Attacking banks is in these days. Except for stock holders and employees at banks it is easy to bash them. After all the government bailed out several Wall Street banks with TARP money. (We don’t hear much about the fact that this money was returned.) But what followed the bailouts was a spending spree meant to help the economy. There is no evidence it did anything to truly change our economic mess. For this reason the president and his administration have a love-hate relationship with banks in general. While he has expanded government’s role in monitoring banking he has also approved the money needed to rescue the banks. This makes his friends on the left very nervous.

s-BANK-OF-AMERICA-large300 The government’s bank bailout has made them an easy target for angst. I even found myself complaining as I left my own bank a few weeks ago. Why the new fees? Wasn’t this service free in the past? How soon I forgot that the bank has every right to run its business as it pleases. And it runs its business in order to make a legal profit. And I have every right to not use the bank if I choose.

Banks generally provide financial contributions to both political parties. Why? It makes sense to cover your bases. But squeezing the profit margins of banks through tougher regulations and price controls is neither good economic policy nor good politics.

Let me state what should be obvious but is clearly not understood by many younger Americans—healthy banks are needed for a long-term recovery of every aspect of our economic life. Yet banks bear the brunt of people’s anger. Who owns these banks? A large portion of the middle class is the real answer! Anyone with savings in a 401(k) plan is invested in equity mutual funds which are connected to banks and have suffered with the banks. Banks have stock holders and these include many more people than the super rich.

Punishing banks and banking because of a few thousand wealthy, greedy Wall Street bankers and traders who intentionally and illegally abused the system during the meltdown is not the way to help America. It hurts ordinary citizens and it hurts the creation of jobs.

Take credit cards as an example. The government decided to interfere in interest pricing and fix a problem. This naturally led to banks raising their costs for service and the rationing of money for loans. If banks lose money in one place they will obviously seek to make it back in another. This is the way business works in a free market. Only someone who is naive or who opposes economic freedom would claim otherwise. One thing is quite clear. Bring down the banks and you will bring down the whole economy. We’ve been there before and it seems that many young people never got that lesson if they got any lesson in basic economics at all.

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  1. Adam Shields October 28, 2011 at 6:10 am

    Some certainly are attacking banks in general. I agree banks are not the problem. The problem is very large banks with too many divisions that are not related to banking. The problem with banks today would not have occurred 20 years ago because banks were not allowed to sell insurance or securities, etc.

  2. George C October 28, 2011 at 8:13 am


  3. Al Shaw October 31, 2011 at 6:47 pm

    How quaint that you appear to believe that America has a free market.

  4. Greg Metzger November 7, 2011 at 11:37 am

    John, I appreciate the wisdom here as someone who has taken to focusing on the banks lately. Let me explain what is for me at least the reason for this–there are indeed many reasons for our economic crisis and there are many things that banks do that reflect the common good, but there has been way too little genuine reform done to address the major role that decidedly untraditional forms of banking business played in the economic crisis. This is so, as I have argued at the link below, because of the extraordinary influence on both parties of big banking interests. None of this is to say that your points are not important for me and other critics, but it is to suggest that your broader points are not inconsistent with criticizing strongly the novel forms of financing that massive banks engaged in and have not yet been made accountable for.

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