The title of this diary comes from an article over at Clusterstock, which is interesting in itself as Clusterstock is a site that covers the stock market. Even the natives are restless.
There is a sick psychology of entitlement on Wall Street that was created during the bubble years. Many simply cannot believe that they do not deserve huge pay packages. Their brains have no caught up with the idea that they are working in broken institutions that would be unable to pay to keep the lights on if not for the fact that Washington has given them billions of taxpayer dollars.
Here is a quick look at three articles up on Clusterstock at the moment that provide some insight into how screwed up Wall Street is these days.
Article 1: Wall Street’s Sick Psychology of Entitlement
John Carney in this scathing article tears apart the perverse ways in which Wall Streeters justify their bonuses. Among his destructions:
"We made money. It was just one part of the firm that lost it all. So we deserve to be paid." Sorry, buddy. That’s not the way capitalism works. Ask the guy who just lost his job installing seat belts in GM cars. He was really good at that but since no one is buying those cars, he’s out of a job. Being really good at what you do doesn’t matter if your firm is broke—and your firm is broke. It’s now on taxpayer supported life-support.
"We’ll lose all the greatest people if we don’t pay them." Oh really? Where will they go? Who, exactly, is going to hire them? Also: so what? That’s how capitalism works.
He concludes with:
Even the sharpest critics of the bailout never imagined that it would be used to make wealthy idiots even wealthier.
Article 2: Ken Lewis Should Be Fired
I can't understand why more people are not saying this but... why the heck do the idiots that run these financial institutions still have jobs? Expecting the same idiot that created the mess to be able to somehow fix it is bordering on insanity. The only reason I can think of would be to punish him, but on the salaries they get,. heck I would take that punishment for as long as it was available.
Bank of America needs another bailout solely because of an idiotic Ken Lewis bet: His decision three months ago to buy Merrill Lynch.
We wrote this a week ago, before we learned that Ken Lewis had approved the payment of $15 billion of Merrill Lynch bonuses while seeking a $20 billion government bailout. We now say again, with even more conviction: Ken Lewis should be fired.
Time for a clean slate. There must be a few bankers in the country that understand risk and are not in the empire building business. It's time they got their chance to run a bank like it should be run.
Article 3: Preventing The Greatest Heist In History
This article addresses why buying up toxic assets is NOT a good idea, as currently envisioned. It argues, as many others have done, that the only way for this to work would be for taxpayers to overpay (and thereby let the banks make some money). Obviously this is not a great deal for taxpayers. Instead we should be asking a better question:
Who Should Bear the Losses?
To save our financial system, somebody’s going to have bear these losses – the only question is, who? Some fraction of this will certainly have to be taxpayer money, but all of it needn’t be if the government would stop bailing out all of the debt holders.
This is the essential question - WHO PAYS? The obvious (to me at least) follow-up question is - "why aren't debtholders being hit harder?", which is something I tried to address in an earlier diary Fixing the banks the right way - Step 1....
...the current policy, as reflected in the most recent cases of Citi and BofA, is to at least partially protect the shareholders and, incredibly, 100% protect all debt holders, even junior/unsecured/subordinated debt holders.
The result is at least a $1 trillion transfer of wealth from taxpayers to debt holders. This makes no sense from a financial, fairness or moral hazard perspective.
Sum it all up and you get this - so far shareholders have been hit by crashing share prices (though they should be wiped out based on what the banks are worth) and taxpayers have been put on the hook for billions if not trillions, yet bonuses are still being paid, many of the clowns who screwed up their companies still have jobs, and most surprisingly BONDHOLDERS have not had to take a hit. This has to change!
- No more bonuses for recipients of government capital.
- A substantial "upside kicker" in return for any government aid (that is the taxpayer gets to benefit from any "upside", possibly through warrants exercisable at a low price.
- The top execs responsible for the the risky bank behavior need to go.
- Bondholders and debt holders need to take a share of the hit (no more free lunch).