Banks Set for Record Pay - 18% over last year!!

[Dave Farber <dave () farber net>]

Begin forwarded message:

> From: hal () halstucker com
> Date: January 15, 2010 5:24:19 PM EST
> To: dave () farber net
> Subject: Re: [IP] Re:    Banks Set for Record Pay - 18% over last  
> year!!

> Dear Prof. Farber:
>
> What much of the current debate seems to lack, centered as it is on  
> bank pay structures and bailout funding, is a broader understanding  
> of the history and depth of the financial sector's misdeeds. I won't  
> go so far as to say America's bankers have "stolen" from us, a la  
> Madoff, by simply taking money from ripe suckers and stuffing it  
> into their pockets. But what has happened over the last two to three  
> years is the fruit of an unfortunately very successful effort to  
> dismantle this country's system of financial regulation. These  
> efforts began roughly around the time of the Regan administration  
> and have been promulgated by lobbyists in the pay of the financial  
> services industry. And our lawmakers have been there every step of  
> the way, helping the process along in a stunning display of bi- 
> partisanship.
>
> To take only one particularly egregious example, can anyone tell me  
> how banks such as Citi and BofA all of a sudden became too big to  
> fail? How they were allowed to make all kinds of risky purchases of  
> complex financial instruments they didn't understand, while also  
> holding the life savings of ordinary citizens like you and me?  
> Savings in many instances insured by the FDIC?
>
> There once was a wonderful set of laws known as the Banking Act of  
> 1933 or, more commonly, the Glass?Steagall Act, put into place  
> shortly after the 1929 meltdown of the financial sector. Glass- 
> Steagall was designed to curb speculation and essentially put a  
> "Chinese wall" between retail banking and much riskier investment  
> banking, and also between the banking and insurance industries. The  
> financial services sector screamed bloody murder when the law was  
> passed and have been trying to have it repealed ever since. It  
> finally was repealed under the Clinton administration, its  
> dismantling seen to by then-Treasury Secretary Robber Rubin, now a  
> key financial advisor to the Obama administration.
>
> The immediate result was Citibank's extremely ill-advised  
> acquisition of Traveler's Insurance, one of the key reasons Citi is  
> currently in the shape it's in. But another result is what we see  
> all around us now -- the crashing and burning of banks that set up  
> what were essentially internal hedge funds that made billions of  
> dollars in ill-advised bets on a whole Coney Island fun house full  
> of complicated derivatives and other obscure almost-impossible-to- 
> understand financial instruments. Instruments that both Rubin and  
> Fed chairman Alan Greenspan steadfastly refused to regulate  
> throughout their tenures.
>
> As has been widely noted, Rubin left government service to take a  
> high-paying job as a director at, ah, Citibank. Is he to be called  
> before the current Financial Crisis Inquiry Commission, to be asked  
> embarrassing questions about what appears to be, at best, an  
> unseemly conflict of interest? Not that I know of.
>
> And what the wise men of Wall Street seemed to understand yesterday,  
> but of course would never say, is that this, like the furor over the  
> AIG bonuses, will quickly subside, leaving them free to start the  
> process all over again. If there were no angry, pitchfork-and-torch- 
> wielding mobs marching down Wall Street last night, the chances are  
> good there never will be. Far from doing something sensible, like  
> restoring Glass-Steagall, legislators will pass a few perfunctory  
> regulations that the guys down in legal will quickly find ways to  
> circumvent, and Goldman, et al., will be free to "innovate" once  
> again.
>
> To paraphrase Mr. Churchill, people get the oligarchy they deserve.
>
> Best,
> Hal Stucker
>
> PS, Paul Krugman has written on all this quite extensively,  
> including today's column, at http://www.nytimes.com/2010/01/15/opinion/15krugman.html?hp
>
> -----Original Message-----
> From: Dave Farber [mailto:dfarber () me com]
> Sent: Friday, January 15, 2010 11:19 AM
> To: 'ip'
> Subject: [IP] Re: Banks Set for Record Pay - 18% over last year!!
>
>  >From: "Jonathan S. Shapiro" <shap () eros-os org>
> >To: <dave () farber net>
> >Cc: "ip" <ip () v2 listbox com>
> >Date: January 15, 2010 11:11:49 AM EST
> >Subject: Re: [IP] Re: Banks Set for Record Pay - 18% over last year!!
> >
> >
> On Fri, Jan 15, 2010 at 7:45 AM, David Farber <dave () farber net> wrote:
> As for home value, they're still over valued compared to the trend  
> line.  If
> your home value dropped, that's unfortunate.  So did mine, but  
> that's the
> way the dice rolls and I'm not going to blame it on some guy that  
> happens to
> work for a bank just because I might naturally be jealous of the  
> money he
> makes.
>
>
> They *did* steal from us, and it has nothing to do with house  
> valuations or trend lines. It's very simple: the banks wrote bad  
> loans in the full knowledge that they would be bailed out by the  
> government using taxpayer money. That money ultimately comes out of  
> your pocket and mine. I don't know about you, but *I* wasn't a party  
> to those loans, and I certainly wouldn't have approved loans to  
> people who self-evidently lacked the means to pay. When somebody  
> contrives to reach into your pocket and take your money without your  
> consent, what do *you* call it? I call it theft.
>
> You are correct that there are contracts requiring that the banks  
> pay the participants according to certain formulae. And I'm happy if  
> we do that, so long as we prosecute the parties involved. We can  
> then seize the bonuses as income derived from crime, which is the  
> treatment it deserves.
>
> The tragedy here is that when everybody is responsible, nobody is  
> responsible, and nobody can be held accountable.
>
>
> Jonathan
> Archives        



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