.6B to its $25 Billion Plus Tally of Recent Settlements.
  • Big Banks Fined $5.9 Billion After Probe Into Rigged Dollar-Euro Trades.
  • CFPB Orders U.S. Bank to Pay $48 Million Refund to Consumers Illegally Billed for Services Not Received.
  • U.S. Bancorp Enters Into Consent Order in Anti-Money Laundering Case.
  • Citigroup to Pay $7 Billion in Mortgage Probe.
  • Bank of America to Pay $16.65 billion for Financial Fraud.

Crime pays well. Fortune Magazine’s article “Wells Fargo Exec Who Headed Phony Accounts Unit Collected $125 Million”:

“it does not appear that Wells Fargo is requiring Carrie Tolstedt, the Wells Fargo executive who was in charge of the unit where employees opened more than 2 million largely unauthorized customer accounts – … to give back any of her nine-figure pay.

… Tolstedt gets to keep all of it because she technically retired.”

The article is about her not having to return any bonus money. Nothing is said about criminal charges.

“If you ain’t cheating, you ain’t trying”

The above quote is found in the USA Today article, “5 Banks guilty of rate-rigging, pay more than $5B”. Sadly, no individual bank employees were hit with criminal charges. Jimmy Gurule, a former Assistant Attorney General and Treasury official was asked about the criminal pleas and massive fines:

“Once again the actual perpetrators and criminal architects of the fraud scheme will avoid criminal liability, … While the payment of these large fines may help to reduce the federal deficit, such penalties will do little to change the pervasive culture of corruption that currently exists in the banking sector. Real change will only occur when corrupt bank officials are indicted, convicted and sent to prison for their crimes.” (Emphasis mine).

Why does this criminal behavior occur?

Richard Eskow quotes a study in his article, “The Big Banks Are Corrupt – And Getting Worse”.

“The percentage of bankers who believed their own colleagues had engaged in illegal or unethical behavior has nearly doubled since 2012. And more than one-third of those earning $500,000 or more annually said they had first-hand knowledge of wrongdoing in the workplace.”

“Nearly one-third of respondents (32 percent) believe compensation structures or bonus plans in place at their company could incentivize employees to compromise ethics or violate the law.”

Incentivizing illegal and unethical behavior appears at all levels of the banking industry. The Center for Popular Democracy published a revealing report. It begins at the teller level:

“Details from the legal settlements with the biggest U.S. banks illustrate the micro-level mechanisms the top banks used to enact their predatory practices.

Banks impose skewed sales quotas on their tellers, customer service representatives, and loan interviewers.

Workers are forced by management to meet these sales goals based on hawking mismatched or predatory products and services… Workers are often threatened with termination if they fail to meet these goals.”

I feel sorry for these front line workers.

  • An employee of HSBC bank stated that workers who failed to meet their sales goals had the difference in sales taken out of their paycheck.
  • A teller at a top-five bank reports that she is subject to stringent individual goals on a daily basis: if she does not make three sales-points (selling a new checking, savings, or debit card account) each day in a month, she gets written up.
  • Customer service representatives at a call center for another major bank report that each individual has to make 40 percent of the sales of the top seller to avoid being written up. … thereby crafting skewed incentives based on the profitability of a product sold, not on how well it matched the needs of a customer.

One call center worker sums it up well: “… What they want, what they need, isn’t important to us. Selling them a product is.” (Emphasis mine)

Management isn’t any better

The US Inspector General produced a Special Report about the TARP bill and its aftermath. Here is all you need to know:

“Treasury allowed some of the largest banks to exit TARP without meeting the Government’s criteria … the banks … wanted to exit TARP to avoid the public stigma of remaining in TARP and limits on executive compensation.” (Emphasis mine)

Reuters looked at Goldman Sachs and reported, “Goldman and Morgan Stanley, the two largest U.S. investment banks, converted to bank holding companies …Goldman, in the first half of 2009, set aside $11.3 billion for its year-end bonus pool, equal to about half of its revenues.” (Emphasis mine)

During my career I served over 40 of the top 500 US corporations. I’ve never seen an industry that comes close to allocating 50% of their revenues for bonuses. All the little bonuses paid to the little people add up to huge bonuses for management.

Big bank employees, top to bottom, are incentivized to do whatever it takes (even if it is illegal, immoral and unethical) to maximize profits. That has to stop!

No bank should be too big to fail! Break them up! Separate commercial and investment banks. Let the big investment banks take the risk on their own money. Taxpayers should not reward their greed and bail them out for their mistakes.

The Brookings Institute reviewed the two major party platforms and concluded, “Democrats and Republicans agree: Reinstate Glass-Steagall.” Both parties promised it so we can take that one to the bank! (Sarcasm intended)

Get out of jail free

Get Out of Jail Free CardWhen the big boys are fined over $204 billion but no one gets prosecuted criminally, you know they are well connected.

Like Monopoly game bankers, the banks currently hold “Get Out of Jail Free” cards.

They buy protection from the politicos every way they can, campaign donations, speaking fees, donations to special funds and Lord knows what else.

I found the recent announcement, Goldman Sachs tells employees they cannot donate to Trump Campaign – but no restriction on Clinton’s both laughable and frightening.

Partners are restricted by policy from contributing to “… minimize potential reputational damage caused by any false perception that the firm was attempting to circumvent pay-to-play rules…”

“False perception that the firm was circumventing pay-to-play rules” is laughable. Here’s what’s frightening. Should Trump get elected and try to rein them in, are the banks that confident they have bought enough members of congress to protect their gravy train?

The market will prevail

If Congress does nothing, the banks will still eventually collapse, the market will see to that. I wrote a short lullaby.


Rock-a-bye-bankers, on the world top.

When the truth shows, your cartel it will rock.

When the buck breaks the markets will fall.

Down will come bankers, once and for all.

It’s time for the politicos to put the needs of the voters ahead of special interests. Break up the “too big to fail” banks now, just like the trust-busting days of the past. It’s easier and safer than waiting for them to collapse again.

I don’t see any way the government can bail them out without a voter revolution or worse; there just won’t be enough tar and feathers to go around.

On the Lighter Side

I was excited to announce our “Miller, On The Money Annuity Guide” this week. We have discounted it for our current readers asking for feedback before committing funds for marketing and advertising. So far the feedback is terrific and many thanks to those who responded. If you have not done so, please take a look at it. I’m encouraging feedback and any suggestions for other topics you would like me to research. Click here to get your copy today.

The goal is to keep this website FREE and generate enough revenue to cover our costs through advertising and other special offerings.

Cub fans are excited to clinch the Central Division Championship. WGN-TV points out how pathetic the franchise has been:

“The 2016 season marks the third time in the modern era of the franchise that the Cubs have qualified for the postseason in back-to-back years, also doing so from 1906-1908 and 2007-2008.”

I remember a tee shirt that said, “1906-1907-1908 The Dynasty Continues”. We’re keeping our fingers crossed this might be the year.

And finally…

Jim M. shares some Facebook wisdom:

  • When you put grandma on speed dial it is called Instagram.
  • Stealing someone’s coffee is called mugging.
  • You know you are a bad driver when your GPS says, “Stop in 400 feet and let me out.”

And my favorite:

  • To my children: Never make fun of having to help me with computer stuff. I taught you how to use a spoon!

Until next time…


  • David

    Best article on the topic I have ever read.

    Of course there is more impropriety that could be mentioned. I didn’t see Goldman’s 5 BILLION fine mentioned as an example.

    While one can find several articles on the subject this one points out how little they will pay…and the tax breaks when they do.

    Oh yeah. No one is going to jail. No one is being indicted. Similar for all banks or quasi-banks or Wall Street firms in the Obama-appointees-run justice department

    • Dennis Miller

      Dear David,

      Thank you for the kind response. The volume of data about bank crimes was very thick. What is galling to me is no criminal charges and the huge bonuses that are paid. The banks are taking huge risks knowing that, should they make a mistake, the government will bail them out. That has to stop.

      I wonder if it is even possible for the public to goad congress into doing what is right?

      Best regards,
      Dennis Miller

      • David

        ” What is galling to me is no criminal charges and the huge bonuses that are paid.”

        And for further clarification for readers, those bonuses came from taxpayers’ debt.

  • Michael Porter

    Hello Dennis,

    This research is some of your finest, and I have been following you a long time. Do you mind if I send this along to my elected representatives? They need to see this. The climate in Washington seems good to get this ball rolling. Thanks for your consideration.

    • Dennis Miller

      Dear Michael,

      Wow, what a nice thing to say.

      I encourage all readers to forward my free articles to anyone they choose, I am trying to build my readership.

      As far as your congressional representatives, darn right!

      This should be non-partisan. You might consider reminding them that reinstating Glass-Steagall was part of their 2016 party platform. Theoretically it should pass with a 100% majority.

      I’d love to know if you hear back from any of them – other than their standard form letter.

      Best regards,

      • David

        Re: Glass-Steagall & non-partisan:

        While it was congressional push from Republicans in the late 90’s to have it repealed, Clinton could have vetoed the legislation and did not.

        I beliveve there is plenty of dirt and blame to hang on both Democrats and Republicans.They have both been feeding from the big money trough

  • Chuck

    I also believe the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which allowed banks across state lines, was another big mistake. When a business gets too big it is no longer beholden to the customer but to the shareholder.

    I’m curious what your thoughts are.

    • Dennis Miller

      Dear Chuck,

      Personally I believe investment banking and consumer banking should be totally separate. When you look at Wells Fargo and Bank of America, they were in the consumer banking business and gobbled up thousands of smaller banks during the merger-mania of the 90’s. Now they are huge and just as corrupt as those banks who started on the investment banking side of the fence.

      If they were to break up the banks and not allow them to go across state lines, what would prevent them from setting up a bank holding company and then each state is an independent corporation? That might still solve the problem. If it didn’t then they could slice them down further.

      The problem is getting the government to do anything; particularly with the level the bankers have involved them into the political side of things. When the senate cannot pass a bill to audit the Fed, (which has not been done in over a century) my confidence in the government looking after us is really shaken.

      Best regards,
      Dennis Miller

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