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Why I want to be a bank

July 15, 2009

Bank rescues is the wrong thing to do, US investor Jim Rogers said yesterday.

His argument is that banks are just like any other business and should be treated like one. I actually find it hard to disagree with him.

Isn’t it curious. When a borrower takes a risky venture and stumbles, a bank is quick to foreclose on him. If a bank takes a risky venture and stumbles, it must be rescued. And rescued they were. (I’m taking about the banks on Wall Street.)

The argument is simple. A bank wipeout could spread and become a WMD, destroying the very pillars of the American economy and sending it back to the financial stone age. How to be the leader of the free world when you’re poorer than Bangladesh? Under no circumstances should it be allowed to happen.

This I believe is the basis of “too big to fail.”

It does make me wonder, are banks public or private institutions? How do you deal with a public institution that is privately held?

The bank rescue also sends a message that if you can choose to be any business, you really wanna be a bank.

Not just any bank. A bank that fulfills two criteria. (a) Dumped all its depositor’s money into risky instruments like subprime mortgages, and in huge amounts too, like $1 trillion in other people’s money, (b) pays its CEOs hundred million dollar bonuses a year.

The target is to be in a position to say, “I got you now. If I go down, you go down.”

Then your business is secure because your customers (= depositors) will fight all the way to protect you, including bailing you out so you can continue to enjoy your $100 million dollar bonuses.

When I grow up, I wanna be a bank, woohoo!! 😀

On a more serious note, do you think banks should be rescued?

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One Comment leave one →
  1. July 15, 2009 5:03 pm

    No. Never. And 1 bank should never be allowed to acquire another bank with the gov’s support. 😐

    anyway, maybe loan sharks used to think like u – i want to b a bank when i grow up!

    Sharks get their fins cut off for soup. I’d rather be spongebob, hahaha.

    Yeah, I agree with your opinion on banks. I had anticipated Obama to dismantle and re-invent the sector into a form that can never say, “if I go down, you go down.” But alas, they just propped up the same old thing.

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