Federal Report Faults Banks on Huge Bonuses
By ERIC DASH
July 23, 2010 "New York Times" -- With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.
In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.
Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts. (Editor--Of course not, Congress has been purchased by the banking lobby and will refuse to enact legislation adverse to the lobby's interests)
Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.
As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.
Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.
On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000.
If the second half of 2010 plays out like the first half, Wall Street bonuses will be paid out at about the same level as last year and similar to 2007 levels, when the crisis had just started to unfold.
“It’s healthier than I would have ever expected a year ago,” said Alan Johnson, a longtime compensation consultant who specializes in financial services.
Mr. Feinberg was named last month as the independent administrator for claims tied to the BP oil spill, making it likely that the release of his findings on the financial firms will be his final act as the overseer of banker pay.
The review, mandated by the 2009 economic stimulus bill, broadened the scope of Mr. Feinberg’s duties to include examining the pay packages of top earners at 419 companies that accepted bailout funds. However, it did not give him the power to demand changes to the compensation arrangements, as he did in each of the last two years at seven companies that received multiple bailouts.
Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.
Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.
Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.
The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks.
Among the banks that have not fully repaid the government, Citigroup was identified by Mr. Feinberg as having the most egregious compensation packages during the bailout period, according to officials with knowledge of his report. The bank handed out several hundred million dollars in pay in 2008 as it struggled to stay afloat.
Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit. Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.
Mr. Feinberg is not expected to name individual executives who received the highest awards. (Editor's bold emphasis throughout)
His review is among several compensation initiatives scrutinizing banker pay. In June, the Federal Reserve ordered about two dozen of the biggest banks to address several pay practices that, even after the crisis, it said encouraged excessive risk-taking.
European banking regulators introduced tough new standards for bonus payments earlier this month. And the Federal Deposit Insurance Corporation is developing a plan that would partly tie bank insurance premiums to the perceived risk of their executive pay packages. That proposal could be reviewed by the agency’s board as early as next month.
____________
Shadow Banking Makes A Comeback
By Mike Whitney
July 22, 2010 "Information Clearing House" -- Credit conditions are improving for speculators and bubblemakers, but they continue to worsen for households, consumers and small businesses. An article in the Wall Street Journal confirms that the Fed's efforts to revive the so-called shadow banking system is showing signs of progress. Financial intermediaries have been taking advantage of low rates and easy terms to fund corporate bonds, stocks and mortgage-backed securities. Thus, the reflating of high-risk financial assets has resumed, thanks to the Fed's crisis-engendering monetary policy and extraordinary rescue operations. Here's an excerpt from the Wall Street Journal:
"A new quarterly survey of lending by the Federal Reserve found that hedge funds and private-equity funds are getting better terms from lenders and that big banks have loosened lending standards generally in recent months. The survey, called the Senior Credit Officer Opinion Survey, focuses on wholesale credit markets, which the Fed said functioned better over the past quarter." ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)
In contrast, bank lending and consumer loans continue to shrink at a rate of nearly 5% per year. According to economist John Makin, there was a "sharp drop in credit growth, to a negative 9.7 per cent annual rate over the three months ending in May." Bottom line; the real economy is being strangled while unregulated shadow banks are re-leveraging their portfolios and skimming profits. Here's more from the WSJ:
"Two-thirds of dealers said hedge funds in particular pushed harder for better rates and looser nonprice terms, and they said some of the funds got better deals as a result....(while) The funding market for key consumer loans remained under stress, with a quarter of dealers reporting that liquidity and functioning in the market had deteriorated in recent months." ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)
As the policymaking arm of the nation's biggest banks, the Fed's job is to enhance the profit-generating activities of its constituents. That's why Fed chair Ben Bernanke has worked tirelessly to restore the crisis-prone shadow banking system. As inequality grows and the depression deepens for working people, securitization and derivatives offer a viable way to increase earnings and drive up shares for financial institutions. The banks continue to post record profits even while the underlying economy is gripped by stagnation.
Central bank monetary policy is largely responsible for the worst financial crisis since the Great Depression. Low interest rates and an unwillingness to reign in over-leveraged banks and non-banks triggered a run on the shadow system that left many depository institutions insolvent. Eventually, the Fed was able to stop the bleeding by providing trillions of dollars in emergency relief and by issuing blanket government guarantees on complex bonds and securities that are currently worth roughly half of their original value. The Fed is now reconstructing this same system without any meaningful changes. The upward transfer of wealth continues as before.
The Federal Reserve Bank of New York's own report confirms that securitization and massive leveraging contributes to systemic instability. Here's an excerpt from the FRBNY's "The Shadow Banking System: Implications for Financial Regulation":
"The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system.....Securitization was intended as a way to transfer credit risk to those better able to absorb losses, but instead it increased the fragility of the entire financial system by allowing banks and other intermediaries to “leverage up” by buying one another’s securities." ("The Shadow Banking System: Implications for Financial Regulation", Tobias Adrian and Hyun Song Shin, Federal Reserve Bank of New York)
The former President of FRBNY, William Dudley, made similar comments in a recent speech. He said, "This crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two years.”
The system can be fixed by imposing capital and liquidity requirements on shadow banks and by maintaining strict underwriting standards on loans. Regulators need additional powers to check-up on institutions which presently operate outside their purview. Any institution that poses a risk to the rest of the system must be regulated by the state. Unfortunately, the Fed opposes such changes because they threaten the profit-margins of its constituents. The Fed is paving the way for another catastrophe.
Securitization creates strong incentives for fraud. Prior to the Lehman Bros. default, structured securities, like bundled loans, were in great demand because investors were looking for Triple-A bonds with higher yields than US Treasuries and CDs. Bogus ratings convinced investors that mortgage-backed securities, asset-backed securities, and collateralized debt obligations were "risk free" when, in fact, many of the loans were made to applicants who had no ability to repay their debts. As foreclosures soared, financial intermediaries demanded more collateral for the short-term loans which provided funding for the banks. That pushed asset prices down and slowed liquidity to a trickle. When the wholesale credit markets crashed, panicky investors ran for the exits. The meltdown in subprime was the spark that set the shadow system ablaze.
Even so, Bernanke has fought all attempts to strengthen regulations, raise capital requirements, or tighten lending standards. Thus, the pieces of the shadow system have been reassembled with no fundamental change. Now it appears that the Fed's bubblemaking efforts are starting to pay off. Here's a clip from an article in the Wall Street Journal which clarifies the point:
"Even as lenders struggle to pull themselves out of the credit crisis, signs of a new and potentially dangerous infatuation with risky borrowers are emerging. From credit cards to auto loans to mortgages, the hunger for new business as the crisis ebbs is causing some financial institutions to weaken lending standards and woo borrowers who mightn't be able to pay.....
Credit-card issuers mailed 84.8 million offers of plastic to U.S. subprime borrowers in the first six months of this year...Fannie Mae, seized by the U.S. government in 2008 to avert the mortgage company's failure, launched an initiative in January that allows some first-time home buyers to get a loan with a down payment of as little as $1,000....The thawing securitization market for auto loans is helping AmeriCredit increase its loan staff and dealer network...Kathleen Day, a spokeswoman for the Center for Responsible Lending, said the consumer group is "seeing banks re-enter the subprime market at a steady clip and make loans to borrowers who don't have the ability to repay.
There is no doubt that the credit supply still is tight....But some lenders are starting to take more chances on consumer loans. Many financial institutions that survived the credit crisis and resulting recession are desperate for earnings growth." ("Signs of Risky Lending Emerge" Ruth Simon, Wall Street Journal)
Financial system instability is no accident. It's Central Bank policy. As financial institutions discover they can no longer count on organic growth in the real economy to increase profits, (because consumers are too strapped to spend freely) they will rely more heavily on dodgy accounting, bogus ratings, opaque debt-instruments, high-frequency trading and lax lending standards. This is the shadowy regime that Bernanke is trying so hard to rebuild. The Fed is laying the groundwork for another disaster.
Showing posts with label Banking Lobby. Show all posts
Showing posts with label Banking Lobby. Show all posts
Monday, July 26, 2010
Sunday, May 3, 2009
Top Senate Democrat: Bankers 'Own' the US Congress
By Glenn Greenwald
May 01, 2009 "Salon.com" -- Sen. Dick Durbin, on a local Chicago radio station this week, blurted out an obvious truth about Congress that, despite being blindingly obvious, is rarely spoken: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." The blunt acknowledgment that the same banks that caused the financial crisis "own" the U.S. Congress -- according to one of that institution's most powerful members -- demonstrates just how extreme this institutional corruption is.
The ownership of the federal government by banks and other large corporations is effectuated in literally countless ways, none more effective than the endless and increasingly sleazy overlap between government and corporate officials. Here is just one random item this week announcing a couple of standard personnel moves:
Former Barney Frank staffer now top Goldman Sachs lobbyist
Goldman Sachs' new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank's committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department. This is not Paese's first swing through the Wall Street-Congress revolving door: he previously worked at JP Morgan and Mercantile Bankshares, and in between served as senior minority counsel at the Financial Services Committee.
So: Paese went from Chairman Frank's office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese's predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That's all part of what Desmond Lachman -- American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) -- recently described as "Goldman Sachs's seeming lock on high-level U.S. Treasury jobs."
Meanwhile, the above-linked Huffington Post article which reported on Durbin's comments also notes Sen. Evan Bayh's previously-reported central role on behalf of the bankers in blocking legislation, hated by the banking industry, to allow bankruptcy judges to alter the terms of mortgages so that families can stay in their homes. Bayh is up for re-election in 2010, and here -- according to the indispensable Open Secrets site -- is Bayh's top donor:
Goldman is also the top donor to Bayh over the course of his Congressional career, during which Bayh has received more than $4 million from the finance, insurance and real estate sectors:
In a totally unrelated coincidence -- after the Government, as Matt Taibbi put it, enacted "a bailout program that has now figured three ways to funnel money to Goldman, Sachs"-- this is what happened earlier this month:
Goldman reports $1.8 billion profit
Goldman Sachs reported a much stronger-than-expected first-quarter profit Monday, bouncing back from its worst quarter as a public company. . . .
In reporting its results a day earlier than expected, New York-based Goldman said it earned $1.81 billion, or $3.39 a share, for the quarter ended March 31. Analysts surveyed by Thomson Financial were looking for a profit of $1.64 a share.
Goldman shares, which have surged more than 70% during the past month, continued rising late Monday, gaining about 4.7% for the day.
Nobody even tries to hide this any longer. The only way they could make it more blatant is if they hung a huge Goldman Sachs logo on the Capitol dome and then branded it onto the foreheads of leading members of Congress and executive branch officials.
Of course, ownership of the government is not confined to Goldman or even to bankers generally; legislation in virtually every area is written by the lobbyists dispatched by the corporations that demand it, and its passage then ensured by "representatives" whose pockets are stuffed with money from those same corporations. Just as one example, as Jane Hamsher reported about Bayh:
Bayh's little "lobbyist problem" is considered by many to be what tanked his Vice Presidential aspirations. His wife Susan earns about $837,000 a year serving on seven corporate boards, among them Wellpoint, a health insurance company for which Bayh helped secure a $24.7 million dollar grant. She's on the board of ETrade, even as Bayh is on the Senate Finance Committee.
Bayh wants people to believe he's a "moderate" who sits in the "center."
Center of K Street, maybe.
Meanwhile, the only citizen protests relating to this mass robbery are driven by anger at the government for treating bankers too harshly and unfairly -- one of the most classic manifestations of what Taibbi, in a separate piece, so aptly calls the "peasant mentality":
After all, the reason the winger crowd can't find a way to be coherently angry right now is because this country has no healthy avenues for genuine populist outrage. It never has. The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That's why even people like [Glenn] Beck's audience, who I'd wager are mostly lower-income people, can't imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over. . . .
Actual rich people can't ever be the target. It's a classic peasant mentality: going into fits of groveling and bowing whenever the master's carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you're a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you're on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger. And that's what we've got now, a lot of misdirected anger searching around for a non-target to mis-punish . . . can't be mad at AIG, can't be mad at Citi or Goldman Sachs. The real villains have to be the anti-AIG protesters! After all, those people earned those bonuses! If ever there was a textbook case of peasant thinking, it's struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to millionaires. It's really weird stuff.
One might think it would be a big news story for the second most-powerful member of the U.S. Senate to baldly state that the Congress is "owned" by the bankers who spawned the financial crisis and continue to dictate the government's actions. But it won't be. The leading members of the media work for the very corporations that benefit most from this process. Establishment journalists are integral and well-rewarded members of the same system and thus cannot and will not see it as inherently corrupt (instead, as Newsweek's Evan Thomas said, their role, as "members of the ruling class," is to "prop up the existing order," "protect traditional institutions" and "safeguard the status quo").
That Congress is fully owned and controlled by a tiny sliver of narrow, oligarchical, deeply corrupted interests is simultaneously so obvious yet so demonized (only Unserious Shrill Fringe radicals, such as the IMF's former chief economist, use that sort of language) that even Durbin's explicit admission will be largely ignored. Even that extreme of a confession (Durbin elaborated on it with Ed Schultz last night) hardly causes a ripple.
Editor's NOTE:
It is indeed surprising that Senator Durbin would be so candid with respect to the control that the banking industry has over US economic policy. He neglected to indicate however that President Obama is also heavily influenced by the dictates of the banking lobby--especially since his Treasury Secretary Timothy Guithner (former head of the New York Federal Reserve Bank and protege of Robert Rubin) is known to have an incestuous relationship with the leading investment banks. Guithner was also intimately involved with the Henry Paulson/George W. Bush initial bank bailout scheme which last fall was hurriedly passed under the guise of providing a vehicle by which the federal government would buy-up toxic bank assets with the goal of returning the large investment banks to healthy profitability. As everyone now knows, despite a second bank bailout, no toxic assets have yet been properly accounted for, valued or purchased. Instead the bailout recipient banks have taken federal money and utilized it to purchase other banks and pay unwarranted corporate bonuses while failing to increase lending to consumers.
Senator Durbin indicated that the needed re-regulation of the banking industry is being met with tremendous resistance by the banking lobby and the members of Congress whom it controls. Moreover, it appears that the banking industry has effectively eliminated the possibility that judges could reduce home-owner mortgages to levels which they might still be capable of paying. To date, Americans who need relief are being abandoned while those who caused the present crisis are allowed to escape punishment for their immoral deeds. They will benefit financially as long as the government continues to make them whole at public expense. The entire situation is extremely immoral and is destructive of the common good.
Unless and until a Resolution Trust Type (RCT) vehicle is developed by which the toxic assets can be appropriately valued and disposed of--the current banking crisis will continue. If a Glass-Steagall type act is not part of significant re-regulation of the banking industry, the excesses (over-leveraging and continuation of inherently immoral derivative vehicles such as CDO's, CDS's, MBS's etc.) will continue in the future. To date, it appears that none of the desperately needed changes are in the offing.
--Dr. J. P. Hubert
May 01, 2009 "Salon.com" -- Sen. Dick Durbin, on a local Chicago radio station this week, blurted out an obvious truth about Congress that, despite being blindingly obvious, is rarely spoken: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." The blunt acknowledgment that the same banks that caused the financial crisis "own" the U.S. Congress -- according to one of that institution's most powerful members -- demonstrates just how extreme this institutional corruption is.
The ownership of the federal government by banks and other large corporations is effectuated in literally countless ways, none more effective than the endless and increasingly sleazy overlap between government and corporate officials. Here is just one random item this week announcing a couple of standard personnel moves:
Former Barney Frank staffer now top Goldman Sachs lobbyist
Goldman Sachs' new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank's committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department. This is not Paese's first swing through the Wall Street-Congress revolving door: he previously worked at JP Morgan and Mercantile Bankshares, and in between served as senior minority counsel at the Financial Services Committee.
So: Paese went from Chairman Frank's office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese's predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That's all part of what Desmond Lachman -- American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) -- recently described as "Goldman Sachs's seeming lock on high-level U.S. Treasury jobs."
Meanwhile, the above-linked Huffington Post article which reported on Durbin's comments also notes Sen. Evan Bayh's previously-reported central role on behalf of the bankers in blocking legislation, hated by the banking industry, to allow bankruptcy judges to alter the terms of mortgages so that families can stay in their homes. Bayh is up for re-election in 2010, and here -- according to the indispensable Open Secrets site -- is Bayh's top donor:
Goldman is also the top donor to Bayh over the course of his Congressional career, during which Bayh has received more than $4 million from the finance, insurance and real estate sectors:
In a totally unrelated coincidence -- after the Government, as Matt Taibbi put it, enacted "a bailout program that has now figured three ways to funnel money to Goldman, Sachs"-- this is what happened earlier this month:
Goldman reports $1.8 billion profit
Goldman Sachs reported a much stronger-than-expected first-quarter profit Monday, bouncing back from its worst quarter as a public company. . . .
In reporting its results a day earlier than expected, New York-based Goldman said it earned $1.81 billion, or $3.39 a share, for the quarter ended March 31. Analysts surveyed by Thomson Financial were looking for a profit of $1.64 a share.
Goldman shares, which have surged more than 70% during the past month, continued rising late Monday, gaining about 4.7% for the day.
Nobody even tries to hide this any longer. The only way they could make it more blatant is if they hung a huge Goldman Sachs logo on the Capitol dome and then branded it onto the foreheads of leading members of Congress and executive branch officials.
Of course, ownership of the government is not confined to Goldman or even to bankers generally; legislation in virtually every area is written by the lobbyists dispatched by the corporations that demand it, and its passage then ensured by "representatives" whose pockets are stuffed with money from those same corporations. Just as one example, as Jane Hamsher reported about Bayh:
Bayh's little "lobbyist problem" is considered by many to be what tanked his Vice Presidential aspirations. His wife Susan earns about $837,000 a year serving on seven corporate boards, among them Wellpoint, a health insurance company for which Bayh helped secure a $24.7 million dollar grant. She's on the board of ETrade, even as Bayh is on the Senate Finance Committee.
Bayh wants people to believe he's a "moderate" who sits in the "center."
Center of K Street, maybe.
Meanwhile, the only citizen protests relating to this mass robbery are driven by anger at the government for treating bankers too harshly and unfairly -- one of the most classic manifestations of what Taibbi, in a separate piece, so aptly calls the "peasant mentality":
After all, the reason the winger crowd can't find a way to be coherently angry right now is because this country has no healthy avenues for genuine populist outrage. It never has. The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That's why even people like [Glenn] Beck's audience, who I'd wager are mostly lower-income people, can't imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over. . . .
Actual rich people can't ever be the target. It's a classic peasant mentality: going into fits of groveling and bowing whenever the master's carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you're a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you're on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger. And that's what we've got now, a lot of misdirected anger searching around for a non-target to mis-punish . . . can't be mad at AIG, can't be mad at Citi or Goldman Sachs. The real villains have to be the anti-AIG protesters! After all, those people earned those bonuses! If ever there was a textbook case of peasant thinking, it's struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to millionaires. It's really weird stuff.
One might think it would be a big news story for the second most-powerful member of the U.S. Senate to baldly state that the Congress is "owned" by the bankers who spawned the financial crisis and continue to dictate the government's actions. But it won't be. The leading members of the media work for the very corporations that benefit most from this process. Establishment journalists are integral and well-rewarded members of the same system and thus cannot and will not see it as inherently corrupt (instead, as Newsweek's Evan Thomas said, their role, as "members of the ruling class," is to "prop up the existing order," "protect traditional institutions" and "safeguard the status quo").
That Congress is fully owned and controlled by a tiny sliver of narrow, oligarchical, deeply corrupted interests is simultaneously so obvious yet so demonized (only Unserious Shrill Fringe radicals, such as the IMF's former chief economist, use that sort of language) that even Durbin's explicit admission will be largely ignored. Even that extreme of a confession (Durbin elaborated on it with Ed Schultz last night) hardly causes a ripple.
Editor's NOTE:
It is indeed surprising that Senator Durbin would be so candid with respect to the control that the banking industry has over US economic policy. He neglected to indicate however that President Obama is also heavily influenced by the dictates of the banking lobby--especially since his Treasury Secretary Timothy Guithner (former head of the New York Federal Reserve Bank and protege of Robert Rubin) is known to have an incestuous relationship with the leading investment banks. Guithner was also intimately involved with the Henry Paulson/George W. Bush initial bank bailout scheme which last fall was hurriedly passed under the guise of providing a vehicle by which the federal government would buy-up toxic bank assets with the goal of returning the large investment banks to healthy profitability. As everyone now knows, despite a second bank bailout, no toxic assets have yet been properly accounted for, valued or purchased. Instead the bailout recipient banks have taken federal money and utilized it to purchase other banks and pay unwarranted corporate bonuses while failing to increase lending to consumers.
Senator Durbin indicated that the needed re-regulation of the banking industry is being met with tremendous resistance by the banking lobby and the members of Congress whom it controls. Moreover, it appears that the banking industry has effectively eliminated the possibility that judges could reduce home-owner mortgages to levels which they might still be capable of paying. To date, Americans who need relief are being abandoned while those who caused the present crisis are allowed to escape punishment for their immoral deeds. They will benefit financially as long as the government continues to make them whole at public expense. The entire situation is extremely immoral and is destructive of the common good.
Unless and until a Resolution Trust Type (RCT) vehicle is developed by which the toxic assets can be appropriately valued and disposed of--the current banking crisis will continue. If a Glass-Steagall type act is not part of significant re-regulation of the banking industry, the excesses (over-leveraging and continuation of inherently immoral derivative vehicles such as CDO's, CDS's, MBS's etc.) will continue in the future. To date, it appears that none of the desperately needed changes are in the offing.
--Dr. J. P. Hubert
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