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This is my effort to share my thoughts with readers about concerns facing our country today.  I believe there is a good chance my grandchildren may be the first generation in the history of this great country not to have a better standard of living than their parents. If so, our generation is to blame. The clock is running out for damage control. .

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Sunday
Jan182009

Congress-Let the Failures Happen

Consolidations always occur when supply exceeds demand. No amount of bailout money can fix this problem.

In the oil business there were too many retail outlets and too many refineries built in the 50's and 60's. In the early 70's when the first oil embargo hit, there was a huge shake out. Thousands of retail outlets closed. Dozens of inefficient refineries closed. It needed to happen, but it took an embargo to make it happen. There were four retail outlets on every corner. Some brands even had two on the same corner. 

In case you haven't noticed, the banks have been building banks on every corner for the last 15 years. In my neighborhood there was one bank that served the retail demand for years. In that same radius there are now 12. This doesn't count the ones in supermarkets.

How much of your tax dollars do you want to pay to protect this inefficiency? This has nothing to do with runs on the banks. This is only the result of false demand created by sub prime mortgages.

No one propped up the oil industry in the 70's. Lots of good dealers with their lives' savings invested in their businesses went out of business and found work doing something else. These were small businessmen. Propping up the banks is not a big issue with unemployment. The average bank in my neighborhood may only have 10 employees. They don't do enough business to merit more. But, none have closed yet. In the oil business it went fast. The industry started consolidation almost immediately. I was in charge of a project team that did the buying, zoning, and building of new outlets. We became a team that did the selling, demolishing, and renegotiating of land leases to determine the viability of sites. Overnight.

Why aren't the banks doing that? They don't have to, they have your money and mine from our government to prop them up to avoid doing what good business says you need to do,  shrink. Nice.

Obviously, banks are overrated for business acumen. If not, they would not have been part and parcel of indulging in bad lending practices, laying off bad mortgages to brokers, then to Freddie and Fannie, then securitization, then shipping $2 trillion of junk investments all over the world and destroying America's financial reputation. 

We probably need half the banks we have in this country. We don't need to help Bank of America buy Merrill Lynch. Why should I care if they buy Merrill Lynch? Why should you care? Why would you give the government money to give to Bank of America to buy Merrill Lynch?

So, congress, get smart. We need to let the weeding of the garden begin. Let the great purge get started. Tell the banks you are on to them. They over built,  they over bought other banks, and there is far too much supply of banking for the normal demand. Without the false demand for bad loans this growth would not have happened. We are never going to need this many banks or retail bank outlets.

For once since this whole mess started, congress,  stand up, and act like you might really get it. Say it out loud. "We have over built and over extended the demand for banks in this country and the industry needs to get smaller to reflect the current demand for banking. Some of you need to go away. Hundreds of retail bank outlets need to go away. Sorry, but you did it to yourselves and we aren't going to ask taxpayers to fix your problem" See that wasn't hard was it Madam Speaker, Pelosi. You can do it Senator Reid. Even you, new president Obama. As the change expert, show you can bring change. This is still a land of free enterprise, isn't it? Our government doesn't fix our mistakes even it they bring pain. Ask Lehman Bros. 

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