Big Banks Making a Comeback

On my way into work this morning I was listening to NPR (to view a condensed version of the program I heard visit: http://www.npr.org/blogs/money/2009/10/big_banks_reporting_profits_in.html) and I heard two surprising, at least to me, statements.  The first was that many big banking institutions had reported profits in the third quarter, which also has something to do with the recent turn around of the stock exchange.  This surprised me, however, because normally when economic conditions approve I believed that the unemployment rate would come down.  On this same program, however, I heard that the unemployment rate is expected to rise and will probably exceed 10% before it starts to decrease.  Unemployment, however, is logically one of the last aspects to improve as the businesses cannot, and do not need to, hire more employees if they are not turning a profit.

 

The truly surprising information was how these banks were making money.  I could not understand how banks would be able to make money seeing as how they are making it extremely difficult to get a loan right now.  The radio host explained that banks are not lending like they have been so they have turned to investing to make profits.  As smaller banks do not have the capital to make these investments they are continuing to fail.  The government made the claim, which was probably accurate, that if the larger banks were to fall, it would be catastrophic for the United States economy.  What happens when many smaller banks fail?  Does it  provide more stress or stability for the U.S. economy?  Should a bail out be contemplated for smaller banking institutions as well?

 

This point leads to the final thought I had for my blog this week.  It seems like the first part of the “save Wallstreet to save Main street” plan has worked.  The government was able to, somewhat successfully, bail out major financial institutions and not only kept them afloat, but now some of them are even in the black.  The problem is that none of Wallstreet’s success has “tricked down” to Main street yet.  Meanwhile the Whitehouse wants to push through a bill that will offer universal health care coverage.  I am probably one of the more partisan neutral people you will meet, but how are we going to get tax payers to pay for this when they have no jobs?