Not Too Old to Fail

As America's bankers take a day of rest to honor the precepts of Martin Luther King comes the suggestion of an anomaly in their policy of equal-opportunity bloodsucking.

A New York Times editorial finally catches up with the reality that "Retirees Saved the Banks," a situation described here some time ago under the heading, "The Fed's Financial Death Panels."

The Times explains how the bailout has victimized older Americans:

"By lowering the short-term interest rate it controls to virtually zero and creating lending programs, the Federal Reserve has enabled banks to borrow cheaply. The banks re-lend that cheap money, but not necessarily to consumers and businesses. They can, for example, lend it to back to the federal government by buying Treasury securities, and earn a nice spread between their cost of funds and Treasury yields.

"At the same time, banks are awash in deposits, much of it from investors who have pulled their money out of riskier investments. With money rolling in, big banks don’t need to compete with one another for savers, which further depresses the interest on offer.

"The result is presumably healthier banks and certainly poorer savers."

Just so, a recognition that, as stated here, the Fed has pursued a "free-money-for-banks policy by holding interest rates near zero, as the largest deploy their profits (at least in part the result of giving retirees nothing in return for using their life savings) to repay bailout loans so they can start rewarding themselves with pre-bubble bonuses instead of making loans to get the economy moving again."

One unintended but painfully real side effect of bailing out banks too big to fail has been the failure to keep afloat older Americans, who played by the rules and prudently saved for retirement and are now too old to earn new income and too experienced to start gambling what they have left in Wall Street's rigged casinos.

As bankers launch what the President describes as "a massive lobbying campaign against common-sense rules to protect consumers and prevent another crisis" with guess-who's money, older Americans should be reminding Congress that, from now to November, they will be watching closely to see who has their interest in mind.