By Ken Stern 

When banks and trains crash

 

March 22, 2023



Seems like banks and railroads are failing all around us. No one is really surprised, from corporate CEOs to congressional committees and Congress, period, to front line workers driving engines and managing branches or federal and state regulators at every agency. Train cars and locomotives jumping the tracks in East Palestine and Springfield, Ohio or nearby, behind the Swinomish Casino? Banks failing in California, New York and, now, Switzerland?

The new normal is business as usual. Big companies are always failing. Big companies are always not following the rules. Big companies are always getting away with murder. The rest of us are left to pick up the pieces, get on with our lives, get ill, go to the hospital, have to move and find another job.

Frankly, my dear, I don't give a damn. Wrong movie. The line from “Casablanca” is the appropriate one: “I am shocked, shocked.” And then there is Sergeant Schultz from the TV show, “Hogan's Heroes:” “I know nothing. Nothing.”


Of course that is a lie. Congress, bank and railroad CEOs, front line managers and engineers, they all know what the rest of us run-of-the mill stiffs and citizens know: the game is rigged, the dice are loaded, the books are cooked, the regulations are purposefully weak and insufficient.

They are not shocked, they know everything and, frankly, they don’t give a damn. After a failure, a crash, or an extended crisis, hearings may get held and federal legislation even passed, but there are as many lobbyists in the congressional buildings’ hallways as there are people maimed, injured and sickened. Legislation may get passed, but the needs articulated early and the strong regulations that at first are pledged to get enacted typically are not in the words when the bill becomes law.


And then what? Back to that old normal, with things mostly okay most days. Years later, in quieter, more prosperous times, the laws get revisited and weakened. Dodd-Frank, that was going to tighten banking regulations and put guardrails in place. It worried the bankers enough that they got portions of it repealed by Congress during the Trump years.

And faith in the free market? Letting the market pick winners and losers? After too big to fail was acquiesced to in 2008 and 2009 and banks learned their lesson, banks and regulators would not prevent bank failures from happening again. No special privilege for the middle size banks. They would have to sink or swim like the rest of us.


The size of Silicon Valley Bank? Its assets of $209 billion floated away and the closure became the second largest in U.S. history. Right behind it, days later and at only $110 billion, Signature Bank.

Washington Mutual Bank was worth $307 billion when it failed in September 2008.

The three together are about the same size as Lehman Brothers, the investment firm, that when it failed in 2008 became the largest bankruptcy in U.S. history, at over $600 billion, just disappeared. Poof. Gone.

On the railroad side, the only time slow is good is when it comes to federal regulation. The air brake, standard on trains, was invented by George Westinghouse in 1872. It was not required on freight trains until 1900.


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Fast forward to the 21st century. Regulations for electronically controlled brakes were proposed on flammable oil trains during Obama’s presidency. Anti-derailment technology implementation has been stalled since 2016.

It is only time to go slow when profits are seemingly endangered. People, small communities, the environment, tracks along Puget Sound bays? Maybe it is not full speed ahead, but a continued gliding along on out-of-date safety regulations. Give companies a break. Let them go slow. It is not at all shocking that more study and debate gets called for.

 

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