By Michael Mccune: The Rant (US Government auditor for 16 years -Banks Disappear In Economic Weakness- (( to Have Michael send you the Rant to your Email contact Him Here (( mccrant@gmail.com))

Banks Disappear In Economic Weakness

To paraphrase President Obama, "I took my eye off the [real economic] ball." For that I apologize to Rant readers.

 

While trying to keep up with the messes scattered by this Administration--Benghazi, NSA, IRS, Syria, monetization of the debt, etc.--I took my eye off the economic ball. Today the oversight is rectified.

 

Despite the volumes of positive news coming from the markets, you must remember the markets no longer reflect the state of the economy but the state of DC.

The markets were supported by DC and thus expect Washington to continue that support for their reckless gambles and the inevitable losses. Going over past writings I find that almost 18 months have gone by since I last looked into the main facet of the economy, the banking sector.

 

I'm willing to bet you haven't thought about how much fear was being generated from 2008-2010 by the bank closings recently. In the swirl of the scandals, the election and Superstorm Sandy, 2012 was quiet year on the banking front because it was backburner news. But banks are back on the Rant's scope now and should be on yours.

 

Would it shock you to know how many banks closed between Jan. 1, 2008 to now? Pick a number to see how close you can come before reading on. I'll give you a few moments to collect your thoughts...Ready?

 

In that time frame, 68 and a half months, the number of banks in the United States has gone from 8,534 to 6,926. That's 1,608 banks or more than 23 per month and almost 270 per year that have been dropped. What's spooky is the number of jumbo banks has dropped in almost equal proportion from 10 to 6 in the same time span.

 

What this means is the banking sector, especially the community bank which is the backbone of Main Streets across America, is still in deep trouble. The financial problems that led to the 2008 meltdown are still in play but the government is at work against the vital community bank even more than the self-inflicted problems.

 

The Rant has repeatedly debunked the false economic numbers coming from Washington. The economic situation crystallized when the Federal Reserve did not announce the expected tapering of the $85 billion per month stimulus package this past week. The Fed does know the true state of the economy, it just doesn't want you to know. But the Fed couldn't begin the expected tapering move because the overall economic numbers were so poor when adjusted for true inflation and not the measly 1.7% it alone determined that the Rant was forced to look squarely at the banks.

 

The unabated printing means bad news for America but great news for Wall Street's concerns so the markets raced ahead to new highs because the traders know their risky venture will still be backed by the government printing press and necessary cash infusions when and where needed as things start unraveling.

 

After the '08 meltdown, the government enacted all sorts of regulations for the banking system but, as reported July 28, 2010 by the Rant, the Dodd-Frank bill did not address the true problem within the banking sector and left in place the derivatives swaps trades and didn't adjust the grade status of this paper manipulation to reflect the true uncertainty of the asset. Only the big boys were trying to hide the true scope of their liabilities by dealing in derivatives but the strangling regulations missed them and hit at the heart of the community bank.

 

Consider for a moment the number of government entities each bank is accountable to. Banks must deal with the Office of the Comptroller of the Currency, U.S. bank examiners, the Federal Reserve, the Federal Deposit Insurance Corporation, state bank examiners and the newly-minted Consumer Financial Protection Bureau. The big guys have enough staff to handle the blizzard of paperwork and still do business as usual. The small bank drowns in the paperwork.

 

The CFPB was established to make sure the banks were treating all customers equal--particularly in loans. But the irony is the small banks were not guilty of making shaky home loans in the first place. They shunned the leveraged derivatives trade, carried no toxic securities and mostly held Grade A assets to cover their depositors' funds. Because of their sterling record, they also received no bailout money and are therefore less profitable than the too-big-to-fail group. So the small bank loses on two fronts--from taxpayer support and unnecessary red tape. 

 

None of that is true for the big boys. The big guys also have expanded their nefarious, dangerous derivatives holdings and the bank regulators--simply because they are the megabanks--have looked the other way. "Nothing to see here America, just move along." (Wink, wink.)

 

So Main Street languishes while Washington and Wall Street party hearty.

 

Of the 1608 banks that have gone into the ranks of closed since 2008, about 500 were closed by regulators. The rest, trying to relieve the regulation burden, found it simpler for all concerned to merge with bigger banks.

 

The pattern here is the same objective as Obamacare. There the goal is to have the government own all insurance possibilities for health care. In banking the goal is to have all banking concerns under the thumb of the Federal Reserve.  

 

Go back to the megabanks. In 2008 the top ten banks controlled nearly 82% of all bank assets. Then came the meltdown and the solace through bailout from the government via the beneficence of the taxpayer. Now the remaining six hold nearly 95% of all bank assets registered in the U.S.

 

This sounds bad but consider the true state of the financial sector since 1984. In 1984 the FDIC covered 17,780 registered institutions. Today's measly 6,926 means less than two of every five banks that existed 29 years ago are still around. 

 

This at a time when the government continues to harp about "expanding choices for the consumer". Where is the expansion?

 

This inherent weakness within the economic system nearly six years after the housing bubble popped, five years after the financial sector meltdown and more than four years after the "recovery" officially began, clearly demonstrates America has not taken the first step to recovery yet. Main Street is adapting to lower expectations and the success of the markets has masked the warts on the economic state of America. Big banks reek of decay that no amount of perfume from Washington can completely cover.

 

It's that rotting face that Washington cannot afford to let see the light of day. It's not that America has a declining clout status among the rest of the world, showing the true state of economic weakness would deny the political forces their base of manufactured opposition as well.

 

The political antics are hastening the day of the dollar's demise. Above all, the political powers must hold onto the myth the dollar is the world's benchmark currency. Without that myth, what happens to the control and power they all covet?

 

"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson

 

Just a quick reminder that the Rant is still working towards a profit-based status. As definitive results are achieved, you will be informed on how to continue accessing the information contained in the Rant. Thank you for your support.--Mike