Market Mentality: Federal Reserve and government will always backstop the big financial players, buy like there is no tomorrow.
The feeling that institutions like JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group, Inc. (NYSE:GS) are backed by the full faith and credit of the Federal Reserve and the government is alive and well. Just five years ago, these too big to fail banks were bailed out by the taxpayers. Since then they have gotten free money from the Federal Reserve to become even bigger. Many times members of congress, big wigs on Wall Street and the media have pounced on the fact that these banks are still too big to fail. Nothing has changed from 2007. Well, maybe one thing. They are even bigger now.
Recently, the small banks have started to complain. Regional banks like BB&T Corporation (NYSE:BBT) are having problems because they do not get the same special treatment as the "too big to fail" banks. They have a right to complain. The big institutions are even fatter now than they were in 2007 and the Federal Reserve keeps feeding them. Even this Dodd Frank bill put through congress is a joke. It was meant to reform these large banks but will barely have an impact. It can even be argued that the Federal Reserve gave these mega institutions special treatment in helps to avoid any issues stemming from the bill. In other words, kissing the ass of people like Jamie Dimon since they know these banks can take down the world overnight.
As the Federal Reserve manipulates the system in an attempt to help the recovery, a new bubble is forming. Will these monstrously large, too big to fail banks withstand the coming collapse? The bond market bubble will crumble, the massive printing of currencies will bring on a mega hardship time for the middle class and poor as prices continue to climb. As I have said before, the Federal Reserve has been the main culprit in every major bubble in history. This is no different and will be the biggest one yet, even bigger than the financial crisis. Please note, there is no sign of collapse even starting until 2014.