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America must stop banking on the big guys

| Thursday, Jan. 21, 2010

The bankers' bailout worked. Now comes the bawlout.

Congress stood them up like ducks in a row last week, the heads of America's biggest banks (bigger, actually, than any banks ought to be).

What a chance to mow down inflated egos with some exercise of official scolding power. Scare them. Remind them who's boss: the public, sounding off through our elected bullies.

Because we're mad. Poll after poll shows it. We thought we had self-rising home values and no-brainer mortgages and it turned out a mirage. Somebody is not going to get away with that. The government or the bankers, take your choice.

The government's choice is no surprise: the bankers. Who else but they, Wall Street's moguls and the 60 or so biggest banks around the country, blew the housing bubble so full of air it was bound to burst in recession. So We the People had to bail out these immense institutions that messed up. And once profitable again, don't they go right back to the old habits of paying their top brass far more than anybody is worth.

No wonder public officials feel entitled to play poked in the eye. "We want our money back, and we're going to get it," President Obama said in chillingly punitive tones.

He proposed a Financial Crisis Responsibility Fee --$90 billion over a 10-year period -- to be laid on banks that took the bailout, even though some reportedly never wanted it, foreseeing the loss of freedom ahead.

If Congress goes along, the country's six top banking firms could be paying $1 billion more a year each to the government with lesser punishments falling down the line on banks merely big, not super-sized.

But can anyone believe such a fee won't hurt us more than it hurts them• It's bound to be passed on to customers. Higher bank charges and interest rates aren't just what the economy needs to continue a fragile recovery.

It would be better to go simple. Just put America's banks on notice there aren't going to be any more bailouts. Ever. In fact, let's do away with the premise. Banks shouldn't be allowed to be "too big to fail." Plus, the wall between commercial banking and (riskier) investment banking that stood up well after the 1930s debacle should be rebuilt.

If a commercial bank's assets grow to say $500 billion, it should split into two or three competitor companies. Elephantine banks serve the greed of top management but they don't lend, manage trust accounts or safeguard deposits any better than merely big banks. Or even smaller banks sometimes. If a financing comes along so huge that one bank can't handle it, syndicate it, what's the problem?

On the other hand, it's shockingly stupid for top bankers to pay themselves like princes after accepting life support from the taxpayers. This plays right into the hands of the congressional and White House scolds.

So let Wall Street go ahead and pay the customary (or even contractual) performance bonuses to lower level employees. But restrain the executive suites. And if indeed some wonderful, God-given investment talent gets bid away to the banks of Asia or Europe ... but here's a bet that's a myth. It's not going to happen.

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