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Too Big to Fail? Too Big to Bail!
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I’ve been following the erosion of the Big banks since the end of 2007 and the landscape is frightening.

Big banks, under the direction of Big Chief Executive Officers, have been on a path of self-destruction for at least seven years. They’ve misappropriated depositors and investors funds to finance their toxic financial risks while pocketing grossly overinflated compensation. And no one seemed to notice.

But we, Congress in our name (their constituents), keep throwing money at these huge banks and other financial institutions claiming that the are, “Too Big to Fail.”

Are they too big to fail? No! Would the financial system, as we know it, collapse? Probably!

But, the most important question should be: would we survive the collapse of the big banks? The answer is,Yes!

Yes, there would be pain. But is there not going to be pain anyway? The failure of the giant financial institutions would definitely hurt. Their failures could cause a lot of systemic damage. But who got them into this untenable position? They did: through over leveraging, misuse of depositors and investors money, bad loans, and the development of creative financial instruments, many of which were nothing but risk taking gambles. And the gambles failed.

Executives have done little to show they deserve to be bailed out by the American taxpayer. It’s business as usual; top executives continue to show a disconnected arrogance and the same hubris that got us into this mess, underscoring the need to pull any financial assistance.

There are lots of smaller local, community, and regional banks, more than 7,500, that have been responsible, that have handled clients assets properly and responsibly.

The CEO’s of the Egregious Eight appear, through their actions, to be oblivious to the devastation their corporations and their own personal greed have caused. Reluctance to pull bonuses, cancel extravagant retreats or orders for executive jets, and decrease executive compensation are telling signs of their committment to help us overcome this global meltdown and brings into question their ability to lead.

We can correct that. Depositors should begin to move their money from big banks to responsible local, community, and regional banks, and credit unions. A phased and orderly movement of funds from Bank of America, Citibank, JP Morgan Chase, Wells Fargo, and institutions like State Street, Fifth Third, PNC Financial, KeyCorp, and US Bank to more responsible banking institutions would strengthen the banking system and reward those banks that adhered to solid, trustworthy fundamentals.

Fear of moving money to smaller banks is real when you consider that the FDIC has already placed 21 banks in receivership during the first three months of this year, compared to 26 in all of 2008. But the big banks, in which you currently have your money, have already failed. You just haven’t been told yet. The big banks have been less than honest in disclosing the amount of toxic instruments they still hold. Nor have they been forthcoming in assessing how many more of their potentially toxic assets will default in the near term. And though it is disturbing, the number of banks taken over by the FDIC is a very low percentage considering the number of banks in the country.

The FDIC has moved to further protect your money raising the individual deposit insurance from $100 thousand to $250 thousand creating a higher level of safety. This new protection is available to all FDIC insured banks so your money is safe at most of the small banks in the system.

To further improve your chances of selecting a ‘good’ bank you can go to Though not infallible, bankrate evaluates thousands of banks and scores them according to their asset management, current capital and liabilities. It is easy to go to and select a healthy smaller local bank to safely move your money.

Do not move all your money at once. Moving five to ten percent each month will prevent a run on the bank that would be even more devastating. But, once the transition begins big banks will be forced to make adjustments, to close branches, to firm up balance sheets, to cut executive compensation, and design a model that will allow them to stay in business if they want to compete with the new growth of responsible smaller banks. As banks begin to close down branches the smaller banks will step in to open new, healthy, responsible branches.

The responsible, orderly movement of money from large banks to healthier local and community banks would begin to rebuild a failed banking system and send a message that can’t be lost, even on Congress; “Too Big to Fail, Too Big to Bail!”


This is the first of many opinions I will include on Big banks have caused egregious harm to the financial system. This is one small solution for a new beginning. Posted on Worth an, March 29, 2009