The real reasons, while apparent to me,  appear  in large to me to be studiously ignored by the mainstream financial media in my opinion

The number one reason is that the companies that we are referring to as the "Too Big to Fail Banks," are not banks but are a new post Glass-Stegal Act amalgemations of various financial entities.

In my opinion, it was because of Greenspan, Rubin and their protoges, Summers, Geithner and Bernanke, that the US abandoned the wisdom learned during the great depression about monopolies and the concentration of too much wealth and power into too few hands and the turn towards so called "market driven economic policy" that allowed the creation of nearly a trillion dollars in loosely and in many cases virtually unregulated financial instruments of mass extinction otherwise known as OTC and other derivatives.

Since the the melt down that is continuing to desimate the global economy started the tax payers via the Fed and US government bailout policy, according to what I read of Nomi Prins,  have seen  over $14 trillion in various financial forms and guarantees put out to shore up the financial amalgamations.  In the meantime, we still await meaningful financial reform and there remain questions on the veracity and workability of such reform when some of the largest derivatives traders are so readily let off the hook: see The Root of the Financial Tsunami and A Solution: Banks Unleashed, OTC Derivatives, Phantom Money and Deregulation. – The thinking of Old and gray on the Financial Crisis

One would think that with that much money we would have seen these new financial amalgamations actively trying to get help the long term economy build a foundation and basis for sustainable growth.  Instead what we are seeing is that the largest amalgamations are benefitting from the consolidation of their industry and that the type of lending that stimulates broad economic growth, such as lendign to small business, commercial refinance and so on, are all declining and actually very rapidly.

In the meantime, government polichy has been to save the Too Big to Fail Banks, first foremost and above all else.  So rather than doing what needs to be done to fix the entire system such as the following big three:

A.  Massive and sustained efforts in R&D Investment spending for sustainable energy, efficient farming, space technology, water purification, processing and distribution systems, energy storage systems and other areas that will generate new technology, new US plants and new US Jobs.

B.  Massive incentives to build plants, and put jobs back in America.   There are lots of new technologies that could be made in the US if we just made it attractive to build in the US again.    There is also plenty of need for infrastructure build out in the power grid, the highway and rail systems, the water distribution systems and the data communication grid.

C.  A massive revamping of the educational sytem to bring educators and institutions into line with the latest developments in learning process and techniques incorporated by the smartest corporations and ideas such as "learning organizations."  These changes and availability of continuous, high level education for the current workforce, including hands training,  computer and remote mentor based training, and mastery based learning systems, which do not rely on fickle grading and counter productive competitive grading systems but that which requires that each student prove mastery and then progress to the next subject at their own rate.  It has  been shown that speed of assimilation is not proportional to mastery or creative application potential.   We now know that there are many types of learners and that there are also people who learn at varying speeds.   The current system rewards those who do well at the pace of academia, which is an unfortunate average that drives fast students to boredom and knocks out a lot of the creative genius that often learns slower, like Einstein.

No, compared to what we are spending on supporting the good old boys on Wall Street that are growing "tired" of the anger they are receiving from the working class, the real economy and real strategic investment in doing the right thing for the long term systemic health of the economy are being ignored, even as China and India other nations build world class educational systems and graduate more and more engineers and scientist or system continues to decay.

So,  given the massive shadow inventory of defaulted homes not yet posted in the MLS system and the next giant wave of ALT – A, Option ARMS, pick-a-rate and other non-subprime reset related and job market related forclosures increase, the banks, sorry amalgamated financial entities, will need another round of stimulus and as foreign demand for US bonds drop, it looks like the long road of quantitative easing and stimulus and deficit spending are going to continue to drive the US dollar and all the dependent currencies to degnerate in buying power over time, i.e. "inflation," even in the midst of the depression.   Here is an excerpt from a  recent article from the Telegraph in London by Ambrose Pierce:

America slides deeper into depression as Wall Street revels

"December was the worst month for US unemployment since the Great Recession began."

"…

The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.

Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism…."

"…Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath…."

"…

This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.

This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next.

US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. "If the 2008 and 2009 loans go bad, then we're back where we were before – in a nightmare."…"

Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever.

The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc…."

The one thing I disagree about in this article is that deflation is baked in the pie.  I beleive that the Fed and the US government and the global financial system have no other choice than to inflate the massive and growing debt away.  If they don't, not only will sovreign the debt be defaulted on by the largest nations, the entire global economy will disintigrate and social chaos and disorder and class warefare will ensue.    As such, the monetary authorities will continue quantitative easing, low interest rates (as far as they can control them) and if the rest of government can get over partisan battling (fat chance) they can do the A,B,C's above and get job and wage growth going in this country and gradually increase the revenue stream so as to begin to pay down the debt starting in about 10 years.   While there must be monetary inflation to accomplish this, it is better than destroying the entire system, which is what tightening would do at this stage and as will a permenant abandonment of QE by the Fed, given the precarious state of the housing market and the impact that higher interest rates will have.

They can conveniently change there title and become eligible to receive bailouts as the need suites them and then

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