18 THE BiG DROP
■ Everything that Made 2008 a Nightmare
is Worse Today
In 2008 all we heard about was too big to fail. Today, however,
the banks that were too big to fail in 2008 are bigger. The five
largest banks have a higher percentage of the total assets in
the banking system. They have much larger derivatives books
and a higher concentration of assets that would seem to be
moving in the wrong direction.
We all know the San Andreas Fault in California can cause
massive earthquakes. We don’t know how big. They can be
quite big, as we saw in San Francisco in 1906. But nobody
thinks it’s a good idea to go out and make the San Andreas
Fault bigger. We’re not sending the Army Corp. of Engineers
out there to make the fault line bigger. In financial services,
however, that’s what we’re doing. We’re making the fault line
bigger by allowing a greater concentration of assets.
Why is that? Well, there are two reasons.
Number one, policymakers don’t use correct models. They
don’t understand that they’re creating more risk with their
policies. They probably think that they’re making the system a
little bit safer. In fact, they’re creating more risk. They’re a little
bit blind in that sense.
The other reason is, if you want to slaughter a group of
pigs, it’s good to get all those pigs into one pen, so to speak. By
forcing all the banking assets into a small number of banks it
makes it easier for the government to steal people’s money in
three ways. Number one, obviously, is inflation. If you’ve got all
this money in the bank, even with one-quarter of one percent
or half of one percent — the Fed says they want 2 percent — it’s
enough to steal your money in small increments.
Beyond that, if there’s another financial meltdown they’ll be
able to lock down the system and freeze bank deposits more eas-
ily. If there were more banks it would be harder to corral all of
them. It would be easier for people to move from bank to bank.