berman@psuvax1.UUCP (Piotr Berman) (01/15/86)
> >> >Imagine that there is no regulations. Then you might have: you > >> >want to borrow, deposit here, insure here, use us as a brocker. > >> >Or worse: we do not like you, we will recommend everybody not > >> >to borrow you. > >> > >> Such tactics work sometimes -- and sometimes not. Would you like > >> to know where it's used a lot around here? Bless you Piotr! The > >> GOVERNMENT operates in this way: .............................. > >> > >Which just supports my claim that not only the GOVERNMENT has > >the power. > > No, Piotr. It supports the notion that the government is not a source > of purely good tactics in this context. I don't deny for a moment > that banking types would like to collude for purposes of blackballing, > (I don't assert it, but I don't deny it either) but (happily) they > tend not to believe each other, and when they do, there's an opening > for what Laura has named the "Toad Terrific" bank to make a killing by > applying better methods of discernment to the alleged deadbeats. > The real problem is the following: big institution could have a tendency (quite visible today) to merge, buy one another etc. Then they will induce people into package deals, which could gradually increase the leverage of financial institutions over clients. Agreed, the leverage is not a raw power, but it is still something. > >Of all the bissnesses, banks can potentially wield the greatest power. > >You as individual may do not feel it this way, but every kind of > >bussiness needs credit. Once there is a leverage, a dependance may > >appear. > > If banks are accorded the exclusive right to lend money > by the government (and here you'd better bear in mind that there > are credit unions, international banks, and the bond market) then > your statement is true. If the government makes moneylending contingent > upon being in favor with the government (not just within a simple law, but > in favor) then your statement is true. Other than that, I don't see > how bankers could retain a monopoly (which is what you seem to fear). > I am not talking here about a monopoly, or even an oligopoly, but a set of institutions which often behave with striking similarity (currently: charging very large interest on VISA/MC accounts). > >of a reap-off here? [A parable about a poor country and greedy presidents of the country and a huge bank respectively] > > There is indeed. Did you spot the quick fingers of the president of > HB? Did you note that if HB were merely one of many, many, agencies that > had to CONVINCE people of their credit-worthiness (rather than have the > government DEFINE them as being credit-worthy, he'd never have gotten > away with it? Do you see why, in such an environment, Mr. Decent would > invest in a fund of such things, rather than betting his all on > HB? Do you see that such manipulations are greatly eased if the HB > president can say: (as they do, over and over) that they're insured > by the FDIC? > > >In the unregulated past the above scenario differed: John. V. Decent > >actually was loosing his account and job. And the reap-off was bigger. > > Ho hum. I disagree. In the unregulated past, we didn't have > Continental Illinois, and Chrysler Corp bailouts to show folks that the > way to save their business is NOT to keep it streamlined and honest, but > to have a good Washington man. (Having a good Washington man is SOOO > much more efficient.... and the little competitors, just starting out, > don't have one to protect them against YOUR Washington man). > In the unregulated past every once in a while a bank was going under together with life saving of many folks [or so was the common wisdom, here my knowledge is drawn from novels like Mark Twain's]. > By the way, unregulated private industry has never come close to > equaling the failures of banking regulation: the French Assignat > inflation, the Collapse of the 1920's German economy, and yes, the > Great Depression. If you doubt the government's blame for the Great > Depression, take a look at what Milton Friedman has to say about it. Before Great Depression there was plenty of depressions (without capital D). What Friedman says about causes of Great Depression may be read in more than one way: there was too much of regulation, or too little and without sufficient sophistication. Friedman himself advocates skillful control of money supply, and even Friedman errs in prediction what given level of money supply will do (currently Volker seems to do it better, contrary to Friedman predictions the inflation is still checked). Having Friedman's mixed luck with the current predictions inmind, I am less willing to believe completely his story on Great Depression. Returning to the topic "Power of banks", it is mostly the power of the rich people to influence things according to their biases, and the average worldview differs very much if you take simple average and average weighted with money. Domestically, the democracy has much of the controlling influence, but when the poor countries are concerned, it is not so: their rich save abroad and loans come largely from the foreign institutions. Piotr Berman