Thread by @kurteichenwald

The biggest threat to America right now is not being discussed much (by anyone but @ewarren) GOD, she needs to be Treasury Secretary.

If young people don't vote this time, given what's happening, your lives can be DESTROYED. Not in the future. Next year.

This is about banks../1

...let me start with this. Im a long-time financial reporter. I have written 3 bestselling books about financial scandals involving complex events. I have given speeches at accounting firms, banks, investment banks, and major corporations about how to run things better. And.../2

...I know underlying financial, banking and accounting issues. In other words, I'm not just flinging stuff out there.

Second, we have gone through the most egregious few years of legal market manipulation I have ever seen. Stock buybacks by corporations have exploded.../3

...the Fed has been flooding the market with cash - not just now, but even when things were good - which in turn pushes stocks up. Massive tax cuts created an unsustainable push of stock values. Companies were allowed to announce "non-GAAP accounting" earnings which, if.../4

...those existed 20 years ago, Enron would never have had to break the law. GE announced more than half a dozen versions of its earnings in one quarter, changing the accounting to get different results. Only one was valid, but the market ignored that one..../5

...this is why price/earnings ratios -which are supposed to the standard for investment values - have exploded to historic levels: Stock prices are not connected to earnings anymore; they are a function of prices that have been manipulated by one-time and false factors. THIS.../6

...is a huge part of why there is such a complete disconnect between the stock market and the economy. You can't manipulate actual buying/selling/contracting of goods and services.

So, in that context, back to banks: Yesterday, the Fed released the "stress test" of banks.../7

...which shows how well they are able to withstand a stress on the system. One of the key elements of this is how much capital the banks have - the capitalization. And, in this stress test, a number of banks were hovering just above minimum capitalization.

Ok, that happens.../8

...there are lots of elements in financial system to deal with that - none of which the banks like, but too frigging bad.

There is ONE the banks like - freeing them up to take MUCH bigger risks, to blend banking with higher-risk investing. Essentially..../9

...because of the fungibility of money, to let them use federally insured cash to invest in far riskier investments.

This is EXACTLY what happened in 2003-2008, which is why we had the Great Recession. Banks took enormous risks with federal money, and lost it..../10

...Republican politicians ALWAYS ignore the fundamental of investing: High return means high risk, high risk means high chance of losing the investment. But the politicians always duo the "These are rich white guys. They're geniuses! They will make only good calls."

It's.../11

...the opposite. I have seen bankers set up deals that are *insane* because, if the deal works out, they get huge bonuses (and they get them before its known if there is a disaster waiting) and if they dont work out - well, that's someone else's problem. They have a choice.../12

...between personally making a million dollars, or getting fired. Which choice do you think people who got into finance for the money will take?

Eventually, it ALWAYS happens that banks/financial institutions get too giddy, go too far, and BOOM! It all falls down. So.../13

...what this means: A number of banks are just above minimum capitalization. When they go below, they can collapse. To solve the problem, the Trump Administration said "Here, take far more risk. That means you'll make more money!"

But again, this is in a market where.../14

..values are disconnected from underlying financial realities. This is also why, when a rule was announced yesterday freeing stock buybacks for some financial institutions, their prices fell - no more of those manipulations available. If companies can't buy their own stocks.../15

...they have to only rely on actual investors actually purchasing the shares because of actual underlying business performance. And - without the buybacks - CEO's etc whose bazillion dollar bonuses are based on stock prices can't keep manipulating up so they get paid.

So.../16

...where we are. Too many banks are hovering in the danger zone. In a Hail Mary pass, rather than taking action to increase the safety of the system, the Trumpers - JUST like Trump did with his insane casino ventures -are saying "Just take more risk. We are always right".../17

...if this is allowed to go on for too long - which Trump and a republican congress WILL do, because this is what they ALWAYS do - there will be a collapse, one that makes 2008 look like a few blocks being knocked over.

Back to young people: YOU will bear the most cost.../18

...the young people who "protest voted" for Nader put Bush in office. The banking insanity started 3 years later. He got back in again - and it escalated. Then, in the collapse, job opportunities shriveled, older people clung to their jobs, but the rich kept getting richer.../19

...driving up housing prices. YOU couldn't get good paying jobs. YOU couldn't afford a house. YOU got screwed in every direction. And the next round, it will be the 18-35 year olds (who were 8-25 yrs old last time) who suffer the most....

...if you dont vote to end this by going democrats across the board - NO frigging protest voting - this will not stop. If you say "Oh, neoliberal this and that" - it's bull. Stop pushing for @ewarren to be VP - she needs real power as Secretary of Treasury....

..shes out there, right now, condemning this. She knows bankers are dancing in delight, that we'll pay the price for their recklessness & GOP indulgence. They cant fool her. At Treasury, she will clamp down with rules to stop this.

Or stay home & see what happens to you.

fin