Category Archives: Wealth Redistribution

Hillary Clinton to charge ‘$200,000 a speech’… which is more than her whole YEAR’S salary as Secretary of State

Hillary Billary Show Me The Money
Next gig: Former Secretary of State Hillary Clinton has signed up with a talent agency and is commanding $200,000 per lecture, each of which will only last between one and two hours

Now she has signed up to earn whopping fees on the lecture circuit

Daily Mail | Feb 20, 2013

By Meghan Keneally

Hillary Clinton has wasted no time cashing in on the lecture circuit as it was revealed today that she will be charging $200,000 per speech.

The massive fee means that she will be making more from a two-hour lecture than she did in a year as Secretary of State.

The announcement that Mrs Clinton has hired a top talent agency to represent her as she begins to give paid speeches following her departure from the State Department came earlier this week, but her $200,000 asking price was only reported on Wednesday.

According to Buzzfeed, that puts her in the same league as her husband former President Bill Clinton who is so in-demand that he can command the six-figure fee.

The volume of the sum is made clear when looked at in comparison to her salary for a year as Secretary of State, which was $186,000.

Hillary DevilHornsMrs Clinton is now represented by the Harry Walker Agency which is known for getting famous politicians and newsmakers plum gigs on the lecture circuit.

The venture is her first formal decision about what she is going to do now that she is no longer working, though she is widely considered to be the Democratic front runner should she decide to run for the presidency in 2016.

Her decision to attach her name to his particular New York-based agency comes as little surprise since her husband former President Bill Clinton has long been represented by the group since he left office in 2000.

The move was clearly a lucrative one, as he made $75.6million from 2001 to 2010 from speaking engagements, making $10.7million in just 2010 alone.

President Clinton is not the only big name with the agency, as his former Vice President Al Gore has been booking $175,000 gigs through their connections, and former New York City mayor and Republican presidential candidate Rudy Giuliani regularly brings in $100,000 per event.

Former vice president Dick Cheney, former Senators Olympia Snowe and Joe Lieberman, Obama campaign strategist Jim Messina and former Secretary General of the United Nations Kofi Annan are all represented by The Harry Walker Agency as well.

Her exact asking price has not been reported, but Politico asserts that she ‘will likely do some speeches for no fee for causes she champions, and expects to occasionally donate her fees for charitable purposes’.

While keeping mum about any future presidential plans, Mrs Clinton has said that she plans to write another book, this time about her work as Secretary of State.

Publishing house Simon & Schuster reportedly paid the former first lady an $8million advance on her first book, Living History, which she published in December 2000.

With any and all positions that she decides to take, she will have to weigh the optics of if it would look appropriate for a presidential candidate.

That said, another concern is shoring up a steady income, because it doesn’t come cheap to live like the Clintons and six-figure speaking fees will certainly help.

Though there were early reports that they might buy a house in the Hamptons area of Long Island, it appears now that they will hustle between their current residences in Washington, D.C. and Chappaqua, a quiet town in the suburbs of New York City.

She is also expected to either work with her husband’s Clinton Foundation or start her own, though no decisions about that have been made at this point.

The only thing that Mrs Clinton has publicly confirmed is that she plans to rest after a very taxing four years of traveling to 112 different countries.

As Mrs Clinton remains coy about her political prospects, her potential competitors are being very blatant in their fundraising attempts.

On the Republican side, both New Jersey Governor Chris Christie and Florida Senator Marco Rubio have raised significant sums for their campaign war chests in recent weeks.

Mr Christie attended a fundraiser in his honor at Facebook founder Mark Zuckerberg’s California home, and Mr Rubio raised $100,000 by selling water bottles with his name on them, playing on his thirst-quenching gaffe during the State of the Union rebuttal.

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Yahoo joins Dell swelling Netherlands’ $13 trillion tax haven for multinational companies

mayer
Marissa Mayer, chief executive officer of Yahoo! Inc., smiles during TechCrunch Disrupt SF 2012 in San Francisco, on Sept. 12. Yahoo has taken advantage of the law to quietly funnel hundreds of millions of dollars in global profits to island subsidiaries, cutting its worldwide tax bill. / DAVID PAUL MORRIS/BLOOMBERG

Now, as a deficit-strapped Europe raises retirement ages and taxes on the working class, the Netherlands’ role as a $13 trillion relay station on the global tax-avoiding network is prompting a backlash.

delawareonline.com | Jan 26, 2013

Inside Reindert Dooves’ home, a 17th century, three-story converted warehouse along the Zaan canal in suburban Amsterdam, a 21st-century Internet giant is avoiding taxes.

The bookkeeper’s home office doubles as the headquarters for a Yahoo! Inc. offshore unit. Through this sun-filled, white walled room, Yahoo has taken advantage of the law to quietly funnel hundreds of millions of dollars in global profits to island subsidiaries, cutting its worldwide tax bill.

The Yahoo arrangement illustrates that the Netherlands, in the heart of a continent better known for social welfare than corporate welfare, has emerged as one of the most important tax havens for multinational companies. Now, as a deficit-strapped Europe raises retirement ages and taxes on the working class, the Netherlands’ role as a $13 trillion relay station on the global tax-avoiding network is prompting a backlash.

The Dutch Parliament is scheduled to debate the fairness of its tax system today. Lawmakers from several parties, including members of the country’s governing coalition, say they want to remove a stain on the nation’s reputation.

“We should not be a tax haven,” said Ed Groot, a parliament member from the Labour Party, which along with the People’s Party for Freedom and Democracy took power in November. Both ruling parties are “fed up with these so called PO Box companies,” he said. “If they go somewhere else we are not sorry at all because they spoil the name of Holland. Otherwise you can wait for retaliation measures and this we don’t want.”
War Declaration

Last month, the European Commission, the European Union’s executive body, declared a war on tax avoidance and evasion, which it said costs the EU 1 trillion euros a year. The commission advised member states — including the Netherlands — to create tax-haven blacklists and adopt anti-abuse rules. It also recommended reforms that could undermine the lure of the Netherlands, and hurt a spinoff industry that has mushroomed in and around Amsterdam to abet tax avoidance.

Read More

Federal Reserve Pushes Assets to Record $3 Trillion

ben
Chairman of the Federal Reserve Ben Bernanke speaks during a press briefing at the Federal Reserve. Brendan Smialowski/AFP via Getty Images

bloomberg.com | Jan 24, 2013

By Joshua Zumbrun

The Federal Reserve pushed its balance sheet beyond $3 trillion for the first time this week while undertaking open-ended purchases of Treasuries and mortgage-backed securities to combat 7.8 percent unemployment.

The Fed’s total assets climbed by $48 billion in the past week to $3.01 trillion as of Jan. 23, according to a release from the central bank today in Washington. Holdings of Treasuries climbed by $7.8 billion while mortgage-backed securities in the Fed portfolio rose by $35.6 billion.

The bond buying is part of Chairman Ben S. Bernanke’s campaign to use the full force of the central bank’s balance sheet to stoke the economic recovery. The Fed began purchasing $40 billion of mortgage-backed securities a month in September and this month added $45 billion in Treasury securities to that pace, bringing total monthly purchases to $85 billion.

CEO of JPMorgan says you don’t need to know how banking works, it’s like an airliner engine, too complex to explain, just shut up and pay us.

“You’re hard-pressed to find another example in history where the Fed pulled out all the stops to help a recovery along,” said Michael Hanson, senior U.S. economist at Bank of America Corp. in New York, and a former Fed economist. “It’s at least as revolutionary as Paul Volcker coming in and saying we’re going to hike rates until inflation” declines.

The Fed has a dual mandate from Congress to achieve stable prices and maximum employment. Volcker, Fed chairman from 1979 to 1987, pushed interest rates to as high as 22 percent to rein in annual price acceleration approaching 15 percent. Now Bernanke is focusing Fed policy on the other mandate, aiming to reduce the ranks of the nation’s 12.2 million unemployed workers.

Substantial Gains

Fed officials have said their $85 billion pace of purchases will continue until the labor market improves “substantially.” Still, they disagree on how long they should press on with the buying.

The minutes from their Dec. 11-12 meeting Federal Open Market Committee participants “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those who said they should continue beyond that date. A number of policy makers are concerned the size of the Fed’s holdings “could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation,” according to the minutes.

The central bank’s balance sheet has provided record windfalls to the U.S. Treasury. The Fed uses interest income from its bond holdings to cover its own expenses and sends the rest to the Treasury. In 2012, that dividend to taxpayers was $88.9 billion.

Hit Zero

One risk from a large balance sheet is the possibility that the Fed’s interest income could evaporate in coming years as rates rise, according to a paper released last week written by researchers in the Fed’s monetary affairs division. The paper studied different scenarios and concluded that the central bank’s payments to Treasury “will likely decline for a time, and in some cases fall to zero.”

The Standard & Poor’s 500 Index, the benchmark for U.S. equities, was little changed today at 1,494.82 at 4 p.m. in New York, while the yield on the 10-year Treasury note increased 0.03 percentage point, to 1.85 percent. The yield has increased from 1.72 percent on Sept. 13, the day the Fed announced its third round of quantitative easing, while stocks have climbed 4.8 percent.

The central bank’s balance sheet is now more than triple its size before the financial crisis. Fed assets stood at $924 billion on Sept. 10, 2008, the week before the bankruptcy of Lehman Brothers Holdings Inc. helped spark a global financial crisis.

The Fed responded to the financial crisis first with emergency credit programs, and then with bond purchases known as QE or quantitative easing. In the first round of purchases, the Fed bought $1.7 trillion of securities. In a second round of QE, begun in November 2010, the central bank added an additional $600 billion of Treasuries to its holdings.

Bill Gates added $7billion to his wealth in 2012 alone (and that’s AFTER he gave away $28million)

gates needle 2
Baby you’re a rich man: Microsoft billionaire Bill Gates increased his wealth by $7billion this year, despite giving away $28million

Microsoft founder Bill Gates named by Bloomberg as wealthiest tech billionaire with estimated $62.7billion net worth

dailymail.co.uk | Jan 3, 2013

By Beth Stebner

Despite giving away a staggering $28million dollars in 2012, Microsoft billionaire Bill Gates increased his wealth by $7billion this year.

And with a new net worth around $62.7billion, the 57-year-old Seattle native was named the richest tech billionaire by Bloomberg’s annual Billionaire’s Index.

But Facebook wunderkind Mark Zuckerberg slipped down on the list after losing $5.2billion, and now sits as only the tenth richest billionaire.

Bill Gates interview: I have no use for money. This is God’s work

According to Bloomberg’s Billionaire’s Index, which was published yesterday, Mr Gates earned some of his $7billion this year from a spike in Microsoft stocks, which went up 2 percent this year.

In addition, Business Insider reports that the philanthropist, who has given a sizable endowment to the Bill and Melina Gates Foundation, has capitalized a company called Cascade Investments.

In a report filed with the Securities and Exchange Commission, it was revealed that Mr Gates owns shares in companies like Coca-Cola and tractor company John Deere & Co.

Mr Zuckerberg, however, was one of the few billionaires on the list that suffered a loss.

The 28-year-old Facebook founder lost $5.3billion after his company went public in May, due in part to a botched IPO and over-hype on the stock’s initial worth.

Last week, the California resident also donated nearly $500million in stock to a Silicon Valley charity, his largest donation to date that also breaks the largest single philanthropic donation to education in 2012.

Beneficiary Silicon Valley Community Foundation said they were ‘thrilled’ by the gift aimed at funding health and education issues. The non-profit which works with donors to allocate their gifts.

Despite Mr Gates’ wealth, which appears to be growing at an exponential rate, Mexico’s Carlos Slim still remains the world’s richest man.

According to Bloomberg, the world’s billionaires added a collective $241billion to their net worth’s.
Mr Gates was born in Seattle in 1955. In 1975, he dropped out of Harvard to found Microsoft with a childhood friend.

He received an honorary doctorate from the institution in 2007.

Billionaires boost wealth to $US 1.9 trillion

NBR staff | Jan 3, 2013

The world’s billionaires added $US241 billion to their collective net worth during 2012, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 100 wealthiest individuals.

The index’s aggregate net worth was at $US1.9 trillion at the market close on December 31, with retail and telecommunications fortunes surging about 20% on average during the year.

Of the 100 people who appeared on the final ranking of 2012, only 16 registered a net loss for the 12-month period.

Amancio Ortega, the Spaniard who founded the Zara clothing chain, was the year’s biggest gainer. His fortune increased $US22.2 billion to $US57.5 billion, according to the index, as shares of his company Inditex rose 66.7%.

Billionaires Worth $1.9 Trillion Seek Advantage in 2013

Carlos Slim, the telecommunications magnate who controls Mexico’s America Movil, maintained his title as the world’s richest person for the entire year. His net worth rose $US13.4 billion – or 21.6% – through December 31, making him the second-biggest gainer by dollars.

Microsoft co-founder Bill Gates ranks second on the list, trailing Mr Slim by $US12.5 billion. He added $US7 billion to his net worth.

Warren Buffett, 82, lost his title as the world’s third- richest man to Mr Ortega on August 6 but gained $US5.1 billion during the year, even after donating 22.3 million Berkshire Class B shares in July to charity.

Brazilian commodities trader Eike Batista was the year’s biggest loser by dollars, falling $US10.1 billion and selling a 5.63% stake in his EBX Group in March to Abu Dhabi’s Mubadala Development Co.

Oracle founder Larry Ellison, eighth, rose $US6.4 billion in 2012 as the shares jumped 31.7%.

The Bloomberg Billionaires Index measures the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in US dollars.

The Royal Presidency: Obama lives better than kings

obama and the queen may 24, 2011

nationalreview.com | Dec 8, 2012

From the New York Daily News:

“Snooki Gives Kate Middleton Advice on Being a New Parent.”

Great! Maybe Kate could return the favor and give Snooki and her fellow Americans some advice. About fiscal prudence, for example. Say what you like about a high-living, big-spending, bloated, decadent, parasitical, wastrel monarchy, but, compared to the citizen-executive of a republic of limited government, it’s a bargain. So, while the lovely Duchess of Cambridge nurses her baby bump, the equally radiant president of the United States nurses his ever more swollen debt belly. He and his family are about to jet off on their Christmas vacation to watch America slide off the fiscal cliff from the luxury beach resort of Kailua. The cost to taxpayers of flying one man, his wife, two daughters, and a dog to Hawaii is estimated at $3,639,622. For purposes of comparison, the total bill for flying the entire royal family (Queen, princes, dukes, the works) around the world for a year is £4.7 million — or about enough for two Obama vacations.

According to the USAF, in 2010 Air Force One cost American taxpayers $181,757 per flight hour. According to the Royal Canadian Air Force, in 2011 the CC-150 Polaris military transport that flew William and Kate from Vancouver to Los Angeles cost Her Majesty’s Canadian subjects $15,505 per hour — or about 8/100ths of the cost.

Obamas get royal treatment in Britain

2012 Selection ‘Surprise’: Barack Obama and Mitt Romney are Cousins

Expensive massages, top shelf vodka and five-star hotels: First Lady Michelle Obama accused of spending $10m in public money on her vacations

Unlike a republic, monarchy in a democratic age means you can’t go around queening it. That RCAF boneshaker has a shower the size of a phone booth, yet the Duchess of Cambridge looked almost as glamorous as Snooki when she emerged onto the steps at LAX. That’s probably because Canada’s 437 Squadron decided to splash out on new bedding for the royal tour. Amanda Heron was dispatched to the local mall in Trenton, Ontario, and returned with a pale blue and white comforter and matching pillows. Is there no end to the grotesque indulgence of these over-pampered royal deadbeats? “I found a beautiful set,” said Master-Corporal Heron. “It was such a great price I bought one for myself.”

Nevertheless, Canadian journalists and politicians bitched and whined about the cost of this disgusting jet-set lifestyle nonstop throughout the tour. At the conclusion of their official visit to California, Their Royal Highnesses flew on to Heathrow with their vast entourage of, er, seven people — and the ingrate whining Canadians passed the baton to their fellow ingrate whiners across the Atlantic. As the Daily Mail in London reported, “High Fliers: Prince William and his wife Kate spend an incredible £52,000 on the one-way flight from LA to London for themselves and their seven-strong entourage.” Incredible! For £52,000, you couldn’t take the president from Washington to a state visit to an ice-cream parlor in a Maryland suburb. Obama flew Air Force One from Washington to Williamsburg, Va., requiring a wide-bodied transatlantic jet that holds 500 people to ferry him a distance of a little over 100 miles. And, unlike their British and Canadian counterparts, the American media are entirely at ease with it.

Just for the record, William and Kate actually spent an “incredible” £51,410 — or about $80,000 — for nine business-class tickets on British Airways to Heathrow. At the check-in desk at Los Angeles, BA graciously offered the Duke and Duchess an upgrade to first class. By now you’re probably revolted by this glimpse of disgusting monarchical excess, so, if it’s any consolation, halfway through the flight the cabin’s entertainment consoles failed and, along with other first-class passengers, Their Highnesses were offered a £200 voucher toward the cost of their next flight, which they declined.

By contrast, in a republic governed by “we, the people,” when the president of the United States wishes to watch a film, there are two full-time movie projectionists who live at the White House and are on call round the clock, in case he’s overcome by a sudden urge to watch Esther Williams in Dangerous When Wet (1953) at two in the morning. Does one of them accompany the first family on Air Force One? If the movie fails halfway across the Pacific, will the president and first lady each be offered a $2 million voucher in compensation?

In his recent book Presidential Perks Gone Royal, Robert Keith Gray, a former Eisenhower staffer, revealed that last year the U.S. presidency cost American taxpayers $1.4 billion. Over the same period, the entire royal family cost British taxpayers about $57 million. There’s nothing “royal” about the current level of “presidential perks”: The Obama family costs taxpayers more than every European royal house put together.

In the American republic, even the dogs cost more. The Queen is a famous corgi lover and has been breeding them since she was a young girl. Now in her late 80s she’s slowing down and only keeps four. The president has one pooch, a photo-op accessory called Bo, who unlike the corgis requires a full-time handler. In contrast to the stingy remuneration offered by the royal household, the presidential dog-walker is one of 226 White House staff earning over $100,000 a year. For many centuries, the King had a courtier whose somewhat intimate duties were reflected in his title: the Groom of the Stool, a position abolished in 1559. Now, after two and a third centuries, the American presidency has evolved to the point that it has a full-time six-figure Groom of the Canine Stool. Will he be accompanying the president on Air Force One to liaise with the Keeper of the Privy Flatscreen over screenings of Lassie?

In 2003, the advance team for President Bush informed Buckingham Palace that he would only be able to stay there if they took out all the windows and replaced them with blast-proof glass. The Queen, keeping a straight face, politely refused, and the president was forced to spend three nights in an insecure palace. Happily, in Hawaii, the flood-the-zone “security” can proceed unimpeded by cheeseparing monarchs who feel the job of head of state entails assuming a modest amount of risk or at least a passing acquaintance with reality. So local residents who will never catch a glimpse of their hermetically sealed-off sultan are expected to put up with walled-off neighborhoods, closed beaches, and residential streets clogged by 40-car motorcades. The Secret Service is installed in luxury hotels, no doubt with their Colombian hookers, and their hookers’ Colombian glaziers, fresh from installing bombproof windows on Bo’s kennel.

The fish rots from the head down, and so do republics. A $1.4-billion president has a defense secretary with a private plane to fly him home every weekend, and a chair of the “White House Council on Women and Girls” with her own Secret Service detail, and all of them ever more detached from the rhythms of American life. In the wake of the Cartagena hooker scandal, the Secret Service with predictable obtuseness imposed a new rule prohibiting agents from having “foreign nationals” in their rooms. The salient fact surely wasn’t that they were “foreign” but that they were hookers. Yet now, at the luxury Moana Surfrider resort, Obama staffers passing through the lobby and bumping into minor princesses and arch-duchesses staying in the cheap rooms on the lower floors won’t even be able to ask them up to their federally mandated ocean-view suites for tips on deficit reduction. In the Brokest Nation in History, it would be unreasonable to expect the president to pretend to have a regular all-American family Christmas for less than five million bucks.

As Ben Franklin famously said: “A republic, if you can keep it in the style to which it’s become accustomed.”

U.S. ‘too-big-to-fail’ banks bigger than ever before – now holding $8.5 trillion in assets


Five banks — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held US$8.5-trillion in assets at the end of 2011, equal to 56% of the U.S. economy, according to central bankers at the Federal Reserve. David Paul Morris/Bloomberg

Bloomberg News | Apr 16, 2012

by David J. Lynch

Two years after U.S. President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government.

Five banks — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held US$8.5-trillion in assets at the end of 2011, equal to 56% of the U.S. economy, according to central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43% of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2007 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and in 2008 with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

US banks are back and bigger than ever

From ‘too big to fail’ to even bigger in just four years

Banks grow despite Obama’s bid to end too-big-to-fail idea

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to grow internally and through acquisitions from European banks, reeling from government austerity measures related to the rising cost of public debt in Greece, Spain, Portugal, Ireland and Italy.

‘Few Massive Firms’

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

The Obama administration rejects the criticism, citing new safeguards to head off further turmoil in the banking system. Treasury Secretary Timothy Geithner said in a February 2 speech that the U.S. “financial system is significantly stronger than it was before the crisis.” He credits new regulations, including tougher capital and liquidity requirements that limit risk-taking by the biggest banks, authority to take over failing big institutions and prohibitions on the largest banks acquiring competitors.

Angering Taxpayers

The government’s financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the Tea Party movement. Banks and bailouts remain unpopular: By a margin of 52% to 39%, respondents in a February Pew Research Center poll called the bailouts “wrong” and 68% said banks have a mostly negative impact on the country.

Banks Cite Changes

The banks say they have increased their capital backstops in response to regulators’ demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, acknowledged public “hostility” toward bankers in a March 30 letter to shareholders, boasted April 13 of a “fortress balance sheet.” Bank of America, which was about 50% larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.

“We’re a much stronger company than we were heading into the crisis,” said Jerry Dubrowski, a Bank of America spokesman. The bank says it plans to shrink by year-end to US$1.75-trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.

Still, the banking industry has become increasingly concentrated since the 1980s. Today’s 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.

“One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at risk,” said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. “Some of the biggest banks got a lot bigger and the market got more concentrated.”

Concerns Voiced

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank’s research department, “Why We Must End Too Big to Fail — Now.”

A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”

Dodd-Frank

The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or “living wills” detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.

The new protections represent an effort to avoid a repeat of the crisis and subsequent recession in which almost 9 million workers lost their jobs and the U.S. government committed US$245-billion to save the financial system from collapse.

The goal of policy makers is to ensure that if one of the largest financial institutions fails in the next crisis, shareholders and creditors will pay the tab, not taxpayers.

“Two or three years from now, Goldman Sachs should be like MF Global,” said Dennis Kelleher, president of the nonprofit group Better Markets, who doubts the government would allow a company such as Goldman to repeat MF Global Holdings Ltd.’s Oct. 31 collapse.

New Regulations

Dodd-Frank, the most comprehensive rewriting of financial regulation since the 1930s, subjected the largest banks to higher capital requirements and closer scrutiny. The law also barred federal officials from providing specific types of assistance that were used to prevent such firms from failing in 2008. Instead, the Fed will work with the FDIC to put major banks and other large institutions through the equivalent of bankruptcy.

“If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy,” Obama said before signing the act on July 21, 2010. “And there will be new rules to make clear that no firm is somehow protected because it is too big to fail.”

‘Completely Unrealistic’

Officials at the Treasury Department, the Fed and other agencies have spent the past two years drafting detailed regulations to make that vision a reality.

Yet the big banks stayed big or, in some cases, grew larger. JPMorgan, which held US$2-trillion in total assets when Dodd-Frank was signed, reached US$2.3-trillion by the end of 2011, according to Federal Reserve data.

For Lacker, the banks’ living wills are the key to placing the financial system on sounder footing. Done right, they may require institutions to restructure to make their orderly resolution during a crisis easier to accomplish, he said.

Neil Barofsky, Treasury’s former special inspector general for the Troubled Asset Relief Program, calls the idea of winding down institutions with more than US$2-trillion in assets “completely unrealistic.”

It’s likely that more than one bank would face potential failure during any crisis, he said, which would further complicate efforts to gracefully collapse a giant bank. “We’ve made almost no progress on ending too big to fail,” he said.

Bankers’ Responses

Dimon dismisses such concerns as “chatter” and says U.S. banks need heft to meet the needs of their globally active clients. Since 2007, the bank has added more than 80,000 workers, equal to the current combined payrolls of Nike Inc. and Colgate Palmolive Co.

In his annual letter to shareholders, Dimon said JPMorgan will spend almost US$3-billion “over the next few years” and devote 3,000 full-time employees to complying with regulations that arose from the crisis.

That regulatory burden could promote further industry consolidation, according to Wilbur Ross, chairman of WL Ross & Co., a private-equity firm.

“We think the little tiny banks, the 90-odd percent of banks that are under US$1.5-billion in deposits, are pretty much an obsolete phenomenon,” he told Bloomberg Television on March 14. “We think they’ll all have to merge with each other, be acquired by bigger banks or something.”

Implicit Guarantee

Jake Siewert, a spokesman for Goldman Sachs, and Mary Eshet, a spokeswoman for Wells Fargo, declined to comment. Spokesmen for JPMorgan and Citigroup didn’t respond to e-mailed requests for comment.

Even with policy makers’ claims that the next crisis will be handled differently, investors still regard the largest banks as protected by an implicit government guarantee. One sign of that attitude is that investors continue to demand from the biggest banks lower interest payments in return for deposits.

That gives larger banks a funding advantage over their smaller rivals. In 2011, funding costs for banks with more than US$10-billion in assets were about one-third less than for the smallest banks, according to the FDIC. That gap was only slightly narrower than the 37% advantage the largest banks enjoyed when Dodd-Frank was signed.

US$250-Billion Boost

For 28 global banks in 2009, that benefit translated into a cumulative US$250-billion, according to Andrew Haldane, the Bank of England’s executive director for financial stability.

“Markets have come to believe that what the government did in 2008 and 2009 isn’t a one-time deal, that the government will somehow come to the rescue of these big financial firms,” Kevin Warsh, a former member of the Fed’s Board of Governors, said on the March 28 “Charlie Rose” TV show.

Credit-rating companies Standard & Poor’s and Moody’s say they anticipate the U.S. government would rescue large banks in a future crisis. Both cut the major banks’ debt ratings by one level late last year, while retaining them as investment grade credits.

Last month, 15 of the 19 largest U.S. financial institutions passed a Fed “stress test” designed to measure their ability to withstand a deep recession.

Richard Spillenkothen, the Fed’s director of banking supervision and regulation from 1991 to 2006, said regulators are moving in the right direction.

“We’ve made progress. I don’t think we’ve totally resolved it,” said Spillenkothen. “The proof will be in the next crisis.”