What’s So Bad About Big Banks?

Throughout his presidential campaign, Senator
Bernie Sanders has called for the breakup of Wall Street’s big banks. These six financial
institutions, which likely include JP Morgan Chase, Bank of America and Wells Fargo, collectively
hold assets equal to 60 percent of the United States’ GDP. The central problem with these
banks, as outlined by Sanders, is that they’re too big to fail. So, what does this mean,
and what’s so bad about big banks? Well, a “too big to fail” bank is one
that is so deeply interconnected with the economy that its failure could lead to an
economic crisis. When such a bank is unable to pay its debtors and creditors, due to risky
investment or improper management, that inability to pay ripples through the economy. Businesses
can’t get loans or pay their employees, people can’t pay for goods and services,
tax revenue drops, and all this can lead to an economic collapse. To prevent this catastrophic
domino effect, the federal government is inclined to rescue big banks before they fail, usually
with a multi-million dollar loan called a bailout. The first major bailout of a “too big to
fail bank” was in 1984 when the Reagan administration gave $2 billion dollars to the US’ 8th largest
bank, Continental Illinois. It came close to failing after buying loans that weren’t
worth as much as was originally thought. This was not unlike the 2008 mortgage crisis, where
home loans were misrepresented as being stronger than they actually were. Perhaps the best example of a “too big to
fail” bank is JP Morgan Chase, which is worth more than any other bank in the US by
assets. JP Morgan is both a commercial and an investment bank. This means it not only
handles individual accounts, it serves as a platform for stock and bond trading. JP Morgan reached its colossal size after
centuries of bank mergers and acquisitions. In fact, roughly half as many banks exist
today as did three decades ago, and those banks carry more than 5 times as many assets. But complex financial institutions are not
a new problem. Back in 1933, President Franklin D. Roosevelt tried to separate commercial
from investment banking with the Glass-Steagall Act. This prevented mixed-use banks from using
customer money for risky, speculative investments, which if they failed, would lead to a loss
for the consumer. But in 1999, the law was repealed, and banks quickly began to invest
their customer’s money again. Many cite the repeal of this law as a potential
cause of the 2008 financial crisis. When bank investments failed, they were directly tied
to their customer’s money. Moreover, the 1984 bail out set a precedent for big banks
– that they could gamble with their customers’ money and expect the federal government to
cover their debt. And indeed after banks like Goldman Sachs and Citigroup went under in
2008, the Bush Administration funnelled hundred of billions of dollars into preventing an
all-out banking collapse. Although the bailout has since been repaid, banks are continuing
to grow larger But in 2010, the Obama Administration passed
the Dodd-Frank Wall Street reform act, which imposed a number of regulatory and oversight
requirements on the financial system. But as is clear in the 2016 Presidential race,
Wall Street reform is still a relevant issue. For example, Senator Sanders has proposed
his “Too Big To Fail, Too Big To Exist Act”, which aims to break up the six biggest banks.
Whether it is even possible to reign in big banks is still up in the air. What is clear
is that without regulations preventing banks from gambling consumer money, the risk of
another bailout will always exist. Big banks are supposed to play by the rules,
but some of the rules are a little vague. Did you know that making money off of company
information can be illegal? Find out more about insider trading by watching this video
up top. Or you can delve into the complexity of a stock market crash by watching the video
below. Thanks for watching Test Tube News, don’t forget to like and subscribe for new
videos every day!

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100 thoughts on “What’s So Bad About Big Banks?

  1. 0:10 What are those $$$$$ referring to? They don't make any sense. Are they supposed to be trillions?

  2. Somebody really messed up the slides. Look at the list of the six banks and their assets. Trillions not Billions.

  3. Implying Sanders knows a single thing about basic financial economics, or even economics in general. It's like Marx's commentary on commerce, when the man himself has never even owned a business. Go shill for another candidate, Test Tube, I'm sure Hillary needs some help. We need to stop looking at corporations as some faceless entity, but rather as a web of employment and economic stimulation. These corporations employ us, and when we aggressively tax them, the burden gets passed onto (you guessed it), us.

  4. can you elaborate on "how" those bail outs were repaid? how about speaking on where that bailout money came from or more accurately how it was created. i know these answers. this short video was kind of vague.

  5. It is called 'investment banking', not 'commercial banking'.

    Also, you are correct. President Clinton's merging of commercial banks and investment banks was a disaster waiting to happen. I'm wondering what Mrs. Clinton has been saying behind closed doors to these large institutions, in order to get them to pay for her campaign. Senator Sanders is right, we should know what she has been saying to these big institutions!

  6. "To big to fail" banks are pretty much monopolies and need to split apart in order to create more competition

  7. If you break up the big banks, then those little mom-and-pop banks wouldn't be able to single handedly purchase whole entire countries like Germany and Japan if they wanted! Too big to fail = Just fine for everyone.

  8. You can't break up big banks. They are our overlords. They have the U.S. government in their pocket.

  9. BTW, I know it's too complicated for a video for folks that don't make their living doing this, but the bail out was not really paid back, either.

    The $700B TARP funds were returned, but the rest of the deals, the one's that don't get talked about because they are very technical, essentially let them take deposits, pretend that it is still a deposit, and then use it to cancel the debt, while keeping all the past, and making still more profits from the transactions, and that's only one part of this.

    As I said, it's too complicated for this short format, but I think people do understand that they were robbed, twice.

  10. The way to fix this is to return to an environment where small banks can provide personalized service and take customers from the big banks. The problem with this is politicians like Bernie Sanders take money from these companies in exchange for protecting them from competition.

  11. You know what really grinds my gears about banks. The fact that they owe you the money most of the time but when you overdraft (ridiculous term im guessing the banks made up) you owe them that money plus a fee that is usually more then you took out. why does the 1% of the time that you owe them out weigh the 99% of the time that they owe you money. Im coining the banking term underdraft to replace deposit and charge them $30 every time they owe me more money. Im just saying what everyone thinking already. I know it won't work but it just feels good saying it.

  12. Banks are unelected people who have total control over the finance of the entire country. These people are held accountable to no one and they are responsible for most of the problems inside and outside of the united states. Bernie only discusses the surface of the issue when the solution should be to completely eradict the current banking system and throw all these people in prison (and accessories) forever while people can see them rot in prison justly via YouTube.

  13. "Wall street's" prosperity trickles down to main street too. This whole hating on bankers trend is massively overblown for political gain. Its typical divisive partisan "strategy" to divide people and create one group clenching their fists in hatred against the "1% " they've been conditioned to hate, reinforced by envy. All the while ignorant to the fact of realizing that their fates are linked. US GDP wouldn't be nearly what it is without investment components that big banks enable, modern risk taking [and incentive] remains crucial to the needs of industrialization and economic growth. And no government has the authority to just split up privately owned institutions. If the argument is risk, its not valid. That's the nuclear option. There is a solid argument for modest regulations though. There were and are financial regulations and standards (basel) in place, and new ones enacted to make sure even the largest bank doesn't fail the way it did in 08. Of which just a few are Capital adequacy/ liquidity ratio revision (periodically), unbiased and transparent independent audits, more responsible CRAs through requiring publicly disclosing if shareholders (with 5 percent or more capital) hold 5 percent or more shares or voting influence in a board capacity in a rated entity of the CRA, and if true prohibit this, to avoid conflicts of interest.

    The average voters are idiots (on both sides), they really don't know the internal mechanics of a financial systems and the fail safes that are already in place, they don't know what they're talking about, except simplistic soundbites of demagoguery by politicians that talk of the "1%owning 90 percent wealth" or "build yuge wall". Inequality is natural, if wealth is just in its acquisition then there's nothing morally wrong in its distribution. Poverty reduction is what both parties ought to focus more on.

  14. The banks paid back their loans because their loans were made whole by the government. They used another bailout to pay off their loans! Criminals all of them and the government!

  15. Why did they not mention the Clinton and Carter administration allowing further de regulation of the big banks?

  16. I know a simple way to solve this. Just kill ANYONE connected to a big bank so that mean's ceo's past ceo's anyone that helps them should be killed cause they commit crimes against humanity. I think the killing them is just okay. Okay then like go after all the rich fucking ceo's any company I don't care kill em all. Boom world saved the general public is happy and uhh yeah

  17. Big banks are trying to break up America and succeeding the US will not exist in 20 years America has already lost checkmate.

  18. How is comparing a corporation's assets (an estimate present value) to a countries GDP (its economic output in a year) meaningful? I don't even get general perspective on either number when comparing with the other one since both are so huge…

  19. Yeah, but the video does not take into consideration the post-FC developments in capital and liquidity requirements, as well as 'bail in' to substitute 'bail out' in not major cases. Furthermore, do not forget about advanced scrutiny on macroprudential supervision side. In my opinion, post Financial Crisis developments pretty much restrain TBTF banks, and most likely next crisis will not be lead by the banking sector.

  20. It is bad that pay taxers and retarded govermant payed their shiits&fails and managers&directors of that Banks get bonus for that in billions of $ like few years ago !!

  21. Only factual information I learnt from this video was the termination of "too big too fail" and pointless legislation that was spoken in theory and very few turned into a bill–second later, repealed. Lol

    Example: If you loan money to your broke cousin… and he doesnt pay you back… whos fault is? the goverment or your terrible financial education? obviously is your fault! YOU MAKE THE DECISION TO INVEST IN A BAD INVESTMENT… SO YOU MUST BE PUNISH BY LOSSING MONEY. that it!
    but… what if the goverment would interveen and tell you… "Hey buddy dont worry! I will protect you from (YOUR COUSIN) not paying you back… every loan you give him will be with INSURANCE with the Deposit Insurance Fund (DIF)

    SO IN THAT WAY… you have NO RISK! so why matter right? ITS A PERFECT SYSTEM!

  23. Regan was against the loan – http://www.nytimes.com/1984/07/26/business/continental-plan-set-despite-regan.html

  24. That's right! They're using what you put into your savings account to make more money by going into stock and such.

  25. I love how this guys talking about how bad banks are but in a previous vid about the Rothschild family he says, there is no evidence to support they are trying to control the world.
    Banks=Rothschild Wake up people!

  26. +seeker daily you are telling people lie I want everyone to know about the world monetary system and it's propaganda PeaCe

  27. Bush and Raegan ruined the US very well, yet PragerU claims that all problems are caused by (Democratic-backed) Gov action.

  28. It seems like there's an opportunity for smaller banks to commit to not making such investments with deposits. Consumers would naturally transfer their deposits to these smaller banks. Banks that violate their commitment would be risk losing their customers. Let the free market fix this problem of fraud and abuse.

  29. Seeker Daily the figures you showed in the start relating to assets controlled by various banks were wrong. In those figures billion should be replaced by Trillion and million should by billion eg JPMorgan Chase & Co: $2.3 Trillion, Goldman Sachs Group Inc: $861 billion are true values.

  30. Why has this video stated JP Morgan Chase and others to have assets in billions when they own assets in trillions. Please correct it. It is a serious mistake.

  31. banking deregulation is what its called and its done by the same party that deregulates law and order to make chaos.

  32. if you want to break them up so bad u have to stop giving them your money with drawl all your money anf go to a credit union OMG i didnt think that was possible.

  33. … yes, the threat of another bailout will always exsist, right after the banks exercise their right to perform a bail-in. Yay, us!

  34. 😂😂😂
    Bruh you confused millions and billions
    The assets of banks are mostly in billions and trillions not in millions how could millions and 3 billion amount to 9.6 trillion😂

  35. If you think about it, money is a very interesting concept. It is completely made up, yet it rules so much of our lives. It is also interesting to think about the fact that only 3% of US currency is printed and the other 97% exists solely in computers.

  36. Banks, especially the international banks, are the great evil. They manipulate the economy, and make us all debt slaves.

  37. The Billions should be Trillions and the millions should be Billions.

    Trillions has 12 zeros
    Billions has 9 zeros
    Millions has 6 zeros

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