Tuesday, July 16, 2013

American Bankers Protect Their Bonuses: The Economy Be Damned

Writing in the New York Times, Gretchen Morgenson tells us a seamy tale about American bankers who are rolling out the big bucks to hire lobbyists to flood the offices of Congress to slit the throat of fledgling legislation in the nest, legislation which has been proposed by the Federal Reserve Board and the Office of the Comptroller of the Currency. 

What the legislation is aimed at accomplishing is to make the banks hold more money in reserve, for a cloudy day, so when their bad loans and mortgages and schemes come back to bite them, they won't have to turn to the government for another bail out, especially if the are the too-big-to-fail variety of bank, which can take the whole economy down with it.

Of course, the banks should and sometimes do require collateral and big bank accounts from people who they lend money to--they want to be sure the borrower has enough in reserve, so if they fail, the bank can get its share. But when the government says, you have to have enough reserve, so when you fail we are not left holding the bag, well that is just foul play!

"The design of the new capital requirement would be much harder for bankers to game. They did just that with other types of capital rules, such as those issued under the Basel regimen, the international system devised by regulators and central bankers," Morgenson says.

The reason the bankers are so alarmed about the government's new idea is it would affect the bonuses due the CEO's by affecting the calculation of of "return on equity" which boards of directors typically use to calculate bonuses. 

The mouthpiece for the bankers is none other than Tim Pawlenty, fresh off the stage of Republican presidential candidates, who says--what do you think he would say: this proposal "would make it harder for banks to lend and keep the economic recovery going." As bankers, we are only thinking about you. 

Jeremiah Norton, of the FDIC says, "It should not have been as difficult as it has been for the agencies to come together on today's leverage-ratio proposal, which hardly seems like a seismic shift in capital requirements and represents an attempt to address one of the core causes of the financial crisis."

Remember the financial crisis?  The bankers and the Republicans hope you do not. They are pretty safe in hoping citizens have short memories. What crisis? What bankers? What mortgage backed securities. What, me worry?


  1. Mad Dog,
    It does seem we're doomed to repeat the financial crisis again considering the lack of much regulation with teeth and the total lack of punishment for the bankers and financiers responsible for the whole mess. Write a bad check to pay the rent and you end up doing a stint in the county jail-write bad loans and bring down the whole economy and your left having to come up with new and inventive ways to make sure your bonus is still as fruitful. Short of real (and deadly -i.e. Marie Antoinette, Czar Nicholas and friends) revolution when does the upper class ever really pay for their misdeeds--isn't it always the little guy left holding the bag. Not that I'm advocating an "off with their heads " scenario but come on, no prosecutions? I do think the President could have taken a stronger stand on this. Did any of those responsible for the Depression ever have to pay up? I think you're right though, people have moved on and put the financial crisis out of their mind what with summer and the impending arrival of the royal baby etc.-- you know, so many other things to think about..

    Did you happen to read the very moving and thought provoking story on the the right to die in the New York Times magazine this week?

  2. Maud,

    Missed the right to die piece. Will fish that out of the pile.
    Mad Dog has spent enough time listening to the entitled creme de la creme, in their unguarded moments, to know they feel no guilt--ever. They feel they are superior and deserve everything they can steal. They are the elect--in their own minds. Smug does not begin to describe it. It is the famous, "Only little people pay taxes," attitude. Unfortunately, the little people do not do much to advance their own cause. Painful to watch.

    Mad Dog