Liberal protesters “occupying” Wall Street hate the big banks, which they see as the engine of capitalism. But conservatives ought to hate the big banks because they are the enemies of capitalism.
Three events last week cemented how the bailed-out subsidy sucklers of Wall Street continue to profit, not from the free exchange and risk-taking that embodies the market, but from cronyism and offloading their risk onto the taxpayer.
First, Bank of America, which would have collapsed if not for the 2008 taxpayer-funded bailout, moved a reported $55 trillion in derivatives from its investment banking arm, Merrill Lynch, to a subsidiary that is backstopped by taxpayers through the Federal Deposit Insurance Corp.
Bloomberg news reported that FDIC officials don’t like the move, which puts depositors’ money at risk and taxpayers ultimately on the hook if risky derivatives blow up. But Wall Street insiders like the move for precisely that reason: If Bank of America melts down, these hedge fund managers or other big-time investors want their money in a division of the bank propped up by government.
In short, big-time investors in risky financial products want taxpayers to bear some of their risk, and Bank of America has come up with a clever way to do that.
Carney will address a John Locke Foundation Headliner audience Dec. 15 in Raleigh.