Too Big to Fail – Again

   Written by on August 14, 2015 at 10:48 am

We never seem to learn!  Seven years ago it was deemed by those in Washington that the largest banks in the country were simply too large to fail.  For this reason, you and I, the taxpayers, were saddled with billions of dollars in new taxes that limit the ability of our economy to grow.  This debt is so great that neither we nor our children or grandchildren will be able to pay it off.

ruff-frankSome major banks had put themselves into a position in which they imperiled all of us financially by loaning mortgage money to folks who simply had no way to make the monthly payments required.  Generally, they simply made the loan then sold the account to another bank or financial institution, passing that risk to others.  Sometime they packaged those mortgages together with similar mortgages and sold them to their own customers without disclosing the financial risks at hand.

As the economy weakened with media hype in 2008, the public was convinced that if the taxpayers did not save these Wall Street banks our economy would totally collapse. I cannot prove or disprove that possibility.  I can say, however, that those big banks are now still doing well while our economy continues to stagger along carrying the mountain of debt.

As this policy was implemented seven years ago, there were conversations about the need to disperse our economy to more banks.  Despite those conversations, the bigger banks have gotten bigger, richer, and more powerful.  Even worse, the administration is pushing banks to approve the same type of shaky mortgage loans that got us into the situation that we now face.

Now we have the health insurance companies going down the same path.  As this President’s Affordable Care Act has fallen into place, the largest insurance companies are scrambling to buy other insurance companies.

What could be the motivation of one insurance company paying or proposing to buy a competitor for two thirds of a 100 billion dollars?  Clearly they could advertise and promote their companies to increase their share of the health insurance market.  Regrettably, those large companies believe the better solution for them is to buy their competition.  They understand that under the current structure of the Affordable Healthcare Act few, if any, new companies will invest in a system that is rigged to fail by the federal government.

If all these merger moves are successful and most of the health insurance is controlled by fewer than a half dozen companies, what happens when the federal bureaucrats decide to change the funding formula?  Will they have the clout to push Washington to increase the payments for this service or that service?  Will the federal government wake up in time to stop these mergers?

We have already seen changes in hospital ownership.  One of those reasons was that our great community hospitals could not compete in a market where the federal government controlled the fee structure.  Each has had to accept the changing world of medicine dominated by the government and government payments.  Thankfully, larger healthcare providers have stepped forward to provide the needed healthcare services.  The flip side of this is that statewide, fewer than ten hospital organizations control almost all of the hospital care in the state.  We will see as we move forward if this is healthy for Virginia and Virginians.

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