Written for VanityFair.com several months ago, this remains one of the best articles written regarding our current economic screw job.
http://www.vanityfair.com/...
Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest.
Grave conflicts of interest.
There is more...
Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
The investment-bank culture came out on top.
The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation—a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant—and successful—in their opposition. Nothing was done.
So this same type event came about 10 years ago and nothing was done to fix the problem. All the while, look who is back as an economic advisor.
Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation.
Here a big reason for the whole CON JOB is revealed. Nothing more than, To Big to FAIL, Management GREED.
And who are they attempting to CON now?
These people deserve their toxic assets and the door.
Anything else that is done to assist them will simply need to be CLAWED BACK, and if I have my guess it will with time.
The best choice of words regarding these To Big to Fail, management types is still offered by Matt Taibbi..
group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream
Whom We allowed because we have been to busy working to take the time to learn the truth. We come home worn out, eat, watch a little TV, maybe get online for a while, go to bed, get up and do it all over again. Deep in debt, we have become slaves to the powers that be. That was all fine until the bills got so high, one income gets lost. and the whole thing just comes falling down around us. Credit card debt climbs to 28% and at some point we just get upset. Only then do we start looking for the truth.
Leadership is found in Bernie Sanders to be sure. It is also found in others in Congress but they will need the people behind them in MASS. That only happens when we decide to make it happen. We are not united in our understanding of the truth, in fact we are a long way off, with most still in denial. The hope is we find each other before it is to late. I for one still believe in hope and change. I simply believe we must become the change we seek.
If you haven't lost your job or home yet, none of this may hit home with you. I have read other diaries here expressing surprise with regard to the outrage over the AIGFP bonus pay. You might not understand that anger until some major hardship touches you. I was coming back from the store the other day and a woman came up to me. She said she was living in her van. The van was burning oil and she needed gas because it was cold at night. She was living in that Van in the store parking lot. Seeing her face and listening to her story hit home with me. I was upset. I am even more so now. I listen to music to help myself to stay ever mindful of the work that must be done. There is much to be done.
A little music to read by...
The motorhead messiah was tuning the system in.
Johnny Magic: Neil Young http://www.lincvolt.com/