The economy is in  the tank. Most economists seem to agree that second-quarter 2012 growth will come in lower than first-quarter’s 1.9%. The recession officially ended in the middle of 2011 and most economic indicators have risen since then but over the past year they all  have flattened out. There are many reasons for this. While housing starts have grown, over $7 trillion of housing market value was wiped out in the months leading up to the recession and today over 11  million Americans owe more on their houses than they are worth. Then,  Americans used rising home equity to fix up their homes, pay kid’s college tuitions and buy things for themselves; those days are far gone. Industrial production and investment is flat, and retail sales are declining. Unemployment is stagnant at 8.2%. Mr. Bernanke and the Fed plan to do something to increase liquidity (add more money to the economy) but so far the plans have not been made known.

Why am I saying all this? Why, because no where are the banks to be seen. Do you remember the bank bailout following the collapse of Bear Stearns and Lehman Brothers? Seems such a long time ago. Do you remember all the talk of investigating and seeking accountability for all the banks’ wrong doing? What happened? Nothing. And since then the banks have all become profitable, and the executives are once again receiving their bonuses. Just like the old days. How did the banks become profitable so quickly? The banks’ goals and objectives differed slightly from ours and the government’s. As they saw it, their priority was to get out from under the government’s thumb. So they needed to get profitable as quickly as possible and repay the government’s loans. This they did in record time. How did they do this you ask? Very simply: they traded. They did not lend to homebuilders and owners, or to small businesses, or to start up companies. No they traded for their own account government bonds. Instead of trading the sham real estate products that go themselves into trouble  in the first place, they went into, what is known in the biz as the bond trade carry business. Prior to 1996 when banks were deregulated they had three functions: provide deposits (savings and checking), make loans and provide letters of credit for foreign transactions. Now they can do almost anything they want, including selling stocks and insurance. And since 1996 there have been many scandals that have touched on all these areas.

Lending creates jobs and helps grow the economy. The government made capital available to the banks; the banks did not make it available to the American people and businesses. I fear the Fed will again make capital easily available to the banks and the banks will ignore their basic responsibility and continue trading at the sacrifice of investing in America. And most Americans will not say a word. They will not pay attention. They will remain asleep. But what about the administration and both houses of Congress? Why are they silent about this? Could it be in that in the race to raise $2 billion both political parties are loathe to rock the boat? To not bite the hands that feed them?