Uncle Sam Needs YOU for a Bailout: 6 Reasons Another Big Banking Crisis Is Coming Our Way

[xchrom]

http://www.alternet.org/economy/uncle-sam-needs-you-bailout-6-reasons-another-big-banking-crisis-coming-our-way



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1. Too big to fail

Thirty years of financial deregulation have seen unprecedented concentration of the financial sector. Before, financial firms were limited both in where they could do business and the types of business they could do. This prevented a big banking blowup in the U.S. for more than 50 years.

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2. See no evil, hear no evil

While the financial system was consolidating, another threat was looming: the “shadow banking system“ was being created. Another New Deal reform, the Investment Company Act of 1940, imposed heavy restrictions on investment companies, which were intended to protect investors from excessive risks, fraud and scams.


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3. Calling in the cavalry, but giving them the wrong directions

Once the U.S. decided to deregulate the financial sector, and banks got bigger, it was inevitable that the government would be called in for a rescue. Most of us were aware that in 2008, the government stepped in to bail out big banks that were destabilized by Lehman Brothers’ collapse and by the bad derivatives bets entered into by AIG Financial Products. The world financial system was at the brink, we were told, and the Troubled Asset Relief Program (TARP) was necessary to save the system.

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4. Creating financial weapons of mass destruction

The need to bail out AIG Financial Products in 2008 arose from huge losses in unregulated derivatives trading. We should have seen that coming, because derivatives had caused LTCM to fail back in 1998. In fact, plenty of people saw that derivatives were problematic. Warren Buffett called them “financial weapons of destruction” back in 2003.

[Kolesar]

1. This reads like a history lesson, but how do the authors predict another "crisis"?

This is the closest they come:

the lack of a streamlined regulatory system means banks play regulatory arbitrage. Recently we saw this dynamic unfold—unsuccessfully in this case— as Standard Chartered Bank used its press cronies to pressure Benjamin Lawsky, New York’s Superintendent of Financial Services, to go easy on the bank for laundering money for Iranian clients and cooperate with other regulators — the Fed, Justice and Treasury— that favored a softer stance. Lawsky threatened to cancel the bank’s license to operate in New York—a death sentence for any international bank. When he didn’t back down, the bank agreed to a $340 million settlement. Lawsky’s firm stance improves the prospects for the pending federal probes.

Is there some hidden technical analysis that predicts a money problem? I would like to know. I have a lot of money in the markets.