According to trade magazine RiskNet, “specialists” at Citigroup are considering launching the first derivatives intended to pay out in the event of a financial crisis. These types of derivatives function like an insurance policy, allowing parties to hedge against risk. “I believe it will reduce the systemic risk in the industry, akin to how the advent of swaps means people don’t worry about interest-rate exposures any more — they just pay a fee to hedge it,” said a Citi spokesperson. In truth, such a derivative is only as good as the institution selling it. Fancy derivatives called “credit default swaps” sold by AIG were critical to bringing down the global economy in the 2008 crisis. Citi is a zombie bank with boatloads of bad assets on its books. Because it is “too big to fail” and has been bailed out over and over again by the American taxpayer, it is betting that taxpayers will come to the rescue again during the next crisis and make good on these derivatives. So let’s call these derivatives what they are: “pick pocket” derivatives. Citi is kindly offering to pick the pocket of the American taxpayer in the eventuality of a new financial crisis.

To enter, download the video here, apply your brilliant idea to it, and email a link to your submission to breakupthebigbanks@gmail.com by March 1st.

Thanks to singer/songwriter/guitar player Sky Seals and to videographer Tom Phillips and his colleagues as the American Movie Company and Digital Alchemy for their help with this contest.

Now, go move your money and get cracking on your video!

If anything is clear, it is that maintaining our current course will lead to ruin.

So I am calling today for a renewed focus on fiscal responsibility in Washington.  However, before my small govt’ readers get too excited, I say we must recognize our obligations (not our limitations) and take decisive action to create the financial resources to meet them.

President Obama is taking a nice first step with his proposal to have the banks pay for some of the damage they have caused, but instead of a one-time we-tanked-the-economy-and-we’re-sorry payment, we need to institutionalize a larger financial role for larger financial institutions.  I’m talking about a financial transactions tax (FTT).

A miniscule tax on stocks, bonds and other financial assets, an FTT could be what is needed to help get our nation’s debt under control. While taxes are always an unwelcome concept – particularly when budgets are stretched, the amount of the tax and who it would affect makes this a surprisingly appealing option.  So appealing in fact – it is already before congress.

A tax of a mere 0.25 percent on the sale or the transfer of a stock is what is being proposed.  According to economist, Dean Baker, such a small percentage would not be a cause for alarm to the average stock and bond buyer who keep their purchases long-term.  The people who buy in large amounts and trade again just as quickly would pay more (read speculators). Those are the ones who are either making higher amounts and can afford it, or should be less reckless with their buys. These behaviors also contribute to the kind of stock market swings that can wipe out savings, kill companies and collapse an economy.

Rep. Peter A. DeFazio (D-Ore) introduced the bill last month to the House and Tom Harkin (D-Iowa) is supporting a similar measure in the Senate.  A number of courageous members have signed on to these proposals, but the legislation is still considered a long-shot.

Rep. Michael McMahon (D-NY) on the other hand, opposed the idea. He claimed that these taxes will hurt smaller investors.  I’m not sure what he means by ’smaller investors’ but maybe he is thinking of his top campaign contributor, Goldman Sachs.  Since Goldman Sachs and their comrade institutions on wall street have enough money to afford a record 145 million in bonuses this year, I think they can handle it.

The truth is 99 percent of the American people invest to send their children to college, and to afford a decent retirement, and to leave something to their families.  They don’t use the stock market as a casino to make phony “profits”, but to participate in real solid economic growth, owning shares of companies that make things to make our lives better.  Because they don’t buy-and-sell-and-buy-and-sell-and-buy-and-sell, they will pay an infinitesimal amount.  Those who use our markets as a casino, to skim profits, they will pay, and they should.

An FTT could raise as much as $100 Billion.  That would pay for healthcare (one or our obligations) and then some.  For more details, Dean Baker lays out the plan here.  This system isn’t anything revolutionary. According to The Washington Post, “The United States collected a 0.2 percent tax on selling stock from 1914 until 1966.”

If you like what you are reading here – lend your voice to the effort for financial reform like the FTT by signing the petition at BreakuptheBigBanks.com.

There are so many other things that people should be focusing on right now instead of layoffs, debt and foreclosure.Sure, news of the recession’s impact is becoming normal but, lest we forget, financial security shouldn’t be a problem for people who work hard and play by the rules.

These times are meant to be merry. The only ones in the news that appear merry are the big banks. Last week, despite tanking the American economy and turning a profit from it, they received nice Christmas bonuses. I was always under the impression that bonuses were given to reward good work.

So in the spirit of the season,  we at Break Up the Big Banks bring you a nice video from our friends at Bankster.  Enjoy, and please take a moment to spread it around.

Looking forward to 2010, A financial reform package already passed through the House, but it looks like it’s a work in progress.  With some calls and demands, (sign our petition on the right) we can take action and help our representatives to right our listing economic ship of state.

Stay tuned for big actions coming – but for now,  rest up, enjoy the holidays, and we’ll see you in 2010.

Of course there have been other voices, Senator Chris Dodd (D-CT) has gotten behind trying to break up the big banks. His efforts come in an election year where he is trailing Republican Rob Simmons by 11 points. Trying to get populist support when his campaign pockets and sweetheart mortgage deal still leave the smell of bank coffers will be difficult to accomplish. There is also the historical voice of Republican President Teddy Roosevelt who was the biggest, baddest breaker-upper (poetic learners-permit) of monopolies in American history – He dealt with an overgrown JPMorgan over a hundred years ago.

Then there is the Tea Partiers. This Glenn Beck inspired group of right wing populist have a laundry list of government spending programs they would like to see eradicated. But where exactly do they stand on banking reform? They were clearly against bailing out the banks in the first place. Now Dubya is against the TARP bill and it was his signature that brought it into law. Where does this put the Republican Party? The far right believes its wrong to prop up big banks due to free-market loyalties. The Republican populist Tea Party movement (which Foxnews claims on a daily basis is the mainstream – “real america”) does not believe in using taxpayer dollars to keep the country’s financial institutions afloat.  So far that is two factions of the Republican party who don’t agree with bailing out the banks, but do not offer any solution (even in retrospect) of how to handle banks that are too big to fail.

Just as a reminder the TARP bill the bailed out the banks was passed 74-25 (33-13 among Republican Senators). What do the 33 Republicans who threw their support behind government intervention and gave a “yea” to TARP think about breaking up the banks? Perhaps, more importantly, what alternative do the 13 “nay” voters have? Is it to let the economic system fail in a free-market vacuum that sucks the credit and capital out when these big banks fail? Does not sound like a great alternative, but without a voice in this debate what can we assume?

Let us not forget about the Republican party base – the evangelicals. What is the opinion of the evangelical right? Does God have an opinion on banking regulations? Matt Phillips over at the WSJ wrote a great piece last week examining the big banks latest tactic to enlist the support of this strong voter base. Among some of the gems are Goldman Sachs Chief Executive Lloyd Blankfein’s saying “he is doing God’s work”, and Barclays CEO John Varley speaking at London’s Anglican St. Martin-in-the-Fields Church saying “profit is not satanic”. Will this have an effect in galvanizing a stronger popular voice in support of letting the too big to fail banks maintain the status quo? I doubt it.

The interesting aspect of this discussion has not been the shortcoming of our politicians or the holier than thou comments of bankers, but the shortcomings of the public discourse to create a substantial dialogue about an issue that crippled the economy and continues to effect every person in the country.

Are Republicans afraid of the calls of “RINOS” from Rush Limbaugh if they support the break up of the banks? Why haven’t any of them come out and offered any dialogue on this issue. The time for opportunistic oppositionism are over. Right now, even Alan Greenspan is resolved in the notion that absolute capitalism is good in theory only and that safeguards must exist to stop greed and protect our economy. Where are you Republicans? Let your voice be heard.

“The fault, dear Brutus, is not in our stars, but in ourselves”–Julius Caesar, Act I, ii.

But for his personal tax problems, Tim Geithner would have been a consensus choice of Wall Street for Treasury Secretary last fall. As President of the New York Federal Reserve, he knew all the bankers on Wall Street. He was not only intimately involved with the bank bailouts, he now appears to have been the bankers’ lapdog. He speaks fluent Chinese, helpful since China holds a huge amount of US debt obligations. Just months into the financial meltdown, avoiding Wall Street caterwauling about the Treasury Secretary-designate may have been a reasonable consideration for the incoming Administration faced with unprecedented calamities from 8 years of George W.

Yet, from the outset, Mr. Geithner’s appointment compromised the Obama Administration-to-be’s credibility on ethics. In order not to lose its first key approval, the President-elect had to swallow-hard and excuse his failure to pay social security taxes. That ethics problem was then compounded by Tom Daschle’s failure to pay his taxes forced withdrawal of his nomination to be Health & Human Services Secretary.

Geithner survived the Senate approval process in part because he was the first that needed a ‘bye’ on ethics and in part because his combination of skills and experience were considered indispensable in the time of severe instability.

Nonetheless, even before the disclosure of his pro-bank lax handling of bailout funds while at the New York Federal Reserve, Geithner had become a lightning rod for the Administration’s economic policies that coddled Wall Street. To be fair, and unlike Rumsfeld, Geithner has had some real successes–such as preventing total economic collapse with the stimulus plan, and stabilizing the financial system.

But Geithner, like Larry Summers inside the White House, has failed to respond to main street’s needs directly and powerfully, and failed to stand up to Wall Street interests when they are inimical to sustained stability. Whether it was home foreclosures, or credit card reform, or financial reform, the measures were compromises rather than strong policy prescriptions. It has taken a popular website, www.breakupthebigbanks.com, and Senators such as Dorgan and Sanders, and House members such as Kanjorski, to push the issue of breaking up the big banks so they can never hurt us again.

President Obama should learn from all of George W’s mistakes including his continued support of Donald Rumsfeld. Many Republicans(!) believe that they might not have lost the 2006 Congressional elections if Bush had fired Rumsfeld before, instead of after, election day.

The Treasury Secretary has become a continuing liability for this President. By stepping down, Geithner can rightly claim some successes, and provide the President an opportunity to appoint a Treasury Secretary that not only does not have ties to Wall Street, but also who has a history of championing main street.

Former Labor Secretary Robert Reich would be a superb choice. For a Treasury Secretary to have previously served as Labor Secretary would itself send a very strong message to main street that this Administration is “on their side” as Presidential election campaign suggested. Reich is eminently qualified for the position–he is a student and author about long-term economic trends, and is an economic policy-wonk.

Go to www.BreakUpTheBigBanks.com, sign the petition, and show your support for breaking Wall Street’s stranglehold on Washington DC and your future.

Scale can create value for shareholders; for consumers who are beneficiaries of better products, delivered more quickly and at less cost; for the businesses that are our customers; and for the economy as a whole. (Washington Post, Op-Ed., Friday, November 13, 2009).

Note that Dimon carefully omits mention that a large company has great financial resources to pay him and his top executives enormous salaries.

Although Mr. Dimon would like nothing better than to engage in a dialogue to defend these assertions, I do not take the bait. I will concede his point, that big banks “can” do these things. They do not always, they need not, but, certainly, they “can.”

Let us recall what big banks have actually already done, using Dimon’s own style of argument:

Scale has destroyed the entire economy for workers, causing millions of unemployed; for consumers who have had little choice but to pay hidden fees on accounts and credit cards; for taxpayers who have had to bail them out with hundreds of billions of their hard-earned money, and at no cost to the fragile banks; for peoples’ retirements and lifesavings; for government that is has pauperized; for bank executives, it has provided unprecedented wealth for creating not much of anything.

Dimon concluded his paragraph above: “Artificially limiting the size of an institution, regardless of the business implications, does not make sense.” (Ibid.)

But, juxtaposed against the harm big banks have already and can do again, Dimon’s arguments for scale, even if true, are woefully inadequate.

That is, it makes perfect sense to limit your institution’s size to ensure that you, Mr. Dimon, cannot destroy me and millions of my fellow citizens again, even if you have no intent to hurt us.

Why should we take that risk?

Even in economics, life is not all efficiency, or supply and demand, or even the lowest cost. Safety, security and stability matter too. Without those, confidence suffers, and without confidence, so does both investment and consumption. Thus, it is arguable that the economy as a whole benefits when it is widely appreciated that the miscalculation, or misfeasance, of a few, can eliminate millions of peoples’ entire life’s work.

Dimon’s article actually proves the point why the big banks must be broken up. Dimon is one of the captains of that industry, and his op-ed piece shows clearly his priorties.

They are, I assure you, not yours.

Go to www.BreakUptheBigBanks.com and join the fight against Jamie Dimon’s priorities and Lloyd Blankfein’s mission from God. Sign the petition.

To mark the historic occasion, House Banking Committee Chairman Jim Leach played host to a group of his closest collaborators on the bill, including Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Lawrence H. Summers, . . . They joined staff members, lobbyists, and reporters in drinking champagne and devouring a large cake, which bore an epitaph for the Depression-era separation of commercial and investment banking that the bill undoes. It read: ” Glass-Steagall, R.I.P., 1933-1999.”

Many of the same people who are now creating proposals to reign in the financial industry were, 10 short years ago, the people eating cake as they destroyed the barn door of regulation and let the big banks run free. So it is critical that we take a close look at what is being proposed.

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The Dodd plan joins proposals from Rep. Barney Frank, Senator Sanders and the White House. Now that all of the pieces are on the board, lets play our game. Points are scored by the Dodd, Frank, and White House proposals for focusing on both creating a consumer protection agency to blow the whistle on banks who try to trick consumers, and for bringing previously unregulated activities into a regulatory framework. As for too-big-to-fail? The plans all give more power to various existing and new agencies to ramp up regulation with the size of giant financial firms.

The only proposal that actually calls for breaking up the big banks is the Sanders one. Short on specifics, the Sanders proposal directs the treasury secretary to identify who is too-big-to-fail within 90 days, and break them up within a year. Cool.

There are valuable ideas in these proposals, but what they all seek to do is address the symptoms of a larger problem. Regulating derivatives, creating ‘moral hazard’ for failing big banks, protecting consumers from predatory practices, and making the industry more transparent are all worthwhile and needed reforms. And none of them will prevent the kind of abuses that destroyed our economy from happening again.

With the exception of the Sanders proposal, we are talking about addressing symptoms of the problem and not the cause. The sheer size and power of the big dogs will make any reform that doesn’t cut them down to size hollow. They will wait until no one is looking, buy enough members of congress (and a big enough cake) and again crash through barn door and get fat grazing on the pastures of the American people.

Join the effort to break up the big banks today. This is only going to happen if we all get serious. Send your friends to breakupthebigbanks.com and sign up to take back our economy.

Larry Summers, the President’s point man on the economy and financial regulation, is said to be a genius. With the DNA of two Nobel Laureate economists in his genome, one might think he would have the best grasp of how to fix the broken financial system.

One would be wrong. Summers would be the best to design a rational system, but it would be very difficult for him to recognize that the actors will not see everything the way he does. And so, he would have greater confidence than justified that the system he designs will work.

That confidence may be conveyed to the President, and thus, even with the best of intentions, Summers can lead him and the country down the primrose path to another catastrophe.

Dick Durbin (D-Ill), the number 2 person in the Senate leadership, has put it simply: “the banks own Congress”. Summers cannot incorporate that observation into his econometric models. Thus, the entire edifice of economic security and protection crumbles.

Big banks’ pursuit of increasing profits–exactly what their shareholders and the economic system dictate as a proper goal–inevitably causes them to undertake actions that can, and have had devastating consequences for almost everyone in the world.

No ‘malice aforethought’ need be invoked. Miscalculation is sufficient to wreak havoc on the life achievements of hundreds of millions of people. And, we know with certainty, that the big banks will use their pivotal position in the economy and their economic resources to quash democratic processes when they are inimical to their profit-making/power-wielding interests.

Lest there be any doubt of that power, one need only note the following confluence of events: the current economic catastrophe, the banks’ collapse, the taxpayers’ bailout, and yet, in spite of all that, the big banks’ ability to prevent Congress from enacting strong financial reform with strong consumer protection. Their lack of any embarrassment at all–other than getting caught–with awarding enormous bonuses only underscores their power.

Wall Street has far more power even than the very powerful insurance + pharmaceutical industries. Good evidence for this is that, despite the enormous loss of wealth and heightened insecurity suffered by almost everyone in this economy–i.e., that keeps the matter roiling in everyone’s consciousness–Wall Street has been able to have its way with Congress, reducing new regulations to a joke, awarding themselves enormous bonuses while still owing tens of billions to the Treasury and while the rest of the economy is still reeling from the damage it caused.

Breaking up the big banks is not a Democratic, Republican, Independent or Libertarian, or liberal or conservative position. It is a common necessity to restore democracy to our politics and some security to our economic system.

It is not that the banks are “too big to fail”. It is that they are so big that they can cause you and me to fail. That is not Adam Smith’s capitalism; it is a system that inevitably breeds rogues.

For this reason we have started a mass movement called “BreakUptheBigBanks.com”. Together, millions of citizens, regardless of political persuasion on other issues, by sacrificing only the price of a latte, can counteract the banks’ corrosive power and sleep better at night, knowing that they will not awaken the next morning to discover that, without even knowing what was happening, their life’s work will have vanished in a sea of credit default swaps.

It is probably the one domestic matter behind which everyone can rally.

Take a minute to click, to join, to help.

It is not that the big banks themselves are “too big to fail”. They are too big because they can cause all of us to fail. In the military terms, that tragedy is cleansed by the use of the innocuous sounding term, “collateral damage”.

The problem is this: One is just as dead from collateral damage as from a targeted hit.

We launched BreakUptheBigBanks.com because the political power wielded by the big banks is incompatible with a functioning democracy. Such political power renders regulation inadequate—we have already seen Congress bow to the will of the very people whom a year ago it rescued from oblivion.

That, fellow citizens, is power—naked, raw, and contemptuous of the public good.

This doomsday scenario is not based upon competing economic theories. We all know this to be true from our own painful and collective experience. No private institution should have that power—unaccountable, geared entirely their own self-interest, and able to cause massive ‘collateral damage’.

We have, therefore, launched BreakUptheBigBanks.com as a public service. It will take millions of you joining, signing our simple petition, and participating to make this successful.

There is no ideology behind this. It is just as compatible with conservative’s distrust of unaccountable political power as it is with liberal’s wariness of concentrated economic power.

Conservatives do not like regulation—once broken up, allowing the banks to operate within their prescribed realms will require far less regulation and bureaucrats to enforce, and far less micromanaging.

Liberals do not like concentrated economic power feathering its own nests at the expense of the general population—once broken up, the smaller banks will be far less able to effect the general population at all.

We can do it. Go to breakupthebigbanks.com, and participate, actively.

For the price of one latte, you will be able again to sleep soundly.