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!

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.

The New York Times’ front page expose on the role that Goldman Sachs has played in the Greek tragedy unfolding in Europe right now raises a huge number of concerns, both for the U.S. economy and the financial reform proposals now in Congress.

To recap, Greece and a number of other European Union (EU) countries are dangerously in debt. EU rules say member countries cannot have budget deficits that exceed three percent of the Gross Domestic Product (GDP). Greece’s debt is closer to 12 percent. Other countries including Spain, Ireland, Italy and Portugal are also in trouble. These countries are “too big to fail.” A default by any one of them would put an end to the nascent EU recovery and possibly lead to a “double dip” recession here in the United States.

Greece has been hiding the extent of its debt for years, with the aid of big U.S. banks. Der Spiegel broke the story that Greece did a billion-dollar currency swap with Goldman Sachs in 2002 that did not show up on the nation’s books as debt. Without it, Greece many not have been accepted into the common currency “Eurozone.”

Doing the Work of the Gods?
Yesterday, the Times provided more details about these deals. Those chuckleheads at Goldman called one of the deals Aeolos, after the god of the winds.

“Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash up front in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics,” reports the Times.

It walks like a loan and talks like a loan, but because it was actually a complex derivative swap, it was secret, bilateral, and off-book. The people of Greece knew nothing, and at the current moment, no one knows how many of these deals are out there masking EU debt, or U.S. debt for that matter.

Congress Need’s to Clip Goldman’s Wings
What the Times story missed is that right now neither the House financial reform bill nor the Senate proposal cover these types of currency swaps. Why not? Well, this is a bit odd: the U.S. Federal Reserve does not want these deals covered.

Although there is no evidence that the Fed is engaging in these types of currency swaps with banks from other nations, their objections to placing these deals on open exchanges should ring some alarm bells. The United States also has substantial debt. Why leave the door open for this type of highly risky accounting?

Congress and the Obama administration need to stop listening to Ben Bernanke and start listening to Gary Gensler, the head of the Commodity Future Trading Commission, who has been pushing a reluctant administration and Congress to drag every aspect of the $605 trillion derivative market out of the shadows.

Like Icarus, Goldman and other big banks who have engaged in these massive deals are flying a little to close to the sun. To prevent the next meltdown, Senate Banking Chair Chris Dodd must clip Goldman’s wings, and make sure that all derivatives, without exception, are cleared by regulators and traded on an open exchange to provide the maximum level of transparency for the United States and the world.

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!

Valentine’s Day is approaching, and we should all, especially in these difficult times, show our significant others all the affections we feel for them. We say “especially in these difficult times” only because that is when an extra smile, or kiss, or other sign of affection can mean so much. We all need a little extra boost these days, and that can arise just from the recognition triggered by these feelings about what is really important in life.

And, let us not forget those who not only visited these tough times upon us, but also used our money provided to rescue them in their moment of need to lobby Congress against reforms to prevent them from ever darkening our days again. One need not believe there was actual malice aforethought that caused the “mistakes” the big bankers admitted to the Angelides Commission to recognize their utter contempt for the rest of us as they shower millions of our dollars on Congress to make the American people bear the risks again of their financial shenanigans.

There is a remedy that requires not a single vote of Congress, nor a single contribution to a political campaign. It is riskless, and all it takes is concerted action by millions of individuals.
You are not powerless, unless you decline to exercise your power. It is not hard, just

MOVE YOUR MONEY FROM A BIG BANK TO A SMALLER ONE.
Specifically, take your money from Bank of America, WellsFargo, Citigroup and Chase, and move it to another bank. [Many people believe that their bank IS small because it is a branch office that often is not very large. These big banks have 1000s of these small branches around the country; that is how they became so large.]
To find a good alternative in your area, go to www.moveyourmoney.info. While you are at it, you can visit www.breakupthebigbanks.com, a partner with us in this campaign, and join our political movement to make banks small enough so that their failure does not steal your retirement, your home, your children’s college education ever again.

Your deposits are protected in a small bank just as they are in large banks, up to a maximum of $250,000. No more. No less.

It is not even burdensome. Set up a savings and checking account at a smaller bank. Put your earnings from Valentine’s Day forward into those new accounts. If you have direct deposit from your company, give your payroll department your new information. Write checks on your old account until it is empty, and draw out your savings and move it to your new account at the smaller bank.

How does moving my $900 savings help? Just like every vote counts, every decline in deposits of the big banks makes them nervous. When they have lost 10% of their deposits, they will start listening. When it is up to 20%, they will be panicking.

Are we advising punishment or retribution for what bankers called their “mistakes”? No. But, just as one disciplines a child more harshly when they show they have learned nothing from a mistake, the big banks need to be taught that they play by certain norms of behavior, or they cannot play with your money anymore. They need to become less self-interested, and more attuned to the needs of their communities…and smaller, so their mistakes can never, ever, hurt you again.

On Valentine’s Day, just think of it as “tough love”.

While Treasury Secretary Timothy Geithner was on the talk shows reassuring America that the economy is healing, developments in Europe threatened to cut the legs out from under a U.S. recovery.

The short story is that Greece and a number of other European Union (EU) countries are in debt, deep in debt. EU rules say member countries cannot have budget deficits that exceed three percent of GDP. Greece’s debt is closer to 12 percent.

They have been hiding it for years, in part relying on major U.S. banks and so-called “cross-currency swaps,” complex financial instruments that allow governments to hide their debts and push their liabilities into the future. The German magazine Der Spiegel broke the story that Greece did a billion-dollar swap with Goldman Sachs in 2002 that did not show up on the nation’s books as debt.

Now the bill is coming due. Greece is in trouble and EU leaders are failing to take decisive action, roiling the markets. The Euro is trading near an eight-month low against the dollar and some are predicting another major shock to the global financial system.

Former International Monetary Fund (IMF) economist, Simon Johnson, sounded the alarm and slammed European and U.S. leaders for not taking the crisis seriously: “They seem to show no awareness at all that much of Europe is facing a serious crisis and it’s not limited to Spain, Greece and Portugal, it’s also going to include Ireland. I think Italy is also very much in the line of fire. There’s a very serious crisis inside the Eurozone.”

What does this have to do with U.S.? While Geithner and others are predicting blue skies, we still don’t know how enmeshed U.S. banks are in the crisis. Moreover, U.S. banks are weak and undercapitalized and may not be able to take too many more shocks. According to Johnson: “As the international situation deteriorates — or even if it remains at this level of volatility — banks will hunker down and credit conditions will tighten around the U.S. And if the European situation spins seriously out of control, as it may well do early next week, the likelihood of a double-dip recession (or significant slowdown in the second half of 2010) increases dramatically.”

For Better, or Worse?
Will the rich nations of the EU live up to their vows and come to the rescue of troubled Greece? Will the EU allow a new suitor, the IMF, to come to the rescue? Will the Greeks default and be divorced? Stay tuned, as this marriage is on the brink, and the consequences for the rest of us may be dire.

Many economists say the nation’s banks are too big. Writing in The New York Times, author Henry Alford offers his ideas for some ways to break them up:

1. Have the bank marry Larry King or Elizabeth Taylor.
2. Encourage the banks to develop a messianic relationship with Yoko Ono.
3. Carom the cue ball off the bank’s proprietary trading desks.
4. Have the bank’s chairman saunter into the living room at 11:02 p.m. and start idly vacuuming.
5. Have Paulie of “Rocky” pull one bank asset off another while yelling, “Break it up and come out punching clean!”
6. Sprinkle the banks with gaily colored, diversionary “accent pieces” like ottomans and love seats.
7. Tell the bank’s hedge fund investors, “We meant ‘hedge’ like ‘bush,’ not ‘hedge’ like ‘bet.’”
8. Have the bank’s ice-skating divisions join hands and form a “whipline” by which to hurl the outermost divisions into orbit.
9. Pulse all speculative risk in processor for 15 seconds, or until dough has consistency of rubble.
10. Change JPMorgan’s and Wells Fargo’s names to Itch Hawkins and Fingers Jackson.
11. Train a laser beam at systemic risks to effect neutron bombardment.
12. Have the private equity division make irredentist territorial claims against the small loans division, inducing Balkanization.
13. Write each big bank a prescription for Coumadin, to reduce clotting.
14. Refer to all the financial instruments at community banks as being “artisanal” or “hand-crafted.”
15. Interlard all bills in A.T.M. cash disbursements with occasional slices of Limburger.
16. Start a rumor that Warren Buffett has put all his money into Pawnee City Savings and Loan.
17. Give the tabloids photos of the big banks canoodling with younger, blonder banks.
18. Have the big bank’s girl-asset tell the boy-asset she is “in the fiduciary way.”

The Center for Media and Democracy and BanksterUSA are pleased to present our Golden Throne Award to T. Timothy Ryan Jr., President and CEO of the Securities Industries and Financial Markets Association (SIFMA). SIFMA is the leading behind-the-scenes lobby group representing big banks and investment firms, as well as broker-dealers and other peddlers of financial instruments, which Warren Buffett labeled “weapons of mass destruction.” SIFMA lobbies Congress and financial regulators, and handles securities-related press for some of the biggest players in the financial crisis–Goldman Sachs, Bank of America, AIG, Merrill Lynch, Citigroup, and Fidelity Investments.

The Golden Throne Award salutes the lobbyists and spinmeisters who have managed to hold off meaningful financial services reform since the Wall Street meltdown. The award is being presented to SIFMA as the largest lobbying conference for the securities industry gets underway in Washington, D.C. this week at the Gaylord National Hotel. The award invokes fond memories of the $1.2 million bathroom renovation ordered by Merrill Lynch’s CEO, John Thain, shortly before the firm lost $27 billion and collapsed into the arms of Bank of America.

“In their relentless lobbying for deregulation of the securities industry, Tim Ryan and SIFMA bear unique responsibility for the collapse of the global economy. For that reason alone they deserve the Golden Throne, but their recent ‘turn pitchforks into ploughshares’ PR campaign also deserves special recognition. Few financial industry lobbyists have worked harder to convince the American public that they are on their side, even while they lobby to stymie any crackdown on business-as-usual on Wall Street,” said Mary Bottari of BanksterUSA.

Securitization is the process by which assets such as mortgages, auto loans, student loans and consumer loans are bundled into bonds and sold to investors. Securitization of toxic mortgages – which were sliced and diced, bundled into complex instruments and sold around the world – was a key cause of the global financial collapse. SIFMA has been a important proponent of deregulating the securities industry. Bernie Madoff and his brother have both sat on SIFMA’s board of directors.

Now that the industry is under Congressional scrutiny for its role in the crisis, Tim Ryan has spent the last year executing an elaborate PR campaign to blunt “populist overreaction” to the financial crisis and convince average Americans, who are experiencing 10 percemt unemployment and record foreclosures, that big banks and investment firms are actually on their side.

“Cashroots” Campaigning
Shortly after the financial collapse, a secret memo of confidential meetings surfaced that revealed SIFMA’S plans to portray themselves as “part of the solution” in order to counter the populist “lynch mob” demanding financial reform. SIFMA kicked off the “execution phase” of their “grassroots” campaign in June 2009, spending $85,000 per month to target policy makers and the news media in New York, London, Washington, and Brussels in an effort to repair their tarnished image. Michele Davis, Treasury Secretary Henry Paulson’s former spokeswoman, and Jim Wilkinson, his former chief of staff, are among those leading the effort. SIFMA’s website claims “phone calls and e-mail from constituents were a critical component of getting TARP legislation passed last year, and they will be vital again in 2009.” Because these constituents are made up of banks and securities dealers, CMD coined the term “cashroots” rather than grassroots for this type of campaigning.

SIFMA Campaign Contributions
SIFMA helps to put the “big” into the biggest lobbying sector in the country, the Finance, Insurance & Real Estate industries. In 2007 and 2008, SIFMA spent $9 million dollars lobbying against meaningful reform of the financial markets. Over ten years, SIFMA and its parent companies have spend an eye-popping $102, 206, 643 on lobbying according to the Center for Responsive Politics.

In the 2008 election cycle, SIFMA’s PAC spent over a million dollars trying to influence the outcome of federal elections. The PAC donated $10,000 a pop to dozens of key policymakers, including Representatives Melissa Bean (D-IL), John Boehner (R-OH), Eric Cantor (R-VA), Barney Frank (D-MA), and Paul Kanjorski (D-PA).

SIFMA Lobbying Activities
Ryan, who earns about $2 million a year, has redefined support for financial reform bills as support for loopholes in those bills that help his clients. Ryan helps SIFMA lobby against disclosure rules, conflict of interest standards and capital requirements for derivatives trading, against breaking up “too big to fail institutions” and the reinstitution of firewalls that once kept bank holding companies from gambling with consumer savings. SIFMA loved the TARP bailout, but is not fond of the proposed Consumer Financial Protection Agency. SIFMA has coordinated lobbying plans for the industry by throwing over 60 strategy conferences, including a regular shindig in Washington so that its members can mingle with government officials. This year, the American Securitization Forum (ASF) takes place in Washington, D.C. from January 31st through Feb 3rd.

Ryan’s Rantings
Positive reinforcement for Secretary Paulson’s 2008 then-unapproved plan for bailouts: “I agree totally with Secretary Paulson — give us the money, give us the authority.” CNBC, Sept. 26 2008.

Developing a narrative for the $787 billion TARP bailout: “I think everyone is really confused. This is not a bailout for Wall Street. This is a relief package for Main Street.” CNBC, Sept. 26 2008.

On embarrassingly large bank bonuses: “Are we sorry about what happened, we are. Are we into massive reform, we are. The compensation that you see come out in a few weeks will be massively different … The system is really changing radically and we’re not getting any credit for these reforms at all.” CNBC, Jan. 11 2010.

When SIFMA lost Lehman Brothers’ membership dues, it laid off 25 percent of its lobbying staff and commiserated with suffering American workers: “No one, least of all our industry, which lost tens of thousands of jobs, wants to repeat the difficulties of the past 18 months.” USA Today, Aug. 6, 2009.

Fear-mongering on Financial Transactions Tax legislation which would tax speculative trading to pay for a jobs bill: “As all of you know. basically, Main Street is supported by activities in the financial sector. We need obviously jobs … jobs should be the number one objective. This type of tax is totally counterproductive.” CNBC, Dec. 4, 2009.

On SIFMA’s on-line games which train American youth in fun ways to manipulate the stock market: “Indeed, the industry’s overall contribution to charitable organizations far exceeds those of many other industries … Increasingly, the struggles of the industry and the market have translated into greater interest in SIFMA’s Stock Market Game, which takes place among both students and teachers. Each year, we now have more than 800,000 students play. That adds up to more than 12 million students over the life of the program.” Tim Ryan Annual Speech, Dec. 14, 2009.

On the death and life of too big to fail: “Second, we need to ensure no financial firm is too big or too interconnected to fail. In a dynamic capitalist system, every firm must be allowed to fail. To solve this problem, Bank of England governor Mervyn King recently suggested that the largest banks be broken-up. We disagree totally with that view.” Tim Ryan Annual Speech, Dec. 14, 2009.

President Obama won’t tell us in his State of the Union address. The deficit hawks won’t crow about it. Don’t expect the Tea Party or Rush and Beck to highlight our generosity either. But the sad fact is this: During the worst year since the Great Depression, with 30 million people out of work or forced into part-time jobs, Wall Street is awarding itself $150 billion in bonus money…..and it comes from us!

That’s $500 for every man, women and child in the country — $2,000 for a family of four. (Maybe we should try deducting it from our income taxes as a charitable donation.)

Had we not bailed out the financial sector, there would be no bonus pool this year. Zip, zero, ziltch.

It seems like financial Alzheimer’s setting in as many forget how all this happened. Wall Street, and no one else, crashed the economy through its fantasy finance extravaganza. It created, sold and traded a slew of newfangled financial instruments that were supposed to remove risk from risky investments. Wall Street went begging for subprime debt in order to create and market their new financial securities, the most profitable activity in their history. As a result of their securitization casino, which leveraged bet upon bet, the housing market turned into a bubble and finally burst. Wall Street had miscalculated, big time. The risk returned with a vengeance.

Not matter what Rick Santelli proclaims, government interference didn’t cause the crash. Greedy, stupid home buyers didn’t cause the crash. Poor people backed by the Community Reinvestment Act didn’t crash the system. And China didn’t cause it either. The book should be closed on this: Wall Street’s fantasy finance casino did us in. (Please see The Looting of America for a fuller account.)

Once housing prices stopped their meteoric rise, the entire precarious structure of bets piled upon subprime loans, turned toxic. The banking system froze and the real economy was tossed off a cliff. We truly were on our way to the next Great Depression.

Policy leaders of all stripes bailed out the financial system because they thought there was no choice–and that was true to an extent. Preventing total financial collapse was necessary. The choices to be made were about how to prevent a further collapse and what kinds of demands we’d make on the banks that had brought disaster upon themselves and the rest of us. Bush, Paulson, Bernanke, Obama, Geithner, Summers and Congress made their choices. They poured money into the banking sector like never before. We gave the Wall Street banks gigantic loans and enormous guarantees on their toxic assets. We gave them TARP. It all totaled to more than $12 trillion, with most of it still in play, even after the TARP repayments. (See Nomi Prins’s excellent accounting..)

We can, and should, argue about whether the bailout was put together properly. A strong case can be made that the victims (the public), rather than the perpetrators (Wall Street’s casinos), should have received our support. Clearly, there were much better ways to rescue the failing economy and produce jobs, which is still by far our number one problem.

Wall Street was saved from bankruptcy, including Goldman Sachs which now cavalierly insists that it didn’t really need the bailout money (yet it took $12.9 billion of taxpayer support via AIG, and tossed it into its bonus pool.) Wall Streeters actually think they’ve earned the $150 billion in bonuses through their own cleverness. Think again. It’s nothing more than taxpayer welfare.

Of course, no one wants to admit that we put the richest people in the world on welfare. It’s embarrassing to acknowledge that we are rewarding those who killed millions of jobs. And worst of all, our political establishment doesn’t have the nerve to take our money back.

Instead the President talks about getting back every penny of our TARP money, with interest. Not good enough, because that still leaves the $150 billion of taxpayer largess in the bankers’ pockets, where it doesn’t belong.

The deficit chicken hawks (who now seem to have Obama in their roost) also have no intention of clawing back our money. Instead they would rather attack domestic programs that assist unemployed workers, the old and the infirm. (Of course, you won’t hear them question the wasted billions in the military budget or in the needless war in Afghanistan.)

The only group really kicking up a fuss is the Tea Party. But their ideology is so screwed up that they’d rather see the money stay on Wall Street. Their righteous indignation is fueled by blaming government, Obama, the Fed and the liberal elites for putting it there. They have no room in their ideological universe for windfall taxes on unwarranted bonuses, which they derisively call the redistribution of income, even when their own hard-earned incomes are being redistributed to Wall Street bankers. Very generous of them.

That leaves the terrain wide open for a new progressive populist movement aimed directly at taking back from our $2,000 per family from Wall Street’s unearned bonuses. It’s not a panacea for our jobs crisis or even a solution to Wall Street’s dysfunctional role in our economy, but it is a very good place to start.

America’s Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.

And yet today, 234 years later, our Founding Fathers’ worst fears have come true. Wall Street’s stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.

It’s high time we address the truth about Wall Street’s tyranny and set a course for a more secure economic future – one that’s anchored by a safe banking system, not a system rigged by banks.

Banks Are the Gamblers … But You’re Taking the Risks

The credit crisis and Great Recession are the unintended consequences of Wall Street’s greed. I say “unintended consequences” because – let’s face it – Wall Street institutions tipped over their own money pot and bankrupted the public casino they had created to leverage bets with house money.

It all started with the Community Reinvestment Act of 1977 (CRA). This piece of legislation was designed to prohibit discrimination on the basis of race, sex, or other characteristics in the credit and housing markets. Of course, this eventually led to lax mortgage underwriting standards in later decades.

But it wasn’t just the Democrats or President Bill Clinton who pushed for an expansion of and greater reach for the CRA in 1999. It wasn’t just the Republicans or President George W. Bush who advocated easier documentation terms for homebuyers in a 2002 speech. It wasn’t just all the Democrats and Republicans who pushed for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) to package and buy trillions of dollars of low-quality, mortgage-backed securities.

However misguided they might have been, these policies were all well intentioned. But each of these policies had unintended consequences. It was Wall Street that made sure these “consequences” could be shaped into a giant moneymaking scheme.

Consider, for example, the truth about the subprime mortgage mess.

Default rates on CRA-predicated mortgage loans were a lot lower than bankers had provisioned for. What the bankers realized was that even though they were pushed to make more of these types of loans than they wanted to, they actually made a good profit on them.

As long as housing markets were appreciating, CRA homeowners in distress could actually sell their properties and pay off their loans. Bankers sure weren’t complaining then.

After Wall Street pumped and dumped tech stocks on an unsuspecting American public – resulting in the “tech wreck” of 2000 … and after the horrific terrorist events of 9/11 … the U.S. Federal Reserve sliced interest rates to record lows and kept them there, much too long.

That’s when the subprime-mortgage and easy-credit games took off. Looking at the low default rates on CRA mortgages, bankers figured maybe loan standards were too high and there was room to lower them and still get paid in full. Standards were lowered across the board.

No Intention of Holding onto “Garbage”

Behind the scenes, the big public casino had been readied and the dice were starting to roll. Because Wall Street and its lobbying armies had gutted existing regulations and stifled all efforts to safeguard the public from new exotic derivatives products, there was nothing to stop the juggernaut.

Banks had no intention of holding on to the garbage they were manufacturing. Wall Street securitized all the junk that it gathered together – and then sold it off to anyone who would buy it.

And because not everyone who would buy Wall Street’s junk was stupid, the institutions reformulated new products from that junk. The new “collateralized” products were just reconstituted, repackaged loans that redirected internal cash flows from mortgage payers so that some “tranches” of the new collateralized pools looked safe and could get the top “AAA” ratings from rating agencies.

It didn’t matter that rating agencies didn’t understand the new math; they were in on the game and got rich, too.

To add insult to injury, Wall Street employed another newfangled product. These “credit default swaps” were insurance-type contracts that anyone could offer on anything. But the real beauty of credit default swaps is that these contracts let Wall Street play on every side of every deal: Wall Street profited once when it sold the junk, again when it sold “insurance” on those subprime securities, and over and over again as it traded both the junk pools and credit default swaps.

The best part about the whole scheme (which all the institutions were playing) was that the game was self-perpetuating. As long as finance companies, mortgage originators and banks were able to package and sell their pools of mortgages and other “leveraged loans,” the money from the sale of them went back to the folks who originated the individual loans in the first place.

The upshot: Those folks could make more loans and start the entire process all over again.

The more money that was available, the lower rates went. The lower interest rates went, the cheaper it was to finance and hold a portfolio of assets. But because rates were so low, and the return on quality loans was correspondingly low, bankers needed higher-yielding assets to maximize the spread on their “cost of carrying” pools of assets. So what happened?

It became necessary to offer mortgages to lower-quality borrowers in order to charge a higher (and more-profitable) interest rate.

That’s how the game snowballed. That’s how it became a feeding frenzy.

Where Greed Takes Control

The idea for Wall Street’s institutions was to “dance until the music stopped.” They all knew they had engineered a housing bubble and that the insane appreciation rates on anything with a roof would eventually fall back to earth. By then, the big players expected they would have found a seat, leaving them to watch the other, less-nimble players stumble and take their lumps.

There was one problem. Wall Street institutions were way too greedy and far too cocky. They believed that they were safe: In their view, they’d either be able to unload their holdings of the junk they’d created, or they had been clever enough to hedge away their risk with their own credit-default-swap-insurance schemes.

Because Wall Street believed it was safe, the institutions didn’t see what was really happening. They were all in the same boat … and that boat was sinking.

That boat happened to be the U.S. economy – and other top economies around the world. Because of their greed, banks actually made the boat and forced us into it. They sunk, along with us, but got bailed out while we were left to drown.

Here’s Where Things Get Good

At this point, you might find yourself asking: So what? Most of the banks have repaid the Troubled Asset Relief Program (TARP) money that they so desperately needed. Most are returning to profitability, and some are even reporting record profits and paying out record bonuses to executives.

Yes, some banks have gotten bigger, a lot bigger. Yes, there are more profits to be shared, because a couple of swaggering laggards of the old investment-banking mold – namely The Bear Stearns Cos. and Lehman Brothers Holdings (OTC: LEHMQ) – are gone. Is that so wrong? Isn’t that part of financial Darwinism in our capitalist democracy?

The truth is not what it appears to be. Bear and Lehman were ruthlessly crushed by their competition so there would be more business to be had by fewer players.

It wasn’t evolution. It was execution.

The bigger banks get, the more they rely on a de facto government guarantee. “Too big to fail” is a doctrine pushed by banks that want to be so big that they crush – or at least absorb – their smaller rivals.

Banks want to be a cartel and to be able to raise fees and the cost of money for their greater profitability, at will. Big banks are making money because the government is keeping interest rates low. Big banks are buying a huge portion of the U.S. Treasuries the government needs to sell to finance the deficit. And that deficit has reached its current size because the money was used to bail out the banks and to mitigate the collateral economic damage that Wall Street caused.

It’s a financing game, another bubble to re-inflate bank balance sheets by allowing them to generate a virtually risk-free, high-net-interest margin.

We need to be afraid of what our Founding Fathers were afraid of, too much power concentrated in too few hands – especially banking-interest hands.

We need to break up all the big banks. And then we need to spread their pieces around the country, placing credit closer to Main Street. We need to end all proprietary bank trading … to eliminate credit default swaps and collateralized debt obligations… and to instill transparency in all capital markets products, trading platforms, and risk-taking businesses that have any systemic impact.

We need a free market, not a free for all.

Competition and free enterprise are the hallmarks of our economic miracle. I’m for less government, less taxation and more power to the people. But this enormous concentration of power that Wall Street and the U.S. banking system have amassed is tantamount to an assault on our very freedom.

It’s time to end the tyranny of the banks. And to once again enjoy the financial freedoms that the end of this tyranny will bring.