The Diane Rehm Show

Just a supportive note about cronyism in America and the culpability of commercial banks: I also thought Katheryn Dicks argument that community banks are separate from investment banks and must be profitable enough to make consumer and business loans to be a bit generous to the industry. From what I’ve read, these banks fueled the sub-prime boom with their “originate to distribute” model, where all they really cared about was the thirty days it takes to get a mortgage loan to Wall Street and tucked away into a CDO for up-sale, and risk distribution. Also, even from a strictly practical perspective, if interest rates are to rise (her suggestion) to allow community banks to be more profitable, that would mean that Americans are 1) first bailing out Wall Street investment banks as taxpayers (inasmuch as the Fed gives banks low-interest loans that they can turn right around and buy bonds with, capitalizing on the spread), and 2) again bailing out commercial banks as consumers (with higher interest rates with which to pay down credit card and mortgage debt). Who’s bailing out Americans? If “America the meritocracy” were not a myth, we would not need business and financial regulation and a progressive income tax system. Wealth is power. Nepotism, personal contacts, and the those-who-get-along-best-go-along model is a reality at about every level. The University of Michigan did a study about this, years ago, documented in the book, “The Rich and the Super Rich.”