Bank "managers" are "employees" who (supposedly) work for the shareholders/owners, trying to earn profits for the shareholders to share. The executive bonus system motivates bankers to manage banks in ways that maximize banker bonuses as bank "employees", not maximize the bank's profits and long term viability on behalf of the bank's "owners". Money is a universal corrupter. Tens and hundreds of millions of dollars of personal fortune in "bonuses" is a strong inducement to employ short term "quarterly" strategies that maximize bonuses and mismanage banks into bankruptcy; especially when bankrupt banks cannot be allowed to fail.
The banking system operates the money payments system that enables us to enjoy the vast benefits of life in a complex economy. If banks fail, the payments system fails. Money stops flowing from buyers to sellers, so goods stop flowing from sellers to buyers. The economy stalls and the whole system crashes.
Bond Debt, Taxes, and the Sound Money Road to Neofeudal Serfdom
If the indebted peasants produce $10 of money to pay the microfinance banker's interest, the banker rejects their money as "counterfeit" and tells the people only bankers are allowed to produce money. He tells them they should form a government with the power to tax the economy and the power to issue bonds. Then the banker will give the government money in exchange for bonds, and the government can spend the money into the economy, and the economy can get $10 of money to pay the interest that is still owing on their $200 microfinance loan. They already repaid the entire $200 of loan principal so they have no money left, but they still "owe" the interest, payable in money.
So the government writes up an IOU promising to pay $200 in bond face value in 52 weeks time, and the bank applies its discount rate of 5%, and buys the $200 bond from the government for $190 of money. The bank gives the government $190 of money which the government spends into the economy. The economy earns the money that the government spends, and pays $10 to the banker, so the economy is "out of debt". The banker squirrels away the $10 as his "capital".
So the economy now has a $180 money supply to use to "pay for" hiring each other and buying stuff from each other. But 52 weeks later the government's bond redemption comes due, so the government taxes ALL of the money supply out of the economy, which, after the $10 interest payment to the banker, is only $180. Because there is no more money in the economy for the government to tax, and because the government cannot simply issue its own money (governments issue bonds, which are government "debts"; in the monopoly money system the whole world uses today, only commercial banks are allowed to issue money to "buy" bonds and create money to "finance" government deficit spending), the government pays the banker its entire $180 in tax receipts.
Now the government and the economy have no money. But the banker -- who enjoys an exclusive monopoly on issuing money -- tells the government it still "owes" the $20 balance due on its bond debt, and if the government fails to pay the money, the banker will consider the government a bad credit risk and won't buy any more bonds from the government, or will jack up the discount rate from 5% to 30%.
The government, seeing the economic prosperity that resulted from the economy having "money" to use, and under pressure from the people who demand the government do something about the economic depression they are suffering from the dearth of money being spent and earned, asks the banker what the government can do.
The banker says, The economy has built nice roads to haul goods and for people to travel on. Suppose you sign over ownership of those roads to me, and I will charge tolls for using the roads. I will pay you $20 for the roads, and you can use the $20 to pay the money you owe me. Then I will buy another bond from you at my special discount rate of 5%, which I only offer to my most creditworthy customers.
The government agrees. The government signs ownership of the national roads over to the banker, and the banker pays the government $20 for the roads, and the government pays the $20 to the banker to pay the outstanding balance of "the public debt". The government writes up a new $200 bond and sells it to the banker who, applying his special discount rate of 5%, pays the government $190 of money for the bond. The government spends the $190 bond proceeds into the economy, and the people now have money to use and money to pay the banker's tolls on the roads that the people built with their own materials and blood and sweat.
Over the course of 52 weeks the banker has collected $20 in road tolls, which he squirreled away as his capital, so there is only $170 of money left in the economy. The government taxes all $170 out of the economy, but the government is still $30 short of the $200 face value of the bond debt whose payment is now due. And without money being spent and earned, the economy has fallen back into Depression.
Because of all the economic activity that was facilitated by having money to use, the people had built a nice electrical generation system and power grid for themselves. And a new port. And some airports. And water and sewer systems. And physically wired telephone and communications systems. And schools (and prisons). Just the kind of public utilities that the banker would like to own as his private property, to collect tolls from the economy for using the public utilities that the people built with their own ingenuity and cooperative effort. So what will the government sell to the banker next, to preserve the government's Triple A bond rating and "special" 5% discount rate with the money-issuing banker?
Somehow, by some mysterious phenomenon that is invisible to mainstream economists and is mystically referred to as "arithmetic", the government and the economy always seem to be getting another day older and deeper in debt. And the banker always seems to be getting another day richer in "capital", and in ownership of the economic infrastructure that the people built with their own hands.
I don't think I have to explicate to you the progression of this story to its arithmetically inevitable conclusion, do I? Eventually the money-issuing banker ends up owning the entire economic infrastructure AND owning all the money; and the economy and the government are STILL in debt to the banker.
Just like the good ole US of A in December of 2014. Merry Christmas, Tiny Tim.
Everybody knows that allowing governments to issue their own money guarantees Zimbabwean hyperinflation, and that's a fact, Jack. Everybody knows that only bankers are competent money-issuers who can preserve "sound money". Banker-issued money is so sound that it bought the whole world as the banker's private property. Now THAT is what "sound money" looks like.
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