The idea of banks being too large to fail is one that has been spoken about time and time again, but so far, nothing has changed.
The destruction caused by the large banks, who have recouped more than their fair share of losses from the various financial crises while the rest of us have suffered, is almost irreversible.
So what are we left to do? Do we continue to support them through scandal after scandal? Do we break them up? What would the ramifications of that be?
Truth be told, there isn’t exactly a simple answer to this issue, with hypocrisy flying in all directions.
In 2010, President Barack Obama made the bold declaration that “there will be no more taxpayer-funded bailouts — period.”
This, unfortunately, turned out to be an empty promise.
The too big to fail banks are only too big to fail because of taxpayer support. If Goldman Sachs and Wells Fargo were not supported by a cushion of taxpayer dollars, their credit ratings would be downgraded significantly, along with Morgan Stanley’s.
A March 27th report by Moody’s shows that these banks are being propped up solely by taxpayers, which is the only factor preventing their downfall.
Bank of America, Citigroup and JP Morgan would all be downgraded three grades if they were without the support.
“They have a high probability of government support,” said Moody’s Senior Vice President David Fanger.
The solution may not be an easy one, but we cannot merely accept that these bank are allegedly too big to fail.