Breaking The Big Bank Summary

As someone with an interest in the financial services, this blog was of great interest. The article is written by Chris Arnade, a former Citi Group employee. Learning from the perspective of an ex-employee provides valuable insight to the reader. Arnade informs us that even though the economy was a disaster, employees still received their compensation and the jobs of very few were in jeopardy. I always thought that many were laid off on Wall Street. In recent years the topic of breaking the big banks has become a strongly debated issue. After the financial crisis, Americans began to believe that these firms such as Goldman Sachs, JP Morgan, Citi Group etc. were these evil entities are to “Big to fail”. During the crisis, the stock market crashed

In a way, if the national government would have allowed the banks to fail it would serve as a lesson for banks so that they should be more careful with their investments. However, many jobs were saved. During the financial crisis, the government initiated different programs in order to alleviate these tensions of failure and economic disaster. Some of these programs included the Troubled Assets Relief Program (TARP) which United States government plunged billions of dollars into the banks. Another program was the National Economic Stabilization Act of 2008, which gave billions to rescue assets that were in trouble such as mortgaged, backed securities. A driving force of the financial crisis was the Federal Reserve’s manipulation of interest rates. The blame is always put on Wall Street, but the Federal Government should also be held accountable The Fed’s manipulation of interest rates during 2002-2006 under Greenspan was 1%. Interest rates were below inflation. When interest rates are low, banks, hedge funds and investors look for riskier assets which will offer higher returns. Bankers also take on more

There was also the issue with subprime mortgages. No one forced these people to purchase homes they could not afford. Why should the banks be blamed? Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, gave a speech, stating that those big banks pose an “ongoing risk to our economy. He strongly believes that by breaking down these banks, the government will be able to manage them more efficiently. If these banks continue to take on risk, if they run into trouble the government will occasionally have to bail them out and the problem would still not be fixed. I agree with article saying that “Bankers, when they fail, need to lose their money, their jobs, and sometimes, their freedom”. Bankers do tend to get carried away with their investment decisions at times. Furthermore, on September 17, 2011, in Zuccotti Park, “Occupy Wall Street” movement occurred (1). Their website argues that they are fighting the “corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations”. These Protestor’s label themselves at the