These People Are Idiots
TNG Founder Ben submitted this post.
Wall Street has driven us off a cliff. This should be their day of reckoning, but it looks like they're going to get bailed out again with few strings attached and minimal changes enforced on the way they behave. For generations we will pay for their greed, yet we won't have the power to vote our shares of these banks we now own, nor will we be able to appoint directors. We'll gain all the bad aspects of nationalization, but none of the benefits. We taxpayers will foot the bill, but the executives and private shareholders will receive all potential rewards. Outrageous, particularly considering that the Obama administration has backed off from any talk of limiting executive pay. Can't we count on the Obama financial team to bring sanity to this situation? I'm not convinced. Treasury heads Larry Summers and Tim Geithner are long-time advocates of the same free market fundamentalism (the market will heal itself) and anti-oversight (regulate credit derivatives? Nah!) that sunk our economy. Change you can believe in, my ass.
It's in moments like this when those that speak truth to power become heroes and inspire the masses. Step up, lady from Missouri. Senator Claire McCaskill (D-MO) is pissed off, and has a plan: limit Wall Street executive pay to the same salary as the President of the United States. It's brilliant and let's us know that not everyone on Capitol Hill is eager to make chumps out of the people they represent. I figured it had no chance of passing, but the sentiment she conveys in this video has struck a nerve. As of Wednesday morning, the Obama Administration has revealed plans to limit executive pay.
12 comments:
I have to disagree. Wall Street contributed to driving the economy to where it is. But this would never have happened if people in 2002 did not start entering into mortgages they knew they could not afford, but they expected the market to increase the value of their homes 100 or 200 percent. Still, why anyone in their right mind would enter into a $400,000 mortgage with no down payment and a $50,000 annual salary is beyond me.
Since loan companies approved these bad loans, Wall Street began to buy bundles of them and package them into derivatives. It's no surprise that when the economy softened and jobs were lost, people defaulted on their mortgages (that they could never afford in the first place) and Wall Street's derivatives started hedging the wrong way.
I think it is fair to say Wall Street deserves a good share of the blame. But it's a more accurate statement to say the grain of sand that started this sandstorm began with some fools who thought they could have it all near the housing bubble bust.
Sorry Teddy, the mortgage collapse was merely the tripwire that got the other dominos falling--hell, it had to start somewhere. We're in the early stages of a systemic breakdown of the economy we've known and loved for decades. Likely due to the high cost structure (and the attempts to defend it) more than anything else. NO ONE wants to believe that! We'd rather think that it is "only" a mortgage problem.
It's the part of the American Dream to own your own home and be part of the "ownership" society. And while people who willingly knew that they could not afford it entered into these loans, it was the mortgage companies and banks that signed off on it.
You can blame the defaulted home owners, but when you perpetuate and condone bad behavior by giving the loans in the first place rather than letting them just dream about it the blame shifts to you.
These bankers had no consideration for the future of their companies and only worried year to year what their balance sheet was. It is easy to blame the home owners, but most of them do not have a degree in business or economics to have seen this coming, whereas the bankers did.
The banks have stopped calling in their loans on the commercial real estate, even though the owners of the malls and strip malls have arrived firmly in default. Calling in the loans would only pin another horrifying liability on the banks' balance sheets. So all parties join in a game of "pretend," that nothing has really happened to the fundamental equations of business life. Something similar goes on at the next level down, where the tenants of the malls and strip malls sink deeper into rent arrears every month, and the eviction process is simply postponed, while the stores themselves put off paying their vendors and suppliers – as the whole system, the whole way of life, enters upon a circle-jerk of mutual denial in a last desperate effort to forestall the mandates of reality.
More than half the population lives the suburban way of life, with its deadly mortgage traps, its mandatory motoring, and its civic disengagements. Nobody in power dares tell the truth: that we can't live this way anymore.
I'm kind of at a half way point between Teddy and J Clarence.
For too long, banks and basically every large company (including the evil multinational corporation from which I draw my income) have been too concerned with meeting next quarter's profit targets than with actually building a sustainable company or business model. When the mortgage-backed securities began to be used by the I-Banks, Main Street Banks, and lending societies, management thought only of what kind of profit these derivatives could bring in next quarter; not on the possible implications for the economy as a whole if the loans eventually went bad. Which of course, they had to - consumers were paying adjustable rate mortgages at rates which were obscenely low by historical standards, and once the bubble got too big, rates would have to rise. Once the rates rose, foreclosures were inevitable. Mortgage holders simply wouldn't be able to make the higher repayments.
That being said, using the American Dream of being part of the "ownership" society as an excuse for one's actions seems a bit far fetched and lacking in common sense to me as well. As a society, we have to take some personal responsibility for our actions, and that includes financial decisions. It does not make sense to buy a house that is eight times your income with no money down, and to do so by making only partial repayments for the first several years, not even covering the entire interest portion of the loan. I know how we have been sold this luxurious lifestyle on easy credit, but our society is based on the (fantasy?) idea that adults are logical and rational and are capable of making important decisions.
To sum up, banks and other corporations which encouraged people to take out loans they could not afford, helping to drive the bubble, are total fucking greedy assholes.
But also, the people who took out loans they could not afford, for the most part should have known better. I'm not going to say that they were greedy... but there are a lot of nice things I want in life, and I could get them on credit, and then never be able to pay back the loan either. As adults, we have to know our limits and try to stay within them.
Sorry I went on for a bit there, but I could talk about this subject for days. I'm whats known as a huge, huge, dork.
It's funny how Bernie Sanders introduced pretty much the same legislation (amending TARP to limit executive compensation to what POTUS earns) back in November and no one even noticed. Now, Claire McCaskill and Barack Obama get the credit. Hum... time to stop writing off the Senate's token "wacky socialist?"
As a former Bernie intern, I wish I could give ya a nice big chest-bump, Keith. That guy has some excellent ideas and he's not beholden to anybody but the social-democratic coalition (urban liberals and rural farmers) in VT that absolutely loves him. Like you said, people might not realize it, but Bernie's had the right idea all along.
"Our money - and our economy - are on the line, and we all have a stake in the outcome," said Harvard Law School professor Elizabeth Warren in her prepared remarks for a Senate Banking Committee hearing.
Warren heads the five-member congressional oversight panel overseeing the TARP, and said that the group on Friday will issue a report suggesting Treasury has significantly overpaid for the assets it has purchased from financial institutions. She said an analysis of 10 of the TARP transactions, when extrapolated for all of the purchases made in 2008, suggests Treasury paid $254 billion for assets worth approximately $176 billion, a shortfall of $78 billion.
"Treasury paid substantially more for the assets it purchased under the TARP than their then-current market value," Warren said.
Bailing out these institutions might be necessary, but bailing out executives and shareholders is not.
For over a year the one point that I and others have been trying make is that the polite fiction that masters of the universe of Wall Street and their defenders in the media and Congress have been trying maintain, that this is liquidity crisis not an insolvency crisis, is utter horseshit. They made bad leveraged bets and lost immense amounts of money, and now they, and their buddies Geithner and Summers, want taxpayers to bail them out so they can go on living their opulent life styles while some of my neighbors wonder if their next food stamp card is going to show up.
When bankers do dumb things and get kingly rewards, again and again, are they really dumb?
Is being so incompetent that you're lavished with multi-million dollar salaries, multi-million dollar bonuses and multi-million dollar perks, can we really call it incompetence?
The whole point of the incompetence argument, assumes that we know their goals and missions. When we see them fail to meet those goals, we assume they are failures. But perhaps we simply don't understand the plan?
And when the plan nets them all that free money to waste, should we call it a conspiracy? They may just see it as a business plan.
Teddy - you are completely overlooking the issues with CDSs and CDOs, which are the securities equivalent of selling spam in a can marked filet mignon. It may not have started that way but when you pack tranche after tranche of filler into a product, you can't call it Triple A, and yet that's what they did. The ratings' agencies (Moody's, S&P, and Fitch) should be gone over with a fine-toothed comb as well and the SEC or CFTC or whomever ends up with it ought be doing regular audits of their fraudulent business practices and real fines when they can't get it straight.
Banks didn't have to care about the loans they underwrote because they could sell them onn, thus taking no financial risk themselves, unless they kept the loans on their books, as Fannie and Freddie ended up doing and as a number of banks have done since.
Neo-cons and Friedman/Ayn Rand worshipers will claim that no one qualified will take the jobs if they can't pay outlandish sums, approved by boards stacked with people so insulated from reality that even W would find it constricting.
Normally I'd say that if the banks come begging, on the verge of total collapse, to Uncle Sam they ought to be nationalized, their stockholders' stock liquidated (as stockholders they usually push for quarter to quarter increases and have no view of the long term growth), and told to STFU. Unfortunately with so many people having been forced into a devil's bargain with 401k plans investing in the stock market, the knock on effects of that could be as devastating as allowing their collapse.
I do think a lot of people knew what they were getting into, but it takes two to tango, and having seen real estate agents, brokers and banks get far fatter and happier, I can see where most of the blame lies.
Ideally I'd love to see us get real about REAL distortions in the marketplace, like the tax deduction for home owners, but that sacred cow is only going to slaughter right after we cut grandma's Social Security benefits.
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