But who’s the real criminal? It’s me, isn’t it?

I’m not really sure what the point of this is, but then I don’t really know the UK context. In the US context I would say that hatred of executive bankers is quite appropriate, even if it gets a little extreme in pseudo anonymous online comments. Even aside form their direct economic actions they are spending hundreds of millions influencing and corrupting our government to their benefit. That’s pretty odious. Responding more directly to your argument, I have a couple of points to make 1) There is a difference between saying that specific banks made specific decisions leading to the latest market crash and saying that the enormous rents produced by the financial sector have been increasingly distorting the economy over the past 3 decades or so leading to, on the one hand, reduced productivity, and on the other, increased vulnerability to this kind of crisis. The latter is a much more subtle argument but I also think much more accurate and much more damning. It’s not an atrios or kos style argument but it is an argument some prominent commentators have been making and, in different forms, since even before this crash actually took place. 2) I think there is plenty of room in an egalitarian argument for redistribution for more than just the argument that these bankers are generating huge levels of productivity but we should redistribute their wealth for fairness reasons. I think it’s also a potentially compelling argument for the significant percentage of the population with no apparent egalitarian instincts that the banking sector is extracting far more wealth from the economy than it is actually producing. This is a debatable point for sure, but I do think it’s worth pursuing. Both from a political perspective and also an efficient government perspective. Rent extraction is not usually an efficient arrangement.

Suppose you’re a soldier in a war, and your commander offers a bonus based on the number of ears you cut from local enemy sympathizers. So, you go, you cut some ears, you bring a necklace of ears to the HQ every Friday, you get some whiskey and cigarettes. Would you say that only your commander is to blame here?

…the number of people who a) benefited from and b) causally contributed to, the bubble and bust is rather bigger than you might think. The “Location, Location, Location” crowd (which in one way or the other, means pretty much the entire British middle class) are in this one up to their eyeballs, and if they want to rage at “bankers” while sitting on their still-massive property gains, then I for one am not inclined to take them any more seriously than the man who eats sausage but won’t talk to the pig-sticker.

I don’t know the situation in the UK, but in the US it’s generally true that homeowners have taken their (massive) haircut, while the financial industry has with few exceptions not, and also, as in your post, takes great umbrage at the idea that that should be even considered.

Do you not think that part of the loathing might be in part caused by the bankers own lectures for the past, oh, 15-20 years on how bloody brilliant they are.

Brad DeLong actually covered housing prices vs. mortgage rates on his blog, and
concluded that that only accounted for a small part of the rise in house prices (in the USA).

OCS: “And I don’t think “bankers” did it all by themselves. They had plenty of help from the politicians, regulators, and free-market theoreticians. Most of whom, I’m sure, are also nice guys.”

We’ve watched horrific catastrophe unfold, and we’ve seen most of these guys (and they’re generally guys, McMegan notwithstanding) have no problem with it, so long as they stay comfortable. They are not nice guys; they just have clean office jobs, and have to actually pull a trigger and get brains all over their nice clothing.

macroeconomic events have macroeconomic causes

Well, okay, but isn’t it the case that The World’s Twenty Largest Banks constitute a macroeconomic force, even if they’re run by a small number of bankers? Signs point to yes…

I’ll also say that it had never been my impression that Option ARMs, subprime mortgages, and property values (??) were themselves responsible for worldwide financial system collapse. It had never been my impression that those things could by themselves pose a systemic threat. Care to show the data on that point? The collapse, I have been led to believe, was caused by failing derivatives the banks sold back and forth to each other. All the guns in the circular firing squad fired, and dying banks and bankers were given public money while they complained about the public’s lack of fealty to them.

I mean, it’s not criminal, but it’s not like it isn’t a crime.

So, where shall I send the bill?

Hmmm… just because most bankers are innocent of contributing to the crisis, doesn’t mean that all of them are innocent.

After all, someone at Northern Rock decided to issue lots of “self-certified” mortgages using money the bank didn’t have, in the hope that it would later be able to borrow enough to fund them.

On the original post:

a. Money for the banking sector bailouts hasn’t come out of the mouths of babes and Sure Start centres; the austerity measures were a specific and separable decision, made by people who ought to be held accountable for it

– aren’t the costs of bank bailouts actually a large and direct component of the deficits which governments have sought to address by austerity measures? Directly in the case of (at least) the UK and USA, and indirectly in many other cases? So “hospitals or bank bailouts?” isn’t just a rhetorical comment, it’s been how the collapse, and subsequent austerity drive, has actually played out. (Bear in mind too, perhaps, that governments have been essentially obliged to go along with this even when they did not agree with it, as for instance in Spain. Austerity has been insisted on. By the financial markets, who need to be reassured of other people’s prudence. )

b. isn’t it actually reasonable enough to complain about institutions which behaved individually and collectively with great recklessness and irresponsibility, driven by greed and arrogance, and were then saved by the public in return, when the consequences for many of the members of that public have been (and will be) rather grim? Who wouldn’t complain?

c. isn’t the real point about the bank bail-outs that, whether they were necessary or not – and let’s assume they were, which seems reasonable – once they occurred, there can be not more moralising about the debts incurred by other people? There can’t be any “you ran up this debt by lax tax collection”, or “you ran up this debt because you went in for financial speculation as a national craze” or “you ran up this debt because your government was best mates with the people who incurred it” or “you ran up this debt because your economy was based on property speculation” or anything. After the bail-outs, there only question is practicality, what gets people out of the hole they’re in. There’s no more moral lessons to be applied. (Apropos of which, I really hope banks are no longer sending amusing “we would like to remind you that you are banking with us, not us with you” letters to undergraduates who exceed their overdraft limits. Though I bet they are.)

But this isn’t what happened, is it? Far from it. People who are at the most, tangentially responsible for economic problems – on the grounds that the government of their country acted wrongly – are having moral lesson dumped all over them. Which leads to another point:

d. isn’t the very essence of social justice that we do not treat poorer people more harshly than wealthier people? That we absolutely do not apply rules and standards, be they legal or moral, to them, that we are unprepared to apply to their better-off peers? Now, given that this hasn’t happened, isn’t happening and is highly unlikely to start happening, isn’t there actually a certain amount of social justice involved in pointing at the banking fraternity and saying “what about them, the bastards?”

I appreciate there’s a lot of silly things said about bankers, and I also appreciate that stigmatising whole professions is unjust, ignorant and potentially nasty. (I also appreciate that some comparisons of some people with bankers are silly and stupid, though perhaps not as many as you do.)

But on the other hand, you know, try being a public sector worker at the moment. Try having it assumed on a daily basis that you’re a lazy cheat sponging off the public and then living out an early retirement on a glorious pension. And try being kicked for it, by the press and the government, and then when that doesn’t work, having them come back and kick you harder. That, I suspect, is really no fun at all.

But on the other hand, you know, try being a public sector worker at the moment. Try having it assumed on a daily basis that you’re a lazy cheat sponging off the public and then living out an early retirement on a glorious pension. And try being kicked for it, by the press and the government, and then when that doesn’t work, having them come back and kick you harder. That, I suspect, is really no fun at all.

You needn’t stop at suspecting it; that’s my reality and yeah, it’s not at all fun.

What the hell. Did I end up at the Atlantic or something by mistake? Is Megan Mcardle posting under a pseudonym now?

If you try to agitate for egalitarian policies based on this kind of argument, you are never going to make a strong case, because in the first place, “bankers” didn’t actually steal that money, for the most part, and secondly, if you are giving all the agency to “bankers” then you are accepting the first premis of the “wealth creators” rhetoric, and this is going to destroy you, politically, across the business cycle.

Perhaps that won’t let you make a case strong enough to get approving nods from economists, but that’s not the point. That sort of characterization is propaganda and populism — it’s an exact counterpoint to propaganda about wealth creators and job creators. In fact, you could see the characterization as theft as punishing them for that propaganda in the downward part of the business cycle.

Additionally the claim that bankers “didn’t actually steal that money” seems to rest on your definitions of theft. If you mean it in the sense of criminal prosecutions, then it’s empty. Call it what you will, but it’s still expropriating enormous rents on other people’s labor by virtue of your powerful position in society. The fact that the people responsible won’t be punished for it doesn’t make it more acceptable.

SoV: Can’t you see how the motives of the financial industry are necessarily pure and honorable? They just want to “get the people into the houses”. The fact that they took handsome profits from it is not worth mentioning (apparently) — it’s probably an overlooked byproduct of their benevolence.

No, the Option ARM’s and subprime loans, the ninja lonas, the interest-only loans, etc were not done “to get people into the houses”.

(in fact the main selling point of most of the oans, particularly in the periood right before the crash, was that homeowners could rapidly flip the houses and make enormous profits)

They were done because the fees charged for originating those loans were an enormously profitable revenue stream, because the loan originators NEVER carried any of the risk; they were bundled and sold to the investment banks almost immediately; fraud on the part of borrowers and originators was not only rampant, it was an essential part of the business plan.

Then the banks sliced and diced the mortgages into CDO bonds, and paid the ratings agencies to rate them highly, again, fraudulently (it’s an open question whether the ratings agencies were criminally fraudulent or criminally incompetent).

Towards the end, when the loan originators had literally run out of people to loan money to, the bankers started selling ‘synthetic CDO’s, which were all the lower tranches of the regular CDO’s they couldn’t sell, resliced and diced and served up to the ratings agencies to magically have AAA tranches again.

On top of that, thanks to lax regulation; in particular the actions of Phil Gramm, and his amendment to exempt Credit Default Swaps from regulation, a form of insurance. CDS’s were not under the regulatory regime that governned insurance, in particular the capital requirements and leverage limits of regular insurance, turning the entire economy into a hideously over-leveraged monster teetering on the backs of people with mortgages they could never in their lives pay off.

Go read “The Big Short” by Michael Lewis for the gory details.

Fundamentally there was rampant fraud at all levels of the economy in the boom years leading up to the crash, and the bankers were in the thick of it.

They deserve every bit of the blame they’re getting.

OK, CTers, what have you done with the real d-squared, and who is this imposter?

Also, OCS @ 9 wrote:

“Seriously, though, I think anger at the financial sector is completely appropriate. As a sector it used its considerable political clout to avoid meaningful regulation, invented practices that inflated a housing bubble and inserted huge levels of risk into the system, all while reaping record profits on the way to crashing the economy.”

We’ve set up an institution called a corporation that legally has a single goal, profit max according to any and all legal means.

In the short run, or series of them, corporations called banks were very effective at that. At least until they weren’t. Before that happened, working toward the same goal, they were very effective at getting the law changed to allow them to better achieve max profit. After that happened, working toward the same goal, they were very effective at getting themselves bailed out, the better to achieve max profit.

Where’s the problem? Not with these particular organizations, nor with the people running them. We could put the whole lot before a firing squad, and before too long, there’d be another lot to replace them given the rich stakes involved. It’s an institutional problem. Whether the problem is the way an LLC is defined, or that they are legal, or something even deeper I’ll leave to those at higher pay grades.

Money for the banking sector bailouts hasn’t come out of the mouths of babes and Sure Start centres;

Wherever it came from, it led to huge bonuses for individuals who on the whole don’t seem to have done a very good job (other than at holding up governments) of running their businesses, with tremendous negative consequences for lots of people.

Macroeconomic forces? Funny, when the economy is booming, and bank business along with it, no one turns down a bonus because, after all, it’s just macroeconomic forces, and nothing they’ve really done.

So out of exit, voice, loyalty, you choose loyalty. Fair enough.

An interesting question, is not “who is a criminal?”, but how to you justify working in a sector that is clearly part of the problem and not of the solution, or do you think your presence and that of others with your views in the sector is a moderating force somehow? If so how?

There are thousands of real criminals among bankers and mortgage brokers. The S&L crisis in the U. S. produced around 1,000 convictions, IIRC. And the current crisis is much bigger and badder. Why, some bankers in the U. S. are having to resort to forgery in order to foreclose!

dsquared is making a really narrow point and inspiring a lot of confusion. We should take him at his word: just take all the money from the banksters. Without the money they’ll lose interest in the heads-I-win-tails-you-lose system that causes so much trouble.

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of the financial sector, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual financial sector profits of the society as great as he can. He generally, indeed, neither intends to diminish the public interest, nor knows how much he is diminishing it. By preferring the support of his own financial centre to that of foreign centres, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the better for the society that it was no part of it. By pursuing his own interest he frequently diminishes that of the society more effectually than when he really intends to diminish it.

your post is full of logical flaws
Just because someone calls a banker a crimminal, doesn’t mean that they call a murderer of infirm old women a saint
As to Mr Blunt, that was a long time ago – surely you must have enough knowledge of psychology to know that it isn’t fair to compare immediate concrete things (I lost my job, a banker got a bonus) to distant less concrete things (my grandfather didn’t like blunt the traitor)

I don’t know the uk, but here in the us, lots of ordinary people did really, really stupid things, and lost their homes, and are living in cars as a result.
The bankers, and people like carly fiorina and hurd, get bonuses.
Lets be clear about the crime: marzillo packaged what were widely known, within his bank, to be fradulent loans and they were sold by JPM BAC GS etc
It JPM etc didn’t know the loans were fradulent it was thru willful exercise of blindness; at a certain point, you have to take responsibility for due diligence.
So my take is that the bankers in teh us were crimminally negligent, at best, and they got tax payer (TARP) bonuses, while ordinary people lost their homes

so to sum it up, hatred of bankers seems appropriate

I think D2’s basically right. The problem isn’t that banks went bust; the problem’s that the government saw fit to have the taxpayer carry the loss rather than wipeout their shareholders and bondholders. It’s the decision to infuse new capital into the banks from the government’s balance sheet, rather than than just appropriate equity and refuse to pay bondholders that’s the cause of austerity measures.

I think the blame goes much broader, at least in the US. Here we created a culture of greed, of getting something for nothing, (actually of getting a lot for nothing). At one end of the scale, we had a million wannabe Donald Trumps, following some shyster’s how to get rich in real estate playbook, flipping. Then we had realestate agents, and associated personnel, like home inspectors and loan officiers getting in on the game, and trying to extract as much as they could while the getting was good. On the top we had the banksters. All of these people exerted political pressure to change the rules in their favor, in some/many cases with great success. Others made money promotting the riches through greed culture. So we now have a great reconning going on. But, it seems the higher up the greed pyramid an individual was the less reconning is required.

and there’s another aspect to the UK debate. The Labour government lauded the city, congratulated themselves for their own management of the Financial sector, and borrowed against what they thought were the proceeds that would roll in over the next twenty years (after all Gordon Brown had “abolished boom and bust”). So the UK Labour movement has a vested interest in blaming the bankers.

I assume we’ve all read Michael Lewis’s “The Big Short”, or “All the Devils Are Here” by Bethany McLean and Joe Nocera? Even I, a banker, had no idea of the scale of it, and the completely brazen nature of the industry. It’s hard to see how anyone can take notions of the supremacy of an unregulated free market seriously after this.

“The demands of egalitarian justice are not based in some convoluted proof that the rich have in some way stolen from the poor.”

This is true. It is not a demonstration, however, that the rich do not steal from the poor.

HV @ 51

Which will not, however, shield them from lightning bolts. Quite the contrary.

Dr Harold Shipman murdered 52 infirm old women in order to steal money from their wills,

So he waited until they were dead before stealing their money. And a man with only 52 victims is the real criminal? Not only are you a card, sir, you are the whole pack.

ejh@20, the financial markets have not insisted on austerity at all, at least for the US and UK, countries with their own currency and most of their debt exposure denominated in that currency.

Financial market insistence on austerity would look like rising bond yield spreads between your debt and some other baseline. This is what we see in Italy and Spain, who have their debt denominated in a currency they do not control. But the US and UK bond yields are at historic lows, and they were already very low and not rising before austerity measures were taken.

If the stock and bond markets both dropped (yields rose), and inflation expectations rose (TIP spreads in the US), that would be a market calling for austerity. Bond yields dropping is basically the market crying for bonds, crying for the government to increase deficits so as to provide more bonds, or for central banks to print more money to raise aggregate demand.

The only large countries who have had austerity forced upon them are in the eurozone. Nobody has forced the US or the UK to adopt these policies, except those who seem to control the political agenda. Hardly anyone in power takes seriously the idea that bigger deficits or looser money could help generate growth or alleviate suffering, even though the financial markets could hardly be sending a stronger signal that they want to see one or both of these things.

You and your mates don’t feel responsible for anything.

Actually, people are aware of that in a general way. It’s been made rather clear.

“The greatest evil is not now done in those sordid dens of crime that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed, and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voice. “–CS Lewis

Let’s see where finance is culpable.

First, debt and money markets and institutions are hopelessly opaque. Every financial economist knows that this is a problem. It is the industry’s fault for not becoming transparent. Lack of transparency is one of the main reasons why the financial crisis got so big.

Second, remuneration incentives in finance were/are very perverse. The industry is responsible for setting up these incentives.

Third, as noted above, the industry is lobbying hard to stop reforms. To the extent it succeeds, it is responsible.

Fourth, it is the industry’s job to manage risk. It failed. It is professionally negligent (perhaps not a moral failing?, though I am not so sure).

Everyone in the industry makes a contribution to how the industry as a whole behaves. Not rocking the boat isn’t an excuse. You are right. You guys are assholes.

I think Justin’s #20 is a perfect example of what I’m talking about. If you want to make the case for redistributive taxation dependent on bankers being bad people, you will fail. If you want to make the case for fair and just treatment of the poor in society dependent on bankers being bad people, you will fail. If you want to make the case for the provision of a decent level of public services dependent on bankers being bad people, you will fail.

What are you on about? Justin said no such thing. Let me paraphrase: If you want to make the case that bankers should be treated as justly as the poor, should suffer the consequences of their actions as do the poor and so on and so forth, then you’re tapping into a large throbbing vein of public sentiment.

Don’t misread what other people write.

Oh – and one more thing. Cops often complain that they have a bad reputation because of a few bad apples, and that mot cops are good cops. That excuse doesn’t fly with most people, because by protecting bad cops they become bad cops as well. If you don’t want to be tarred by the same brush as the financial industry as a whole, then I suggest you vigorously denounce them instead of being apologetic and dismissing all the bad consequences as either being the work of just a few bad apples or the result of vast impersonal forces.

We only did it ’cause you let us – it’s your fault.

Oh, and by the way… the analogy using “most cops are good” is right on the money. When “good” cops help protect the bad cops, they become bad cops. To be completely honest, I’m pissed at the banking industry (any my country’s banking industry is considered a paragon; I live in Canada). However, there’s lot of other cohorts and institutions that deserve opprobrium too… legislators are right up at the top of the list alongside their rich buddies.

D^2 @69 wrote, …the fact that if you’re serious about egalitarian politics you shouldn’t be making it dependent on a thesis about ownership of profits…

Except most of it isn’t profit but rent.

@polyorchnid octopunch. This word “paragon”. It must be something like “too slow to get in on the action”?

Actually, it really means that the finance minister we had under Chretien actually took his job as steward of the economy seriously… and since he was a self-made billionaire (made all his money in shipping; he took Canada Steamship Lines and turned it from a sinking enterprise into a going concern) he actually personally understood how all this stuff actually worked. I’m talking about Paul Martin, for people that aren’t familiar with Canadian politics.

When the Canadian banking industry came knocking in the nineties asking to be able to get in on the action, he told them to go stuff themselves. ISTR that the impetus was permitting the Royal Bank of Canada to merge with the Bank of Montreal. They cranked up the poutrage through the business press (we need to get big so we can compete in the world market!), but that all went away when he told them “oh, you want to compete, then? Great, tell you what… you can have your merger, and I’m going to let the world’s banks compete on a level playing field here for Canadian’s banking business.” That pretty much shut them right up.

When the Conservative Party of Canada won in 2004, they immediately moved to relax the banking regs. That would’ve been the impetus of Flaherty, the new Minister of Finance. I can say a lot about Flaherty, but the big one is that I can’t believe the people of Canada gave him the job after he cooked Ontario’s books as Finance Minister under Ernie Eves (that’s without going into the voters in his riding… what the hell is wrong with those people?). If I’d been the CFO of a corporation and I’d pulled the stunt he did during the Eves campaign while say publishing an investor’s prospectus… I’d’ve been charged, convicted, and incarcerated.

Anyway, simply put, yeah, too slow; by the time the legal framework was in place after Martin got sandbagged by the corporate press here in Canada (that means the Globe and Mail above all others, for those that know about how shit works here) they just didn’t have enough time to get into serious trouble before the whole house of cards fell into the shitter.

‘Sir Anthony Blunt (crime: betrayed dozens of serving agents to Stalinist Russia)’

No he didn’t! The Daily Star invented that calumny. Blunt’s greatest feat as a spy was in supplying vital information to the Soviets about Wehrmacht tank deployment before the battle of Kursk. He deserved his knighthood for that.

What are you on about? Justin said no such thing. Let me paraphrase: If you want to make the case that bankers should be treated as justly as the poor, should suffer the consequences of their actions as do the poor and so on and so forth, then you’re tapping into a large throbbing vein of public sentiment.

Don’t misread what other people write.

Quite.

I mean really. If you want other people to bother, and you go out of your way to ask them bother, make the bloody effort to bother yourself. Or don’t bother in the first place.

It rests on the simple moral principle – you have, he needs.

Heh, interesting. No consideration for merits whatsoever, eh? Very radical philosophy, I must say. Even in Stalin’s Russia a coal miner who finished the five-year plan in two would get to go to a luxury sanatorium.

All feelings aside ( I am a bankers daughter) there were laws broken. Bankers lied, for money. Bankers got money they were not entitled to for making loans that were against the law, and they walked away with the money and other people bailed them out and other people ended up in upside down mortgages. Yes, those who fell for this were stupid, trying to get something they shouldn’t have tried for. But they were trying for a house, a neighborhood, a place for their kids to grow up in. The bankers lied, cheated, forged documents and got away with it.

Bankers have the same problem doctors do – doctors let other doctors operate drunk, people died, they got sued. Bankers let other bankers cheat, people lost money and the bankers just walked away.

All we need is a few honest bankers to agree that Mr. Countrywide should go to jail. That the people supervising the Robo-signers should go to jail. If we saw that just SOME BANKERS believed in the rule of law, this would all go away.

There is no other area in life where you can damage a person, a neighborhood, a country and get away with it like this. At least if you found yourself in a war you could shoot back.

Bankers know math. They understand reality. They, more than anyone, know how wrong this was. Just admit it. Be a banker we can trust. Be somebody who follows the law, tells the truth, does the right thing. Not the easy thing, but the right thing. All you have is your honor. Show some, let us see it.

“And hang on a minute,” I continued, “I as a British taxpayer now own 43% of Lloyds because the British government had to bail it out in 2009. And Lloyds’s headquarters is in London. Lloyds have been putting it about that the only reason they needed a bailout was because they took over HBOS the year before, but that’s not true; they’d have been bailed out even without HBOS. So that’s one London-based financial institution that collapsed – and arguably caused a lot of the whole damn mess in the first place – and one that needed me to keep it from collapsing.”

“shutupshutupshutup,” Daniel added.

“I am even so keen to see tax rates raised on people like me that I am prepared to save you the effort of composing a Sunday School lecture about it.”

And the fact that it is vanishingly unlikely that the level of redistribution you want to see (the profession of which which absolves you from any blame for the misery being inflicted on the poor by the profligacy and greed of people like you) is just beside the point? What can you do? It would be silly to give away what the state won’t take, wouldn’t it? Even if a dozen families could live on your salary?

Go on, show us you mean it, give away half of your wealth and income (after all, you will still be a rich man). If you need directing to the people who need it (I know you have read about them, but I have a feeling you don’t meet too any), I will be happy to help.

” Do you want to be saying that therefore the Greek crisis should be dealt with by hitting those people hard? ”

How else is it being dealt with?

The point is though, that it’s really difficult to make this into a tale of how a defined group of naughty people (and preferably naughty people who can be identified in numerous ways as being “the enemy”) did bad things.

Not true; what you should say is that it’s really difficult to make this into a tale of how ONLY a defined group of naughty people did bad things. Failure has a thousand fathers but that doesn’t mean that it’s impossible to name any of them. Lots of people in the financial industry committed fraud and this helped cause the crisis. Lots more people were, at the very least, criminally negligent in their risk management, and that helped the crisis grow. The point about the banker-hatred is that the people who were criminally negligent don’t really seem, to the average punter, to have suffered any consequences as a result, and don’t seem to think that they did anything really wrong – as your article points out – and therefore there is the terrifying possibility that they will do it all again quite soon and cause another crisis.

the case of Greece, where it actually was benefit claimants, pensioners and (particularly) public sector workers who caused the crisis.

They caused it by being paid too much money? Talk about denying agency…

Greece got to where it is because successive governments used the EMU interest rate windfall to avoid facing up to tough political choices.

Greece got where it is today because its governments spent the last eight years lying about their borrowing levels and colluding with major banks, in particular Goldman Sachs, in order to conceal the true state of the Greek public finances.

Looking for someone to blame is a logical response to actions in which someone is to blame. I don’t think it is too complicated.
Now,iIf you can’t find someone to blame, but you can find people who benefited enormously from activities that you find blameworthy, then a second best idea is to blame these people. And when these very privileged people very publicly wallow in very public displays of self-pity because they aren’t liked in comments columns in newspapers (although they are so liked by the governing class that they get to advise on their own regulation and regularly take massive helpings of government money when they go oopsy in some speculation because, well, the deregulations they advised led to the oopsy moment), then blame should turn, very properly, to mockery. If the newspaper commentors can only mount a charivari now, so be it; eventually, being a majority, maybe they will be able to mount something more.

Torquil Macneil 09.23.11 at 9:24 am

” Shorter Daniel: hurrah for egalitarianism, but you’re not getting any of mine!

Most of the CT regulars are very quiet on this thread. I wonder why? Imagine for am moment that it had been written by Megan McArdle and … KABOOM!”

Well, I haven’t. And I imagine that they’re sharing my feeling, which is:

WTF?!?!?!?!?!

The only clue that this isn’t a McMegan pile of steaming Chicago is that it doesn’t have the glibness, and the smiling high school b*tch queen style that she likes.

hidflect #83: Unfounded accusations of racism are over the line. Please try reading before insulting.

I’ll try reading before clicking Submit.

It’s quite possible to yell about banksters and denounce feckless government bailouts, and then conclude that what we really need is a good stiff dose of austerity, hard money, and tough credit. In fact it’s quite an old trick – that is actually how the epithet “banksters” was originally coined, by the right-wing opponents of Franklin Roosevelt.

And y’know, that’s precisely what the government of our own dear country just did. Lots and lots of denunciations of banks, bankers, and bailouts to get everyone’s hands in the air, then drop in the austerity… and smoothly fade out the tough credit/stricter regs/Project Merlin element.

And the fact that it is vanishingly unlikely that the level of redistribution you want to see (the profession of which which absolves you from any blame for the misery being inflicted on the poor by the profligacy and greed of people like you) is just beside the point?

This appears to be an argument that any actual progress is impossible, so the people must be offered something to vent spleen at. It’s actually quite horrible and contemptuous of the public’s intelligence.The only actual difference between this and the Osborne Mix detailed above is that Gideon doesn’t intend any progress even if it were possible – which isn’t really much of a difference, especially as he actually does claim that any other course of action is impossible.

This is either bollocks or appallingly badly put:

they were invented because they were the only way to get the people into the houses, given how expensive property had become

I am not going to go so far as some other people have done and read this to attribute altruistic motives. But they were the only way to keep the property development->construction->realtor->mortgage-originator->investment bank->securities investor pipeline going, given how expensive property had become. And three out of the six elements in that pipeline are engaged in the business of banking and finance. Often more, as the banks were also lending hugely to property developers. (HBOS was killed by its corporate division’s property lending.)

They were also the only way to keep the consumer goods economy growing, given how crappy wage settlements had been for years in real terms, but that is another story.

Barry@108 is being very unfair. It’s definitely got the glibness.

“But it’s safe to talk about redistributive taxation now because there’s no chance of it happening.”

Quite.

Dsquared@ 117

I think I rest my case about economics not being able to deal with the issue of power. Thank you for explaining how it fails to do so.

About exculpating individuals: We know about the consequences of making moral choices in immoral systems, from Sophie Scholl to the good sergeant in Platoon. We also know, having been confronted repeatedly by examples taken from studies of the Stockholm syndrome, or personal narratives like The Republic of Silence, how difficult it is to shore up one’s own individual moral universe when everyone else — everyone — treats you like a lunatic. It’s simply a fact that systematically constraining the moral choices of individuals is one of the principal goals of totalitarian social systems, however inadvertent, or organically evolved they may seem to be.

So it’s one thing to put on the uniform, and to witness, or even sometimes to participate, in evil deeds. It’s quite another thing altogether, however, to defend the machinery of evil, and one’s collaboration in it, after the danger has passed.

“Send me the bill”, I said. I am even so keen to see tax rates raised on people like me that I am prepared to save you the effort of composing a Sunday School lecture about it.

The lectures come as moral lessons only insofar as the financial services industry has kept making the same catastrophic mistakes over and over again over the past 30 years, and has done so based as much on institutional greed as on incompetence. When taxpayers bail the industry out time and time again, a lecture is in order.

For the Greeks, as with the “bankers” it’s not the individuals who are at fault so much as the rotten system in which they participate — in this case successive Greek governments that created a false sense of entitlement amongst public sector workers (in the con-game model, they’re the marks who were over-promised). Those irresponsible governments do indeed deserve to be lectured by the Germans and other wealthy Eurozone countries before Greece gets (or is denied) yet another bailout.

So yeah, Mommy gives you another temporary loan to help you get out of the mess, but you get a lecture on why what you did was very foolish and a suggestion that you use the money wisely and productively instead of blowing it on fancy beer or executive compensation.

Hey, at least your industry is getting its bailouts along with the lectures; the home buyers who took out the sub-primes and the Greek protestors are just getting the lecture.

‘But it’s safe to talk about redistributive taxation now because there’s no chance of it happening.’

So:
1) Redistributive taxation is an essential policy for any social democratic or socialist state.

2) There is no chance of redistributive taxation being implemented because, erm, you know.

3) Ergo anyone who advocates redistributive taxation, which we have proved above by our detailed forensic arguments to be impossible, is a reactionary hiding behind feeble excuses.

4)True radicalism consists of (pauses, looks noble, gazes into the far distance).

“This is only one step up from the socialism of fools. People just seem to have a compulsion to turn something that should be a simple matter of redistribution through the tax system, into a search for moral vindication or something.”

But an oft-repeated fiction, if not a morality play, is the reason the financial sector (in the US anyway) was able to throw off the regulatory controls that the government previously exerted for the common good. The story had heroes: the bankers, who were brilliant beyond the ability of any government dolt to understand. And brilliant bankers deserve outsized rewards because they contribute to the prosperity of everyone else by brilliantly funneling capital to the right players in the economy, thus playing a crucial part in a system that lifts all boats.

So this was still an egalitarian story (as American egalitarianism goes): yes, CEOs and Wall Street guys make a zillion times more than workers, but that’s because they are the wise heads making decisions that still bring a rising standard of living for the average worker.

Let’s even say this story was believed and repeated in good faith. But what happens when all the premises of this morality tale prove hollow? Even before the crash, living standards for all but the very rich were flat or barely rising–this despite large gains in productivity. And then the crash which, even if they didn’t cause it, the brilliant wizards of Wall Street did not foresee let alone prevent, despite their brilliance.

At the least, one would expect that this tale was tarnished beyond repair. Bizarrely, it’s not. I’d be very happy to drop *any* moral blame game if, in return, all the players in the financial sector and their lobbyists and political cheerleaders would agree to throw out these myths and accept practical measures (not moral retribution): greater government regulation, higher taxes on those who proved not so brilliant and badly mismanaged risk, and an end to the talk about “job creators” (ie wealth extractors) as necessarily the class that lifts all boats. In the US, though, this is a laughable prospect. Instead, the moral disdain is heaped on those with the least political power and those furthest from the centers of financial control.

This is not a coincidence. I’ve never heard any other banker acknowledge they have a bill to pay up. It’s novel, so I’ll offer my thanks. But long as any practical propositions (taxing the rich, regulating the financial sector) is met not just with obstacles but with howls of moral protest against this unthinkable “class warfare,” I’ll be angry with the guild who still insists on their own morality tale, facts be damned.

“Myopia, wishful thinking, general tendency of assets to be bought by the highest bidder rather than the most sensible one, normal pathologies of a market economy plus of course it’s much easier to see these things in hindsight.”

And all along we were told you were the smart guts who earned and deserved their money. There was no need for hindsight. I, and others, know people who work in the finance trade, some of them in mortgage backed securities. They absolutely knew it was a house of cards, but the incentives were such that they just carried on until the inevitable end. You, yourself, have said many times that you saw this coming.

“You, yourself, have said many times that you saw this coming.”

And if you saw it coming but continued to take the cash when you could choose not to, what is that but immoral?

This is the cake that just won’t get eaten, isn’t it?

“I’m open to criticism of the industries I’ve worked in, to the point of chucking one completely. I don’t take it personally.”

Quite. Is there a living, breathing, example of a banker who has publicly come out and called a spade, a spade? Can we name one? Largely, exculpation or silence. This is one of the biggest shames of all.

When you have the Daily Mail doing its “immigrants can lower your house price” thing on the front page, while devoting large amounts of space to interest-only mortgages, BTL and Icelandic savings accounts in its extensive personal finance section, then you end up with a pretty ugly set of bourgeois motivations that translate to the ballot box.

I’m still inclined towards protests-too-much, though: the public impulse to impose collective blame is a product of the perceived avoidance of individual blame, and if someone doesn’t own up, it’s detention for the lot of you. One of the threads running through a certain author’s succinct summary of “avoiding projects pursued by morons” is its sense of appropriate consequences for those who embark upon disastrous projects and those who place their faith in them.

It may be helpful to list the things and people Daniel has been analogised to so far in this thread.

A soldier who delivers severed ears to his commander in exchange for whiskey and cigarettes (@6 Six whole comments in!).
A non-specific murderer (@14).
A concentration camp guard (@120).
A concentration camp organiser (Odilo Globocnik! and we’re only @65).
Joseph Stalin (@115).
Dr. Harold Shipman(@59).
Megan McArdle (@108).

Some options not yet used include Dick Cheney, Tim Worstall, Cthulhu, von Sternberg-Ungern, Barack Hussain Obama, and I’m frankly disappointed nobody has called him history’s greatest monster yet, but it is only a matter of time before Bob McManus shows up.

My disagreement can be summed up by the following distinction. Daniel would no doubt say that this bears out his point – people are consumed by unreasoning and unproductive rage at anything that has anything to do with banks. I would say that this demonstrates that Daniel is a practised and expert master troll, someone who has learned how to define exactly what will whip a given Internet forum into a frothing welter of stupidity, and deliver it on cue.

It’s nice to see Daniel has someone to stick up for him in these trying times, Alex, and that the art of forelock tugging as not entirely died out.

“Some people really did do bad things, and where people behaved dishonestly or negligently they are the proper objects of punishment, but actually, this crisis was a result of the normal behaviour of the system acting normally”

FFS.

the majority of bad subprime mortgages were definitely ones in which a bad decision was made by a borrower who should have made a better one.

[…]

it’s not actually productive or correct to carry out a blame exercise.

Delicious.

I think Nancy hit the key point. This is a lovely sentiment:

In general, if you want to build a better society, the message from the more thinking and socially responsible element of the financial sector is “send us the bill and spare us the lecture”.

But on that definition, “the more thinking and socially responsible element of the financial sector” seems to be a vanishingly small group with almost no influence on policy. Mostly, the message from the UK financial sector seems to be that you should not send it any bills under any circumstances, and that any attempts to send bills will result in a change of address to somewhere less grabby like Switzerland.

Also Daniel @140:

the majority of bad subprime mortgages were definitely ones in which a bad decision was made by a borrower who should have made a better one.

Sorry if I’m missing the point here, but surely this is at least as much the fault of lenders who were actually claiming to have some sort of special expertise about assessing financial risk.

Because conspiracies only happen elsewhere, right Daniel?

If I really thought that the rage brigade were (as ajay says above) trying to make people suffer consequences in order to prevent similar failures happening again, then I’d be more sympathetic to it – if it was sort of a populist version of a lobby for financial reregulation.

But I think the rage comes about because people and institutions didn’t suffer the consequences. Look — if after the banking crisis the government had taken over the banks, fired management, given bondholders a haircut, closed the hopeless banks and recapitalized the healthy ones, and instituted strong regulatory reform that addressed all the weaknesses of the system that had become so obvious, then there wouldn’t be this rage. Or even if after it was all over we had bankers saying, “Yeah, we screwed up, and clearly our industry needs more regulation to keep this from happening again.” But none of that happened.

Instead, the guys who got us into this mess actually gave themselves record bonuses. They fought reform. And at the same time they were lecturing people whose houses were now worth less than they owed (and whose mortgages gave them every right to turn the house over to the bank) about their moral responsibility to keep making those payments! And that same industry fought against efforts encouraging them to renegotiate mortgages (making — astonishingly — moral hazard arguments), fought suggestions that people in bankruptcy could have their mortgage terms changed by the judge … Well, you can see from my italicization that I’m getting enraged all over again.

It’s not that I think all “bankers” are capital E Evil. As I said, most were just doing jobs in a system they had no real control over. If you lined them up in front of me I couldn’t pick out the ones I wanted stripped naked and driven out into the wilderness (although I’d certainly give you a pass if I recognized your face).

But yes, I do think anger is appropriate, no matter how unfocused, no matter whether it’s politically useful, and even if a lot of it is uninformed. People know they got screwed, and in a general sense they know who did it to them and got away with it.

Daniel #140:

Well, it is in as much as the borrowers in the US did have agency; there were cases of fraud and mis-selling, but the majority of bad subprime mortgages were definitely ones in which a bad decision was made by a borrower who should have made a better one.

You seem to be saying that because a lot of people in different spheres had some agency, then we can’t blame anyone at all, even though some agents in this mess obviously had vastly more power and information than others; though at a pinch, and given a choice, it’s preferable to blame the little people, eg Greek public-sector employees or unrich Americans who wanted houses and were told by experts they could have them. But surely, if you don’t want people to blame the bankers (because agency was so liberally spread around), then you don’t get to blame anyone else either?

even in the case of the most seemingly sensible charges you can make, ie the bankers, it’s not actually productive or correct to carry out a blame exercise

I actually agree with you that “bankers are the real criminals” is bollocks. But I think it is understandable-bollocks-shorthand for something that is obviously true: that the entire nexus of crisis-bailouts-“austerity”-imposed-by-politicians-with-well-thumbed-copies-of-The-Shock-Doctrine has done a lot more harm to a lot more people than a few hundred teenagers smashing windows and nicking mobile phones.

OCS @153

Post of the day, like Steve, I can’t put it more clearly than this. Any chance of an answer specific to 153, DD?

After reading the OP and the comments, I must say, Daniel has persuaded me. I would like to take this opportunity to apologize for blaming bankers, for thinking that bankers had anything to do with the collapse of the banking system or even its subsequent bailout. This was myopic of me, especially from the standpoint of the pursuit of egalitarian politics. Clearly, if we are to be egalitarian, we must stand with the bankers, who, on the whole, are surely very nice people to stand with.

The spiritual burden on financial sector workers must be enormous, knowing that they are the only people who have made money these past few years. They must be tortured by their sympathy for the Greek pensioner, even as Greece’s creditors, i.e. bankers, try to extract all money from them, even to this very day. Chin up, Daniel. Greece will muddle through, somehow. Don’t worry yourself too much about it.

I await the day when the Guardian comments section goes quiet, and in beautiful egalitarian fashion, bankers are treated in exactly the same fashion as the poor. Peace, comrades.

OCS @153

Dead on target. What fuels the public rage is the endless, insufferable arrogance of people caught in flagrante, before multiple witnesses, on video, on Facebook, and on the big screens at Times Square, saying that this is all for the best in the best of all possible financial worlds.

Daniel at 140:

“Well, it is in as much as the borrowers in the US did have agency; there were cases of fraud and mis-selling, but the majority of bad subprime mortgages were definitely ones in which a bad decision was made by a borrower who should have made a better one.”

‘there were cases’ = ‘trillions of dollars of junk securities were fraudulently advertised and rates as sound’

In addition, there are cases of high-scale mass production of forged documents which have come to light in mortgage companies, chiefly because they went bankrupt.

“but the majority of bad subprime mortgages were definitely ones in which a bad decision was made by a borrower who should have made a better one.”

This is a classic right-wing lie, placing the blame on the amateur in the mix, while ignoring or down-playing what was done by the professionals.

I would also add that any productive actions taken will involve the punishment of innocent people, because there is no other solution; efficient reforms will be blocked and gutted by banking lobbyists; effective prosecution of companies and small groups will be blocked by the revolving door between (in the USA) the SEC and the DoJ and the financial defense bar. The market will also not be allowed to work in this situation, because the bankers will drive the risks up high enough that their collapse would take down the rest of the developed world’s economy (moreso than before, because now they *know* that nuclear blackmail will work).

The most likely route to reform is that the banking industry causes yet another massive crisis in the next several years, and actually puts the half-broken developed world into an undeniable Great Depression II. At which point outrage will finally break these barriers, and revenge will be taken.

The situation is analogous to facing an attacking army – sure, it’d be sweet to send in the Teleporting Death Ninjas, and decapitate the enemy’s command structure, and do the sort of surgical strikes which happen in movies, but that only happens in movies.

In the end, you win by killing a whole bunch of the enemy, 95% of whom are poor dumb grunts.

It is still an open question to what extent actual criminal-type crime played a role in the financial crisis, and I think we need to accept that the lowest possible bound of that extent is not “zero”

This is right. And, as I said upthread, businesses invent products and then they sell’em, and they are responsible for what they come up with. It’s a fallacy to think that all possible business ideas are somehow inherent in the mind of the customer before they happen. Businesses lead fashion as well as follow it, and if you invent the financial equivalent of deck shoes, you’re damn well responsible. You started it.

This is a classic right-wing lie, placing the blame on the amateur in the mix, while ignoring or down-playing what was done by the professionals.

No. Certainly in the UK and Ireland, and as far as I know elsewhere, the property boom was an era of absolutely repellent, piggish greed that was actually open to you! It was a culture of speculation that was *participatory* and all the uglier for it. All sorts of people got the opportunity to behave like caricature bankers, right down to the horrible politics, and they did.

I think Daniel’s broad point has been made before, by another direct beneficiary of capitalist exploitation:

“Every stock-jobbing swindle everyone knows that some time or other the crash must come, but everyone hopes that it may fall on the head of his neighbour, after he himself has caught the shower of gold and placed it in secure hands. Apres moi le deluge! is the watchword of every capitalist and every capitalist nation. Capital therefore takes no account of the health and the length of life of the worker, unless society forces it to do so. Its answer to the outcry about the physical and mental degradation, the premature death, the torture of overwork, is this: Should that pain trouble us, since it increases our pleasure (profit)? But looking at these things as a whole, it is evident that this does not depend on the will, either good or bad of the individual capitalist. Under free competition, the immanent laws of the capitalist mode of production confront the individual capitalist as a coercive force external to him.” [Marx, Capital, (Fowkes trans.), 381].

(Sorry – first sentence of above quote should read “In every stock-jobbing swindle everyone knows that some time or other the crash must come, but everyone hopes that it may fall on the head of his neighbour, after he himself has caught the shower of gold and placed it in secure hands.”)

# 172- and not, perhaps, because iTunes and Amazon let you buy stuff you really like, while bankers wrecked our lives.

PS-
on the myth of the irresponsible, greedy Greek pensioners, see Krugman today:
http://krugman.blogs.nytimes.com/

Marx – not a bad financial journalist for a philosopher and global revolutionary…

Normal, sensible people, acting for the most part rationally (but myopically) based on the incentives and the market in front of them, caused a bubble and a crash. If you are going to assume that it was caused by malefactors, or was in some way a pathology or abnormality of the system, you’re not going to develop the right analysis of capitalism. It has crashes and crises. That’s how the system works.

Add “legally and ethically” after rationally, and you’d have my sentiments exactly.

And especially if you want “more regulation” to actually be helpful, you need to understand this.

elm seems to have gotten to the heart of the matter in comment #1.

This:
they were invented because they were the only way to get the people into the houses, given how expensive property had become.

is laughable.

d2: ok, what about this: not just “tax the rich [which includes bankers]” but a financial transactions tax specifically designed to eliminate certain of the innovative products and procedures that characterize the latest golden age of finance? one might desire such a tax not out of moral outrage, but from the belief that activities destructive to society have become central to finance. if this turns out to mean that bankers are a lot less wealthy, all the better!–then we won’t have to worry that most of them don’t share your generous beliefs about income tax……

In 2006 (with the HSBC profits warning) it became clear that something was up

2006 was the year that the housing market in San Diego crashed, so yes, it was pretty clear by then that “something” was up.

Daniel @126: There were, and are, a lot of Bungos out there. But it seems crazy to allow the Bungos to crash the economy. If there had been any meaningful lending controls (commission claw-back if loan goes tits-up in under two years; banks required to hold at least some portion of their mortgages) Bungo would have been refused a loan at some point. After all, the bankers portray themselves as wise and worldly, at least a step or two above the people shilling dubious products on late-night TV.

And let’s not forget the role of appraisers. Someone had to swear that the house in question was really worth the inflated sales price. I heard again and again, “don’t worry we have an appraiser who can hit the numbers.” Honest appraisers who didn’t “hit the numbers” were blacklisted by lenders. Hence, the new rules restricting lenders from choosing appraisers.

As for agency and responsibility, it is the nature of the corporate beast to diffuse decision making and obscure responsibility. This makes it more difficult to point to a specific actor and say he’s the problem, but it doesn’t make it impossible or undesirable. A lot of dishonesty could be prevented by extending the US Supreme Court’s holding on corporate personality. Execute the directors of failing financial institutions. After all, bankers do cost/benefit analysis a lot better than junkies who rob banks.

@185
There really hasn’t been a major re-regulation of the system Daniel. Well, not ‘major’ in any sense anyone from outside the finance sector might recognise as major. I think jamie of Blood and Treasure probably nail it a couple of years ago when he said,
“It was probably wrong to say that various banks were nationalized over the past year. It would be more accurate to say that after working for the banks as a regulatory contractor for a number of years, the government agreed to be taken over directly by them in a deal funded by the taxpayer. The new financial-political entity is now free to divest itself as much as possible of loss making non-core functions like education and health, freeing up money to remunerate Mr Hester and his friends. “

Banks wouldn’t exist without morality plays – otherwise, we would long ago have canned the unpayable debts and the non-recourse loans of homeowners that permitted jingle mail wouldn’t have elicited such moans of outrage from the banking crowd.

Blame is, after all, via Graebner, an ur-form of debt. And what we know about the banks is that they are very keen on having their debts paid back by their debtors, and very keen, when they go oopsy cause of ‘complexity’, to get bailed out, with upper management of course walking away with a goodly pile of cash – more than, to use a blameworthy comparison, all the cash in your typical Tanzanian village.

It is best to use real histories rather than fairy stories about X and Y lending each other money – which can fairly be called a fairy tale for saps. How about a fairy tale for grownups? How about the wonderful story of the Royal Bank of Scotland.
It is a transatlantic tale, and it involves no bad people, just sorta scummy people. Bankers, you know. Now bankers hate being called scummy people. Those words are so hurtful! Luckily, their wounds – for don’t they have feelings? – are more than bound out by a very merciful establishment that makes sure that verbal blame doesn’t translate into anything like not being able to afford a Sofitel hotel room when you want one – why, that would be blame indeed and o so unfair.
So how does this tale go?
The Bank received 541 billion dollars worth of 1 percent and below loans from the Fed over the past 3 years (And for those who are interested in how bankers have garnered some small little recompense for all the mean things said about them in the papers, you should take a gander at Table 8 of the GAO report on the Fed’s Emergency Loan Program. You know, 16 trillion dollars in loans to the financial sector looks awful impressive!)
But why would the Fed give a foreign bank such oodles of money, at such a low low low rate, when it is hard to imagine that the Royal Bank of Scotland would give one of those slimey middle class people who wants a home and is temporarily short of funds a nice one percent loan for twenty times his income? Perhaps the answer is that things are just so darn complex. Or maybe we need the bank so, we just can’t figure out any way whatsoever to loan 16 trillion to ne’erdowell householders.

But in any case, due to the nice non-blaming Fed and the nice British government, in this fairy tale, the RBS was well supplied with cash. And how about the upper management that led it, so royally, down the toilet? Well, it being so complex and all, we don’t want to blame them!9 people in the upper management of RBs, according to this story from 8 March 2011, were well rewarded for all their hard work:

“… the nine key staff – including chief executive Stephen Hester – had been handed bonuses for 2010 of £10m in shares with a further £18m in long-term incentive plans that run until 2014 when their exact value will be known.

… The RBS disclosures came just 24 hours after Barclays lifted the lid on the pay deals it makes to its highest earners – handing five of them £110m.

Hester – whose £2m bonus for 2010 was announced last month and will be paid in shares – is receiving an extra £4.5m in stock through the long-term incentive plan on top of his annual bonus and £1.2m salary. This puts him on track for a pay deal of around £7.7m. For 2009 he did not take a bonus but received just over £4m through the long-term share plan.

Finance director Bruce van Saun is receiving £1.3m in shares for his 2010 bonus and a further £2.8m through the long-term incentive plan.

The largest bonus awarded in shares is the £2.5m handed to John Hourican, head of the investment bank. Next week it is likely to emerge that Hourican has received more than that because he is also being paid in the bank’s debt – although he is not expected to top the £7.7m that Hester could be handed if he meets all his performance criteria.

American-based Ellen Alemany also emerges as a top earner with a £1.1m bonus in shares and £2.5m of stock awarded through the long-term plan. Nathan Bostock, who runs the parts of the bank being shut down or sold off, gets £637,000 in shares for his 2010 bonus and £2m through the long-term plan. Brian Hartzer, who runs the retail bank, had £600,000 awarded in shares for 2010 and £1.9m in the long-term plan.

The 2010 awards are coming from the £950m payout pool agreed with UK Financial Investments, which controls the taxpayer’s 83% stake in the bank, at the time of the Project Merlin deal.

The Merlin deal requires the pay of the five highest earners reporting to the chief executive to be announced and RBS is expected to make those disclosures next week. The nine included in Tuesday’s announcement are expected to be among them.”

Let us concentrate on Ms. Ellen Alemany, with her £1.1m bonus in shares and £2.5m of stock. Now, Ms. Ellen Alemany sounds like a nice enough person. Daughter of a liquor store owner. Making her way to the top by hard work, no doubt. After carrying off her swag from RSB, she was given an honorary degree from a Rhode Island college in May of this year: PROVIDENCE, R.I. – Ellen Alemany, Head of RBS Americas and Chairman and Chief Executive Officer of Citizens Financial Group, Inc. has been named an Honorary Doctor of Business Administration at Bryant University. This honorary degree was presented at the school’s undergraduate commencement on May 21, 2011.

“I am honored by this degree from Bryant University, one of Rhode Island’s great institutions” In its citation, the University commended Ms. Alemany as someone “who in both her personal and professional life exemplifies what being excellent in the world of commerce means. At a time when many financial institutions and their leaders have failed to merit public scrutiny and approval, you make it a point to be worthy of the trust of your customers, employees, and your leadership team.
“Those who are familiar with you say that even before the financial crisis you were thought of as an authentic banker—a person with an unending commitment to excellence and accountability. To this end, you re-launched the corporate campaign, GOOD BANKING IS GOOD CITIZENSHIP, reminding us all why banks exist and the critical role they play in fostering growth and prosperity, that in a most essential way they are meant to serve the communities where they exist. Indeed, good citizenship for you is embedded not just in the name of your company, you see to it that it is rooted in your daily corporate culture.”

“I am honored by this degree from Bryant University, one of Rhode Island’s great institutions,” Ellen Alemany said. “This is a special time for the Class of 2011 and I was proud to be a part of Commencement as this year’s graduates prepared to leave Smithfield for the careers and the life journey for which Bryant has prepared them so well.”

Strangely enough, the honorary award said not word one about the fact that Ms. Alemany was part of the group who presided over one of the UK’s great Bank collapses, albeit as head of an American subsidiary. But bygones are bygones – save when you are caught after a riot with a bagful of cigs. Then it is six months for you, and eviction from public housing.

Perhaps our Bryant University friends are merciful Christians – or egalitarians of Daniel’s stripe, who are shocked at how bankers are blamed in comments columns – but somehow they never asked about that good citizens rhetoric. Let’s roll the tape back to distant 2008, when this happened:

“No comment at the weekend from ROYAL Bank of Scotland officials on reports that its American subsidiary Citizens Financial Group was under investigation by the US regulator for deleting e-mail records vital to an investigation into the mis-selling of financial products to the elderly.

Two New England newspapers reported last week that the Securities and Exchange Commission (SEC) was involved in an investigation by the Massachusetts state regulator for the alleged “unethical and dishonest conduct” in selling variable annuities.

These are tax-deferred investments that provide periodic payments to investors. They are considered inappropriate for elderly investors as their value rises or falls with the underlying investments, usually stock or bond mutual funds. Gaining access to the fund carries a hefty surcharge.

Citizens chairman Larry Fish, who earned £2.3 million last year and whose multi-million dollar “secret” bonus scheme was attacked at the RBS annual meeting in Edinburgh in April, has defended Citizens Financial as “an ethical entity”, but has refused to comment on the details of the state investigation, or whether the SEC was involved.

Massachusetts secretary of state William Galvin accused the bank of not co-operating with the inquiry.

The Massachusetts Securities Division, which regulates banks in neighbouring Rhode Island, where Citizens Financial is based, lodged a complaint against its brokerage arm, accusing it of failing to preserve e-mail crucial to the variable annuities inquiry.

The complaint said Citizens “failed to preserve e-mail communications related to its business as a broker-dealer, despite having an affirmative obligation to do so”. The lost e-mail has “substantially and severely impeded” the investigation into the sales of variable annuity investments to elderly customers, Galvin’s office said.

It had filed an earlier complaint in February, accusing Citizens of violating securities laws in connection with variable annuity sales.”

Now there are those who might look at this as perhaps a mark of systematic corruption. There are those who would enter into the court of public opinion the thousands of cases of fraudulent docs that have been submitted to the courts by the banks in America, intent on repossessing the homes of that greedy middle class that was up to their eyeballs in cheating their betters. But those people are naive queens in some morality play! Because what it is, see, is, its complex.

Daniel, I tend to agree with you on this one, (but goshdarnit I really need somebody to BLAME). The basic problem as I see it is that money is a medium of exchange to let people work in specialized occupations, and to get them into houses and to get food on the table, but money is also (and this is a different function) a commodity which itself can be speculated upon. So we end-up with derivatives-overleveraged private financial institutions which, when a bubble pops (whomever its malefactors were), need to be bailed-out in order to preserve the “medium of exchange” function for the non-financial population, which is to say most of the people. If Greece takes the overexposed European banks down and the overexposed U.S. banks follow, then we won’t be out of the bad economy yet for another long term. Yet welfare states are always going to grow bigger because in normal times enough people become dispossessed in the churning of real (as opposed to financial) jobs that there is a continuous social problem. Now I am not telling you anything you don’t already know. And of course people have always distrusted and hated bankers because they don’t understand the mechanics in your comment #120 but they realize that bankers are making a lot more money doing a lot less physical labor for a job that, by that definition, is a lot less important. Most people would read your comment #120 and not have any idea of the things you are writing about. So another big question is how policymakers will be elected to do the correct thing, elected that is by voters who don’t understand the basics. Meanwhile the global system is getting bigger and so bubble-burstings will likely hurt more and more of those voters. Bankers are in the industry that gets the first bailout, and afterward the bankers do not, as an industry group, protest the austerity measures that prop-up the value of their own assets. So I think the problem is currently on them. What does the financial industry intend to do that rectifies the situation? Nothing?

“Most people would read your comment #120 and not have any idea of the things you are writing about.”

Yeah, I mean, it was so horribly “complex”, no way I could possibly understand. Stop arse kissing, Lee.

@198
We have Glass–Steagall in the UK? Who knew? I thought the Vickers Report had been kicked into that long grass over there, conveniently the other side of the next election.

Daniel #185:

I only brought up the bloody Greek pensioners in order to point out what silly and/or repulsive consequences this business of looking for villains can have.

Oh, I see, you didn’t mean it? Okay! But the point about certain other actors having vastly more power and information than Greek pensioners did is still perhaps germane, even for someone who isn’t looking for a “morality play”, a desire for which I don’t think I’ve ever expressed outside a university bookshop.

Tom #200, then you are a complete idiot of a different type. Run Daniel’s comment #120 past the first 20 people you meet on the street, and get back to us with the results.

Ok, so I get the part where you’re channeling Marx, but the rest is inscrutable to me.

There was a systematic defrauding of a helluva lot of people—of consumers, of homebuyers, of securities-purchasers, and of workers with retirement accounts. This was indeed, as you point out, systematic, indicating a deep problem with the coercion imposed upon loaners and/or securities-bundlers.

In this period of systematic defrauding, there were plenty of crimes committed by individuals who remain unknown (or we can euphemise and say ‘lots of rules enshrined in law that were intentionally not followed in letter or spirit’), and there were exploitations that should have been criminal (and should be criminal henceforth). We don’t have a good understanding of who all did this, and nobody (no executive with jurisdiction) seems to be investigating (the ‘seems to be’ is doing a lot of work here since this really is a matter of perception).

I wonder if the UK did a better job of investigating and prosecuting crimes and malfeasance than the US did. Around here, it’s talking-head conventional wisdom that nobody was fired, nobody ought to have been fired, record-high bonuses were paid to everybody including those who bundled and disguised junk as valuable, and if we’re not sending anyone to jail, maybe we could hold the malfeasants to account by withholding part of this year’s bonuse—NO THEY DESERVE THOSE BONUSES AND MORE. (Yes, in all caps.)

The ‘burn the banksters’ sentiment is largely a response to that: generating a severe recession and massive unemployment worldwide by packaging junk as valuable is self-evidently awful when Toyota does it, but somehow okay if it’s JP Morgan?

…of course, we wouldn’t blame a Toyota worker for bad design, we’d blame the engineer.

But we have no understanding, in banking, of who was an engineer with culpability and who was a drudge-worker with no culpability. It’s impossible for us to know who among y’all were advocates for, and participants in, the systematic defrauding of consumers. And we remain completely ignorant, even those of us who try to keep up on this shit, which is like a full-time job as it is. What is 1000x scarier is, nobody in government or industry seems to be interested in discovering who the engineers are and curtailing their power. Nobody seems to want to find the crooks and disempower them. (Again, ‘seems’ is important.) So forgive our broad brushes, please. We’re trying to make sure politicians don’t feel comfortable just papering over the systematic defrauding of a helluva lot of people, and ignoring holding anybody to account for the resources they extracted from the economy through defrauding others.

But there just aren’t enough genuine bad actors to satisfy the crowd. Particularly since, as the link in the original post and this comments thread both show, the appetite for moral condemnation is pretty much insatiable, and the level of interest in what might constitute a sensible plan for dealing with the financial sector surprisingly low.

In a general sense I’m sympathetic to your argument — I tend to be an “incentives matter” kind of guy myself. If you set up the incentives for a particular thing, you’ll get more of that particular thing. What’s the point of blaming the person who responds to the incentive?

But what makes the case of the financial industry so maddening is that the industry worked so hard and so long to set up the very incentives they were responding to. And after the crisis they continue to work very hard to prevent the kinds of regulations that would remove those harmful incentives and restore some stability.

I would personally much prefer that after the crisis we as a public, through our governments, had cleaned house without any particular rancor. “Sorry, gentlemen. We trusted you to manage our financial sector and you crashed the economy instead. We’ll have to take over. Now that you’re all broke maybe you can get jobs as book keepers or something.”

But the people responsible didn’t suffer any meaningful consequences — I’m guessing none of those fired bank heads are struggling to pay their mortgages, for instance, as many of their former customers are.

You can talk about systemic problems. But when the people who set up the system, reaped massive rewards from the system, broke the system, and still prevent repair of the system also escape meaningful consequences … sorry, I don’t see that any response but anger is possible.

I can certainly confirm that a lot of the people fired by the investment banking industry over the last three years are indeed struggling to pay their mortgages.

Luckily, however, we can apply your logic re American subprime borrowers here, and conclude that it is the bankers’ own fault for making the bad decision not to save enough while they were earning zillions.

If there had been any meaningful lending controls (commission claw-back if loan goes tits-up in under two years; banks required to hold at least some portion of their mortgages) Bungo would have been refused a loan at some point.

Not so long as the loan was perceived, by everyone from Barney Frank to Franklin Raines to the next-door neighbors to the banker making it, as entirely safe–which it would have been in any of the previous 25 years.

That’s the problem with bubbles, and especially with bubbles in a fractional-reserve banking system. If people thought the investment was risky, there wouldn’t BE a bubble.

Now, you can say that bubbles and bank runs mean we ought to go back to a gold standard and 100% reserves. Or you can say that you need an FDIC for the shadow banking system. But saying, “banks are horrible–they’re subject to bank runs” is a ridiculed minority position.

Daniel: “I only brought up the bloody Greek pensioners in order to point out what silly and/or repulsive consequences this business of looking for villains can have.”

Steven: ” Oh, I see, you didn’t mean it? Okay! But the point about certain other actors having vastly more power and information than Greek pensioners did is still perhaps germane, even for someone who isn’t looking for a “morality play”, a desire for which I don’t think I’ve ever expressed outside a university bookshop.”

I was going to reply, but the sheer f*ck-headedness of Daniel’s positions here is wearing me down. And leading me to the position that the punishment of innocent banking people is perhaps justified (so long as the higher-level ones get their firster and harder).

In the end, the only thing which will produce a mind-change in this field is an even worse catastrophe, combined with very harsh and very widespread collective punishment.

I fear that it’s like WWI; we’ll have to go through worse, and change things the way that we changed Germany – by killing so many men that the survivors were chastened, and the leadership either dead, fled or discredited.

Because I don’t think that mistakes made in economic decision making have particular moral significance in the absence of other factors indicating dishonesty, or to put it pithily and stylishly, “economics is not a morality play”.

Other factors indicating dishonesty (or if you prefer, bad faith) were and are present. For instance, “But what makes the case of the financial industry so maddening is that the industry worked so hard and so long to set up the very incentives they were responding to. And after the crisis they continue to work very hard to prevent the kinds of regulations that would remove those harmful incentives and restore some stability.”

Daniel seems to have a reading comprehension problem. He has been told, plainly and repeatedly, that many of his colleagues acted in BAD FAITH in their business dealings. That is, they engaged in deliberate deception and misrepresentation of the value of securities that they sold for handsome profits. This may be “normal” from his insider’s perspective, but in the larger world, such conduct is reprehensible.

Trolling means never having to say you are sorry, and Daniel is an exemplary troll.

There’s a lot of back and forth between “bankers” and “bank heads” here. I can certainly confirm that a lot of the people fired by the investment banking industry over the last three years are indeed struggling to pay their mortgages.

This is where I concede your point. Not everyone who ever worked in a bank is responsible. In fact, no one “banker” is responsible. To the extent that people are spitting on you in the street, or saying rude things at cocktail parties simply because you’re a “banker”, I sympathize.

But to suggest that no one should be angry at anyone — hey, stuff happens! — is the wrong conclusion. In the first place, I think there should be a lot more effort to focus the blame on particular banks, bank heads, lobbyists, lawmakers and regulators. But that sort of effort has been met with complaints about crowds with pitchforks.

You argue that responsibility is diffuse, and I agree with you. So maybe my anger should also be diffuse — my anger ranges from mild annoyance with the bit players to actual sympathy with the laid-off investment bankers (negative anger) to fury at those who either knowingly or with callous disregard of the consequences helped bring this about and still made out like bandits. But all that diffuse anger still adds up to a real sense of rage.

Maybe what it boils down to is that the class of non-bankers gets to be really, really angry at the class of bankers. Then you and I can still like each other personally, and I can still feel a justified anger against your industry, recognizing that no one player deserves all of my anger and some deserve none. And I can hope this class-based anger helps lead to meaningful reforms.

Adam Applegarth ought to have turned down three out of every four mortgage applications he received, at random (which is what Northern Rock would have to have done)

Why “at random”? Northern Rock wrote in their last successful securitization prospectus (see page 104):

“In May 2001 [i.e. after Applegarth became Chief Executive] the seller introduced its fast track program to prospective borrowers for certain mortgage loan products. If a mortgage loan is judged appropriate for the fast track program, income is accepted as stated by the prospective borrower without further proof once positive identification of the borrower is provided and the borrower has passed the seller’s credit scoring test […] In March 2004, the seller discontinued the fast track program in favor of a new set of procedures under which verification of a borrower’s income was not required in certain circumstances. For mortgage loans with an LTV ratio no greater than 85% (or no greater than 80% in the case of mortgage loans in excess of £500,000) a borrower receiving a medium to high credit score did not need to provide proof of income.”

The collapse of confidence in the quality of these “liar loans” was an important factor in Northern Rock’s failure to find anyone to underwrite the 2007-3 tranche of securities (even Lehman Brothers wouldn’t touch it). Applegarth should have anticipated this possibility, and avoided adopting these procedures in the first place.

“If you are going to make your case for bank regulation or egalitarian politics in general dependent on finding much more criminality than there actually was, you’ll be reliably disappointed. ”

From which one might conclude that if, given the size of the economic catastrophe created to a lesser or greater extent by banks, this wasn’t the result of criminal malfeseance, one can only marvel at the guile of the industry in lobbying so effectively to make it so.

To prevent the kinds of regulations that would remove those harmful incentives and restore some stability, come, so far as I can tell, in only one variety. Require a 10% down, in cash.

Notably, no one is proposing this. And notably, it would hurt homeowners far more than bankers.

tl;dr Daniel: Mistakes were made

Proverbs 22:16
He who oppresses the poor to make more for himself or who gives to the rich, will only come to poverty.

Yes, it’s a poor analogy, because none of the other snowflakes can listen to that one snowflake who could say “Stop doing that.”

yes, it is ashame that there weren’t some snowflake regulators for the innocent snowflakes to speak with.

I was wondering do the terms, channel stuffing, round-trip transactions, and parking mean anything over there? Never seen derivatives used to smooth out earnings? Our bankers seem to have had a problem with out-of-control auditors forcing them to use these techniques. I’m sure it was to help the poor afford housing, and had nothing to do with hitting bonus targets.

I think ScofV nails it here, as did (let’s not forget) OCS at 157.

Daniel seems to be arguing that it’s unfair to regard him or most of his coworkers as criminals, and that doing so does not benefit egalitarian politics.

But much of the anger is directed at the lack of consequences for bad decisions, and in fact the rich rewards paid to so many of those who made them. This has nothing to do with criminality, in most cases, and nothing to do with egalitarian politics, except insofar as it is egalitarian to expect that those whose bad decisions did so much damage ought to suffer financial consequences.

Adding on to Bernard’s comment.

Daniel: (re:bankers acting in bad faith)

” and many more didn’t, and you (and you and you and youuuu bap-a-bahh) are not making this distinction and this is my point. ”

Those who ordered the bad faith (actually, criminal fraud) are getting away with it, which leaves the rest of use with two major options:

a) Let everybody get away with it.
b) Collective punishment.

As I’ve said above, I don’t think that this will happen until the next crash – which the people running the banking sector are doing their d*mnedest to bring about.

“and nothing to do with egalitarian politics, except insofar as it is egalitarian to expect that those whose bad decisions did so much damage ought to suffer financial consequences.”

It is in fact a question of egalitarianism because when bankers expect the public to insulate them from the consequences of their industry’s mistakes, they are in fact asking for special treatment. Manufacturing workers losing their jobs to outsourcing don’t get sympathy. They are not criminals. They didn’t even make any personal mistakes or act incompetently or negligently. Still, they don’t get any sympathy for their bad luck. Most bankers are not criminals although some are, and not all of them were incompetent or negligent although many were. Still, even the “innocent” among the bankers shouldn’t expect the sympathy that they deny to the rest of us when something bad happens.

“if you are going to rely on any sort of financial regulation to abolish asset bubbles and consequent crashes, also disappointed”

There’s nothing like a smug assertion powerlessness to mollify the already frustrated.

piglet@251,

I thought that the part of my comment following “except insofar as” covered your point, but maybe not.

the fact that if you’re serious about egalitarian politics you shouldn’t be making it dependent on a thesis about ownership of profits, means that if people are so totally hung up on theses about bankers (or capitalists in general) being criminals, it probably isn’t egalitarianism that motivated them in the first place

The primary argument against egalitarianism is based on a thesis about ownership of profits, so this doesn’t really seem that suspicious to me.

“Particularly since, as the link in the original post and this comments thread both show, the appetite for moral condemnation is pretty much insatiable, and the level of interest in what might constitute a sensible plan for dealing with the financial sector surprisingly low.”

Oh, great. So I when I say that the nuclear power industry is evidently run by incompetent people who are incapable of designing plants that won’t melt down, that’s “moral condemnation.” When I can’t, myself, come up with a better power plant design, that’s a surprisingly low level of interest in what might constitute a sensible plan. And when I point out that the nuclear power industry couldn’t function without its influence on government and the assurance that the government will bail them out for any accidents that would otherwise bankrupt the industry, that’s me saying that the people in the industry are worse criminals than serial killers. Plus, if I was really interested in good politics around power, I’d see how cheap and self-defeating it was to just blame everything on nuclear. People shouldn’t be angry after a major accident, they should instead pursue abstract, unreachable solutions.

This is CT, folks.

Going back to the comparison with Megan McArdle (92), and since CT regulars were called on (I’m a sometime and I hope soon to be more frequent contributor): there are two big differences between Daniel and Megan. One is that he understands how capitalism works. The other is that he tells us to tax the rich regardless of whether or not they are bastards, and she is opposed to taxing them regardless of whether or not they are bastards. I confess I haven’t read absolutely everything that has been said on the thread so far, but everything I have read by Daniel just seems like wellinformed and smart Marxist analysis (and none the worse for that). I understand why the enthusiasts for capitalism on the thread might want to blame the immoral bankers, but I can’t quite get why the lefties are so eager to blame some bankers rather than a system.

Sure, rich people are often complacent and sometimes evil. But the enemy, as the IMG used to say, is profit.

@260

Oh, by all means, capitalism’s crises are “inevitable” and it is utterly impossible to regulate capitalism in the general interest. And, that’s not the self-serving sentiment of a criminal class, it is respectable opinion shared by everyone with inside knowledge. Because it is all so complex.

Lovely. Simply lovely.

Harry, you do remember what even-tempered, objective old Karl-san had to say about capitalists and mill-owners in vol. 1, don’t you? If systems analysis is totally incompatible with an occasional off-color rendition of Seeräuber Jenny’s little ditty, we’re all gonna have a lot less fun in life. So are the starchy-collared guys at the banks, for that matter.

I didn’t think that the idea that periodic crises were an intrinsic characteristic of caapitalist economies was as controversial as it apparently is.

These “periodic crises” were supposedly tamed by the enlightened central bankers, but the crises are becoming bigger and bigger. The S&L disaster, the tech bubble collapse, and the mortgage meltdown show an alarming trend line of unsustainably increasing magnitude. Sovereign states are now at risk because they are the last bastion of stability preventing Daniel and his greed-head colleagues from destroying everything.

Greed-heads use leverage, deceit, and illegality to construct temporarily profitable systems of finance that are massively unstable. As long as they can pocket a personal fortune before TSHTF, they don’t give a damn what happens to everyone else. This phenomenon used to be kept in check by functioning regulatory, academic, and journalistic institutions. All of these safety mechanisms have been undermined by the growing political power of the financial institutions, which appear to prefer suicide to cultural change.

Daniel would have us believe that his workplace is populated by decent and honorable people caught up in events beyond their control. This is arrant nonsense, as demonstrated by numerous documented accounts of the events of the last few years. Daniel and his peers were, at the very least, complicit and silent in the face of serious abuses of the public trust. They richly deserve the scorn that continues to be heaped upon them.

My guess is that people who leave comments on a Guardian blog (or elsewhere) do so because they feel like bankers have taken unfair advantage of the middle class, the poor, or whoever isn’t a banker. Perhaps people were misled, but they still bought houses and took out mortgages. Countrywide and Lehman didn’t turn out so well, but the rest of the major US banks are posting nice profits even as they complain that BB’s twist will have them earning less. That aside, my take is that non-finance people are really bad at valuation. If the price or worth of something is whatever someone is willing to pay, congratulations for making someone willing to pay that price. Of course people would get mad if the price no longer reflects the value. One option simply is to not pay or renege on a contract, although it seems that a lot people value personal integrity or honesty over money.

It could be the case also that people did not make any distinction between value in use and value in exchange. Flipping houses was popular in the US not too long ago. Big houses too! Likewise, I see nearly no value in diamonds, but other people do, and if I knew I could sell one (flip it), I surely would because of the value in exchange. I think people would get a better idea of the price they should pay (on just about anything) if they asked themselves if a great number of other people would find something to be quite useful, in which case you’d have something that would not fluctuate greatly in value since a lot of people would be willing to pay such a price for a good or service, or, on the other hand, ask whether value in trade “exceeds” value in use in some way. For example, Michael Jackson’s glove or other sentimental collectibles. Worthless to most people, but someone is willing to pay an exorbitant price.

In short, bankers might not be very nice, but consumers bought and need a lot of products they sell and services they perform. If you want to make them more like regular people, then regulate. Have risk caps or pay caps or ratings agencies that don’t seem like prognosticators. Or stop buying things. Or whine about deficits and debt. Whichever works for you really.

cfg

Sam@216. I can’t say that I’m aware of what loans would have met the approval of Barney Frank. The approval of Franklin Raines is worth less than nothing given his performance as CEO of Fannie Mae.

Loans were being made in 2004 -2007 that would never have been made even a few years earlier, not 25. I watched loans being made on properties where the monthly payments were in multiples of the highest possible rental value. Now rental value may not be the only way of valuing a property but it is at least tied to reality. Buying a house with a $3000 a month mortgage that would rent for $1200 a month, at a time when a housing bubble was clearly in evidence makes no sense. Making such a mortgage only makes sense when done in bad faith.

My only regret is that I did not sell a Hawaiian condo property in 2007 when comparable units were selling for $500K. In 2011 I could purchase the same property today for about $300K. Realtors were touting these properties as money-makers when used for short-term vacation rentals. I ran the numbers on some to show one couple that they would be losing money every month even if the property was rented 365 days a year at unrealistically high rents (and ignoring all repair costs). Banks were happy to make these loans. Appraisers were happy to sign off on insane valuations.

What is left at the end of the analysis is either than the whole system was set up to sell loans certain to fail, with predictable consequences to buyers and the economy as a whole, while enriching the loan originators, or a conclusion that a lot of Wall Street financial wizards actually had sub-room temperature IQs. Then the challenge is to explain how people so stupid came to such high positions.

It is not a liberal or, especially so, a pragmatic/progressive ideal to value the moral outcomes of systems.

Rubbish. The moral component of a financial system is critical to its functioning. The foundation of contract law is honest compliance with the terms of an agreement. Misrepresentation and bad faith in the sale of financial instruments is a fundamental moral failure that has led to massive losses and growing instability in world markets. It is impossible to actively police every financial transaction in the world. The difference between efficient and dysfunctional markets is largely one of moral tone. The US once prided itself on having honest financial markets and effective regulation. This reputation is in jeopardy largely because of a moral failure, not some fluctuation in the business cycle or lapse in analytical acuity.

Do you even listen to yourself?

Next thing I know, you’ll be telling me that fat people deserve to be fat because “they can’t follow a diet.”

Straightwood, being wrong is not a crime. I might believe a contract is worth a different amount then you, and if I tell you the terms of the contract correctly I’ve not committed fraud if you buy it at a price I find in my advantage.

If I tell you that the mortgages in a securitized bundle meet certain documentation requirements and I KNOW they do not, in fact, meet those requirements, that is not only misrepresentation, it is fraud. Just such actions are currently the basis of several lawsuits in which institutional investors are seeking damages from those who sold them toxic mortgage-backed securities. One does not accidentally accumulate a bunch of “liar loans” and sell them as AAA securities.

The literature of investigations, both governmental and journalistic, of the mortgage market fiasco is full of indefensible acts of peddling garbage as high-grade investments. Daniel would have us believes that he inhabits some kind of alternate financial industry universe in which misrepresentation, the corruption of rating agencies, the undermining of regulators, and the over-leveraging of risk were not widespread and widely known practices.

What about the policy x politics debate? Even if we cannot ascribe blame at particular banksters (which I think we can), this kind of diffuse agency argument is a political non-starter, as most speeches on the subject by Obama prove.

Pounding on the excesses of the financial industry and showing its faces: Madoff, the crazed traders, Goldman Sachs conscious selling of bad stock in incredible bad faith is just good politics, and the fact that democrats have been faring so badly is their unwilingness to create such a narrative and ignite a serious movement that fights for the redistribution Daniel claims to want.

If Obama had built a (valid) narrative: the financial sector has become too big, too dangerous for our economic and political sistems and we must fight to bring it to a healthy size and away from criminal activity. This should be done by means of taxation, regulation, smaller bonuses, etc. Political ratings and the state of the economy would look much better now. But the window has closed, and with it comes the inevitable next crisis fueled by the same distorted incentives.

Expand it slightly to ‘wrongdoing’, and I think we have plenty of meat to make the case on.

Expand it to “fuckups”, and we’re in exactly the right domain — and I think one issue here is evaluating the nature of the fuckup and the appropriate response.

Take, for instance, the England rugby team, an analogy that may be apt, given that English rugby union is a game for stockbrokers. Should they fuck up against Romania, there’s a taxonomy of potential fuckups: collective fuckups that can be blamed on the management’s fucked-up gameplan; collective fuckups that can be blamed on the team’s failed execution of the management’s otherwise fine gameplan; individual fuckups that come from being just not good enough, and should lead to being dropped; individual fuckups that are one-offs, there but for the grace of JPR Williams, and so on.

280: depends on your criteria for “widely known”. Some people, including me, suspected it. But we couldn’t prove it, and contra Michael Lewis, the people on the other side of the trade were not idiots and their arguments were not intellectually repulsive (up to 2005, that is; anyone who couldn’t see there was a problem from 2006 onwards was being an idiot, but the damage had been done by then). There is a massive difference between “what you believe to be the case” and “what you are so sure is the case that you are prepared to stake all your money and credibility on it” and it’s a very important one to be clear about if you are trading securities. In Keynesian terms, the evidence for widespread corruption in mortgage securities had fairly high probability but low weight.

And it’s worth reiterating the timeline here. Everyone bangs on about the Paulson/Abacus transaction but you should remember that a) it was carried out way into 2007, as a last gasp attempt to get otherwise unsaleable securities off the balance sheet and b) it was a wholly synthetic transaction, based on derivavtives contracts and did not result in a single extra subprime loan being made. Awful though it was, the contribution of that transaction to the crisis was 99% of sod-all.

Economics IS a morality play, dressed up with a bunch of equations and dubious assumptions. The moral is that everyone would what they deserve in the end, if it weren’t for those meddling governments….

Okay, so there was fraud. The question is how much and how significant. Some seem to be arguing that honesty would have stopped the financial crisis, but if you look in the financial crisis inquiry report, the first minority appendix, you will see an estimate of the scale of fraud in dollar terms and the conclusion that it didn’t matter much. What mattered far more was people being wrong, and a few lucky people being right.

So now we need to have a coverup to make the proffered explanation work. Fraud would be a wonderful opportunity for political grandstanding, which committees love to do. Instead the best they could do was grill a very smart hedge fund manager about why he felt justified in putting his money where is mouth was. I’m not buying it: the incentives go the other way.

Anecdotal evidence (U.S. version):

In 1977, my wife and I went to a local savings and loan looking for a home loan. We had the 20% down. We had enough income such that the total monthly cost, including the insurance and tax escrow payments, worked out to slightly less than 33% of our net monthly income. We’d both worked five years for the same employer — a large public university. We also had my wife’s parents pledged as co-signers.

The loan officer looked at my longish hair, looked down at the paperwork, and said, I don’t know, son, you don’t have much of a credit history here. I’m not sure I can see my way clear to loan you this much. Then he looked at my father-in-law’s crewcut, looked down at the paperwork again. You were in the Marines, sir? he asked. He followed the question with some masonic-sounding mumbo jumbo ending, as I remember in semper fi, and we had the loan, which stayed with the originator for the entire six years we owned the house. (The S&L in question did go bust within a year after we sold the place, though — something about the Keating Five, as I remember.)

Flash forward to late 2003. I’d just retired, and was buying another house. I went to a mortgage broker this time, again with 20% down, and more than the recommended monthly income — a solid-gold, defined-benefit pension payout — although I no longer had a wife. The mortgage broker ran a credit rating search and laughed. This is the highest rating I’ve ever encountered, but what’s this — a GAS credit card? — I haven’t seen anyone with one of those in years. He then looked down at the paperwork, and said, Listen, with that rating, I think we can lend you — here he quoted a figure roughly 75% larger than I was asking for.

I can’t make the payments on that much, I said, and I don’t want a variable rate.

Well, okay, he said, but it’s there if you want it.

Within a month after escrow closed, the loan, which had originated in some bank on the other side of the country, was sold to a national insurance company. Since then I’ve lost track of who’s getting the money, but presumably somebody is.

Did I know what was going on? Well, no, but considering that the equity recovered from the sale of that first house was more than the price we’d agreed to pay for it — by a considerable amount — and considering that I have less than zero equity in the house I’m living in now, despite my 20% down payment, I have given those facts, and the two anecdotes recounted above some thought. My conclusions do not at all incline me toward charitable thoughts about representatives of the financial industry….

Just came from Grasping… and delong says it is too that the banksters or is that unibanksters did it in the board room with subprime trash.

The point is, everyone in the business believed it’d be impossibly unlikely for home loans in aggregate – even NINJA ones – to reach a default rate higher than low-double-figures.

The point is, everybody who was “in the business” was actively working to avoid actually contemplating the possibility of large numbers of default. If they truly believed it was “impossible”, then it was only because they were sticking their fingers in their ears.

Risk management took a back seat to profits. Reward went to those who made a lot of money however they could.

From the GAO report on risk management regulatory failures:

In another example, other regulators found weaknesses related to an institution’s oversight of risk management before the crisis. One regulator issued a letter to the institution’s senior management in 2005 requiring that the institution respond, within a specified time period, to weaknesses uncovered in an examination. The weaknesses included the following:

The lack of an enterprisewide framework for overseeing risk, as specified in the COSO framework. The institution assessed risks (such as market or credit risks) on an individual operating unit basis, and was not able to effectively assess risks institutionwide. A lack of common definitions of risk types and of corporate policy for approving new products, which could ensure that management had reviewed and understood any potential risks.An institutional tendency to give earnings and profitability growth precedence over risk management.

I twice brought up facts about how the financial sector mesh with tax havens. Daniels has surely been busy, but it would be interesting to hear a reply on that specific point.

To structure things a bit more, I ask if Daniel wish to question any of these points:
(1) the City of London financial entity is a tax haven
(2) tax havens are key causal and magnifying factors for the current financial crisis(es)
(3) tax havens are key enablers of anti-egalitarian politics
(4) tax havens are key vehicles for hiding ill gotten billions from the financial crisis

Banksters: a report on the banality of evil.

Hmmm. Did one of Salon’s cute contrarians jump the corral? I look forward to to future posts; perhaps a “Nadine Dorries, Misunderstood Champion of Liberty and Inquiry” or “Stephen Yaxley-Lennon, Martyr to Political Correctness”.

hopkin @ 299

Wenger is looking more like Job at the moment than Dr. Pangloss. The irony for me is that it’s Sir Alex who now has the personnel that Wenger needs to play the game the way he wants to play it.

Ferguson’s genius, it seems to me, is that he’s figured out how to win no matter who he’s got, or what style he has to use to deploy them to best advantage. Wenger hasn’t. As a Gunner’s fan, I hate to admit it, but there it is.

Atrios today: More free money for banksters! http://www.eschatonblog.com/
Please tell me why we are not permitted to hate billionaires who buy governments in order to use them to funnel tax dollars to themselves while telling the rest of us that we must sacrifice our old age and our children to the gods of austerity.

There seem to be several distinct issues here:

First, I think we all agree that bankers are universally nicer than serial killers. We all agree that individual bankers as individuals did not set out to plunge the world into a reasonably nasty recession.

But second, the profession – and by implication the individuals inside it – manifestly does not have the wherewithal to successfully manage 100 billion-dollar balance sheets comprising the life savings of ordinary folk on the liability side and the system of credit which powers the entire economy on the asset side without adult supervision. That’s coupled with too-big-to-fail – essentially free liability insurance which amounts to a provisional claim on an uncapped portion of my and every other taxpayer’s future income.

So to my mind, in a moral sense the profession owes the public a lot more than the public owes the profession. What does the profession owe the public? Humility. Contrition. Public announcements about how ring fencing does not go far enough, that the proposed Basel III capital rules are inadequate. Much better disclosure of the risks the public are underwriting. Changing the of the term “retail customer” to “taxpayer who may be forcibly coerced to underwrite our failure”. Less whininess about compliance and audit requirements – much less whininess. More responsibility from senior management, less buck-passing. The end of the bancassurance model for all but 100% vanilla businesses. No endless attempts to do an end-run around ring fencing by exploiting legal loopholes. Acceptance of sub-10% RoE in the medium/long term given a high capital universe. The occasional “there but for the grace of God” comment when asked about the possibility of failure.

Third, bonuses and compensation. If the profession needs strong adult supervision (which it manifestly does) and only exists by virtue of an implicit or explicit taxpayer guarantee (which it manifestly does) and is essentially and often literally just an arm of government, why is the profession not paid public sector wages/bonuses for performing at a sub-public sector level of competence?

Forgive me some hyperbole: it’s not clear to me that if we’d grabbed a bunch of teenagers flipping burgers and put them in charge of these banks that they would have performed worse. The charge against the profession is not one of being serial killers. Nor of being evil. It is of massive incompetence in the management of other people’s money.

> Daniel @3:56 pm
>> You seem to be saying that because a lot of people in different spheres
>> had some agency, then we can’t blame anyone at all

> Happy to confirm that this is my view; consistently since my first post on
> the subject on CT, my candidate for the blame has been “the general
> tendency of complex systems to have complex and unpredictable dynamics”.
> Sorry it’s such an unsatisfying villain, but if you bought a ticket on the
> expectation of seeing a morality play, I have to say I didn’t advertise that
> there would be one.

So if every major system in modern life is so fractally random, unpredictable, and ultimately unstable what exactly justifies paying some of the lucky few people who work their way to the top of such systems $50 million/year for years at a time [1] whilst those who haul their trash get paid $15,000?

Cranky

[1] or for that matter, the midlevel guys who make $250k + bonus.

Nothing justifies it, it’s not a morality play. If you don’t like it, tax it.

Taxation, without “justification” or “morality”, is a pretty empty concept.

Actually, thinking about this a bit more, there is something pretty cowardly and weaselling about using only one half of a Marxian structural determinist argument that the causes of the crisis were systemic so we shouldn’t blame anyone. I mentioned Hobson above, but I think the point can be made a bit more strongly. Marx might have believed that the maladies of capitalism were determined by its very nature and so turning the critique of capitalism into a morality play is a total dead end. Systemic forces are at work, not the wicked machinations of certain groups. All hunky dory so far, but Marx’s approach is also pretty clear that certain groups, classes if you will, are the bearers of those forces and so play either a progressive or regressive role in human affairs. So just as egalitarians shouldn’t get bogged down in assigning personal responsibility for large-scale systemic outcomes, nor should they start blubbering (or lamely trying to deflect criticism) when people start to call for the expropriation of the expropriators.

If you don’t like class warfare get out of the kitchen.

what exactly justifies

Nothing justifies it, it’s not a morality play. If you don’t like it, tax it.

Now that’s just contemptible. When I ask someone what justifies their treating a given set as closed under a certain set of operations, no one thinks that I’m indulging in some sort of morality play.

It’s quite obvious that Cranky is asking why these guys should be paid so much, given that they claim it’s because of their precious ‘leet skills that only a very very special few can master. Since you’ve just said those skills aren’t worth bupkas when it comes to navigating these unimaginably complex, ever changing systems, that they might as well randomly guess, well, that kind of blows that particular “justification” out of the water now, doesn’t it?

Or are you going to pretend to misunderstand what people have plainly written yet again?

Oh, and when are you going to actually, you know, do some work to convince people that you’re right? You know, the usual case in these sorts of rational investigations?

how this new stuff actually lowered risks

…TANSTAAFL …obviously it lowered somebody’s risk

Denmark and Elizabeth Warren’s speech are not egalitarian, they are species of ‘welfare state’. In an egalitarian society individuals don’t own factories.

Systemic forces are at work, not the wicked machinations of certain groups.

It has never been clear to me how or why “systemic forces” are supposed to be incompatible with the idea of individuals or groups acting according to any instrumental logic whatever, much less on any cognitive basis. Where does Marx talk about this?

The statistical view does not preclude individuals’ acting on the basis of beliefs.

I don’t think Denmark could sustain its progressive tax system (which is not as progressive as you might think, a lot of the legwork is done by sales taxes), and particularly, its high levels of wage compression through union bargaining, if it had a bloated financial sector on the British model. There is a reason casino-style banking was biggest in places like UK, US and Ireland. Sweden had a big crash in the 1990s, but it looks like they found some way to stay out of trouble this time.

dsquared is dead right that the Scandinavian model is not about the state dictating what people should produce, but he misses the key point that it only works when you have an entrenched system of wage coordination and skill formation, run through ‘encompassing labour market institutions’ as the jargon has it.

@328: Yes, d^2 is prevaricating between (a) the choice amongst alternative models of capitalism/role of the financial sector in the economy and (b) the sort of ‘should nurses be paid more than footballers’/labour theory of value arguments. The latter are pretty pointless (apart from when they direct attention to unproductive rents such as windfall profits and land value) but the latter has to be part of any egalitarian critique that actually wants to get somewhere.

I’m amazed at how clueless dsquared seems to be about the role of outrage in driving egalitarian policy. Historically, there have been few things more effective than outrage at privileged classes (be it landed aristocrats, “fat cat” capitalists or what have you) for driving egalitarian politics. That the outrage isn’t always strictly-speaking 100% fair and careful and nuanced — and that it can often segue into uglier phenomena — has nothing at all to do with its political effectiveness; by the same token, the decline of egalitarian politics has less to do with outrage than with the development over several decades of an illusion that we had outgrown the need for outrage. So the recommendation that we steer clear of all this unseemly outrage if we want genuine egalitarianism looks unrealistic, and really little more interesting than concern-trolling.

Looking at the financial sector as a whole, it is a bit disconcerting to see how many of its members seem keen on experimenting with how far they can go in baiting public outrage before they start getting real violence in response. But I suppose to many of them it seems like the best defense is a good offense.

Actually the welfare state was built in the aftermath of the second world war and was founded on solidarity and a nation united.

The labour movement, which powered most iterations of the welfare state, passed through many periods and phases of often-violent struggle to reach the point of making such states possible. I don’t think Attlee’s government is an exception.

Actually the welfare state was built in the aftermath of the second world war and was founded on solidarity and a nation united.

This is a drastic, even desperate, oversimplification. Working-class solidarity, which threw out the wartime leader Churchill, was based in good part on three decades of intense class conflict, from the pointless butchery of World War I to the General Strike and through the Depression. In effect, the working so passionately and unanimously hated the traditional English ruling class (cf. our Wall Street) that they finally served notice that the nobs’ day was over.

Daniel, you seem to be underestimating the unifying potential of popular indignation against ruling-class villainy.

This has been a very interesting discussion. The only thing that I’m going to bring up here is dd’s quote “if you don’t like it, tax it”. There’s a real problem for you and your colleagues is this: if it all goes pear shaped again in the next year or two (and it may very well do so), then people won’t be taxing it, they’ll be lynching it.

I don’t actually want to see that happen, because when you repeat October Revolutions, a lot of people get lynched who don’t really deserve it, and you are far more likely to have really really bad long term results than good ones. However, the way elites are acting (and esp. financial, legal, political, but also yes academic and cultural elites) it’s what they’re going to get. It’s why I called them suicidal upthread.

dd, the end game for your colleagues is that they will be swept up in the lynching, even if most of them don’t actually deserve it. If they don’t want that, you and the people like you in your industry need to start shopping out the people who do deserve it, so the lynching they get is one that happens in a court room than the one you’ll all get on your front lawns as their families watch, helpless, while their McMansion burns to provide illumination, no matter whether that particular person and family deserve it or not.

I’m not sure what the super-elites expect as their end game. Do they all expect to evac out to some island nation with their (perfectly legally acquired) reaper drones to keep the rabble from breaching their defences or something?

Or maybe they just all figure they’re going to move to China. After all, the way biz folks have been treated in China when they go there to buy stuff might make them think it’ll be great (a friend of mine who used to do purchasing for a major Canadian manufacturer has told me about those trips, and the comments from his boss about “the next time we go fuck some chinese bitches”), but I suspect that if they’re coming there because they’re fleeing the rubble it’s not going to quite work out the same way as it did when they were going there to buy stuff.

Bad, stupid products[2] like Option ARMS or subprime buy-to-let teaser mortgages, were not invented by the industry out of sheer cackling evil; they were invented because they were the only way to get the people who did not have the means to pay for them into the houses, with the very nice side benefit of us getting big bonuses when we sold-off the crap mortgage-based securities to pension funds and little old ladies.

lolz. Fixed it for you dude.

There’s a real problem for you and your colleagues is this: if it all goes pear shaped again in the next year or two (and it may very well do so), then people won’t be taxing it, they’ll be lynching it.

I’ll bet you ten quid you’re wrong. I’ll even offer you odds, although I suppose if you’re right you may have a problem collecting.

#340: I really think that if your hopes lie in building contractors working on McMansions, you’re going to be disappointed.

Daniel, if popular anger isn’t the least threatening to bankers, why would they ever pay taxes or be subject to regulation? For that matter, if it’s so unthreatening, why do you care about it?

If people saying mean things about bankers in the Guardian make you guys so unhappy, that’s got to make you less eager to do things that will make people mad at you in the future.

You are saying, I guess, that there’s nothing you could have done differently, since whenever interest rates fall by a few points that just inevitably leads to housing bubbles, financial crises and years of mass unemployment. Doesn’t seem like people are buying it.

Lemuel:
I think the larger point here is that DD understands that popular anger is a danger to bankers and those that facilitated their fraud. What he wants is to convince everyone that the anger is unwarranted. So that effective reform is neutered.

Shorter Dsquared: “It’s a shame what happened, but those mortgage lending consumers shouldn’t have worn such short dresses.”

“Normal, sensible people, acting for the most part rationally (but myopically) based on the incentives and the market in front of them, caused a bubble and a crash. If you are going to assume that it was caused by malefactors, or was in some way a pathology or abnormality of the system, you’re not going to develop the right analysis of capitalism. It has crashes and crises. That’s how the system works.”

If it weren’t for malpractice suits and likelihood of prosecution for manslaughter, the incentives for hospitals would lead to them rationally (but myopically) reusing dirty needles, not sterilizing instruments, and generally reverting to 19th century surgical practice with the fatality rate to match.

Totally understandable! It’s just incentives!

Unfortunately, the financial industry has managed to lobby governments to avoid anything like the kind of accountability that exists in medicine. And they sure as hell aren’t going to allow any serious regulation or redistributive taxation to be put in place.

Even the new ringfencing is a few years from coming into effect. Plenty of time for the City to threaten to flounce, and get the whole thing binned.

I think DD is muddling three different questions together 1) whether anger at bankers is warranted, 2) whether it’s good grounds on which to base a program of redistribution, and 3) whether it’s politically useful. And they shouldn’t be mixed up, because it’s possible to be angry with the financial industry without basing your whole case for redistribution on those grounds. It’s not like the Guardian commentators were champions of unregulated markets until they woke up one day after the crash thinking “Those bankers are real bastards, aren’t they?”
“You have, he needs” is morally impeccable but isn’t going to convince a lot of voters.

“I would suggest that making this kind of idiotic and distressing argument is evidence that its maker isn’t smart and, yet even more so, not particularly left. ”

Oh no, let me come to DD’s defense in this , and for that matter to the defense of many of the other posters on CT. What these kinds of posts illustrate is not that the writer isn’t smart, or isn’t on the “left” for the usual definition of that term. What they illustrate is that the crudest kind of prediction of opinion from occupational interest is distressingly true for these people. DD is free to be “eccentrically on the left” as long as nothing about bankers or the interest of bankers is involved. Several of the humanities professors are quite free to be on the left as long as this involves going to stirring demonstrations and the like, but not on the left when it involves, say, shunning a prominent and thoroughly nasty right-winger instead of treating them as a serious interlocutor. That would interfere with progression up the pundit ladder, and is therefore against everything that is right and good about public discourse, the pursuit of truth, etc.

I often think that we don’t sufficiently punish managerial incompetence. An executive who runs a company into the ground and gets its employees laid off probably causes much more harm; death, sickness, and human misery than one robber or murderer. The employees and their relatives end up dying due to preventable diseases, malnutrition, and exposure. Their children end up poorer and worse educated. They become more likely to commit crimes. Sure the statistical incidence of this sort of thing isn’t that high, but if you get 10k people laid off, you probably cause a couple deaths on average. Personally, I think that we should treat the person that caused the lay off harshly. If it was due to fraud or negligence, they should be charged with manslaughter. The reason we don’t is #1 because we can’t prove that they directly caused the deaths, even if we can be certain that they caused them in an actuarial sense. #2 Because of some Kantian notion of justice that I find completely unpersuasive.

‘Sir Anthony Blunt (crime: betrayed dozens of serving agents to Stalinist Russia)’

No he didn’t! The Daily Star invented that calumny.

Just been persuing Miranda Carter’s excellent book on the noble Sir Athony (hero of Kursk). It was not the Daily Star that made up the slanderous accusation of Blunt sending 49 Dutch SOE agents to their deaths; it was rather the Daily Telegraph (18th November 1979). It’s possible that the writer of the Telegraph article had genuinely confused Sir Athony with another spy with a similar surname. What’s inexcusable though is that, when professional historians pointed out the mistake, the newspaper refused to disabuse its readers by publishing a retraction.

The banking industry and finance as a whole is obsessed with making returns on capital > than the average inflation adjusted rate of growth. It is possible to do so on a micro scale… investing in a smart better business beating out other businesses. But the story is different on the macro scale — consider the growth of all these returns compounding. Finance as a whole cannot reasonably perform this feat without some eventual consequence: Either A) an unsustainable bubble crashing these returns, or B) a massive redistribution of wealth to an investment class.

Both A and B happened, with median household wealth plummeting. Our solution to A was to make the investment class whole at the cost of the general economies. Trillions to save bankers so they could continue lending to each other, or simply extracting rents from the treasury… Government could have simply picked up short term lending, nationalizing or replacing, and instead spent their money putting people to work. Instead, the median household receives austerity, lower government wages, reduction of services, fewer jobs, etc.

Nothing has changed for the bankers, they continue extracting their %s from the real economy, and gradually building their way to the next bubble.

To Tom west who said that greed is “human nature” I would say only if the sociopaths and Asperger crowd keep making that choice while they continue to breed…

The brain is complex, but it doesn’t take a rocket scientist to know that the high risk crack was and is an addiction and it is not hard wired into us. It is a selfish choice to believe greed is good and to make that your drive for life.

At one time, this drive would have been thought to be an illness, akin to living in some barbaric compound with the lesser animals. Why blame the banksters when they are just a part of the grand new reality show, where greed lust is the new norm and Ayn Rand is the come back kid.

Rich, I seem to remember from the last time we discussed this, three years ago, that you yourself work in a job as “someone who advises nonprofits on ethical investments”. In other words, a banker. So you might want to gently steer the conversation away from “BS rationalisations about why they personally are not involved”. Ye gods.

“But who’s the real criminal?”

Well, if it ain’t you, and it ain’t me, then who the hell is it? I know, let’s look around and see which individuals have the most money, and how they got it. Then we can look around and see which individuals can’t feed their families, and why not. Then, we can just leave it that way, if you like, and ignore both sides’ whining.

(Only read to 69, so if this is redundant, toss it.)

No, voyou, I’m not. I recommend trying that sentence again, this time along with the one before it. But I don’t think that anyone here makes a calculation of the form “I will write blog post X in order to benefit from Y” — blog posts are self-evidently too feeble a medium to sell oneself out for. Instead, I think that the attitudes that benefit them occupationally become such unquestioned parts of their worldview that they can write any kind of nonsense, deploying their ability to rationalize to make full reversals from their usual more-or-less leftist stances when it comes to items that affect them. If they really were sellouts, they might be better intellectuals.

People hate bankers because they’re paid too much, and they’re mostly wankers. You want to be love, do something else. But please stop complaining, its undignified.

FTW

Oh, dear…

A new study from a Swiss university finds that financial traders are more uncooperative than psychopaths and that they have a greater tendency for lying and risk-taking.

As part of their executive MBA thesis at the University of St. Gallen in Switzerland, forensic psychiatrist Thomas Noll, a chief administrator at the Pöschwies prison near Zurich, and co-author Pascal Scherrer studied the behavior of 28 financial traders in a decision-making game, comparing their performances with those of people who were diagnosed as psychopaths.

They expected to find that, like the psychopaths, the traders would be uncooperative with others, but that they’d perform better at the game because, as Noll said, traders “are supposed to be good at making money. In social interactions, they’re supposed to be good at performing.”

But the two authors were shocked to discover that the traders were actually more uncooperative and egocentric than psychopaths when playing a prisoner’s dilemma game — a type of gaming scenario where participants can choose to cooperate or betray each other.

Moreover, even though the traders lied and took risks more than their psychopathic counterparts, their performance at the game was about the same as the control group. This means the traders not only didn’t play well with others, they also didn’t do any better at the game than regular Joes.

http://bottomline.msnbc.msn.com/_news/2011/09/27/7993962-traders-more-reckless-than-psychopaths-study-shows

“this guy and his species”

Not sure about the “species,” but “this guy” turned out to be quite fraudulent. As in, he aint what he claimed to be.

Though mileage will of course vary, the episode seems to me to support Daniel’s point.

John Emerson @ 377

Well, he ought to be a hoax, even if he isn’t. I’d sleep better if I could believe that such people didn’t exist, or if they did, were treated by everyone but their families as the village idiots that they are.

##373, 379 – the thing about finding a turd in the punchbowl is that it not only radically diminishes the allure of continued drinking, but casts a queasy miasma of suspicion over what has already been consumed.

#378 If he exists it is necessary to disinvent him

Earwig: …he aint what he claimed to be.

John Emerson: I have not found any verification that Alessio Rastani was a hoax. The Yes Man has denied that he’s one of them, and to my knowledge they usually take credit for their hoaxes.

I don’t know what he “claimed to be,” but it doesn’t seem that he’s what he was billed as.

I stand corrected. So far, no person profiting off the recession has admitted in public that they experience no moral qualms about doing so.

I suppose we should be grateful that the appearance of morality is still important.

However, contra William Timberman, I don’t believe that it’s possible to sleep easier in your bed at night just because no such admissions have taken place. Aside from the fact that, actually, many people do regularly admit to such beliefs (albeit in scholarly articles rather than by getting themselves plastered all over the BBC), there remains the matter of behaviour. A great many individuals and institutions within a certain class certainly behave *as if* they believe that kind of thing, or at least some mutated flavour of it, which makes the issue of whether they say they believe it, or believe they believe it, somewhat moot. Many of them may well believe that they are, indeed, making the world a better place when they sell the inflated junk that makes the financial world go round. In which case they are to be pitied and protected from themselves, lest they cause more injury.

Now, it may not be helpful in one sense to assign “cacklingly evil” motives to such people for the intent of ascribing blame or responsibility or good old retributive justice purposes. But on the other hand, from a policy point of view it certainly makes sense to pay attention and say, look, if we let the financial services sector get too big for its boots, it will attract a fuckton of pretty odious bastards who are both morally and intellectually not all there. We should do something about that, because it seems like a problem.

Unfortunately, what we actually did in this country was elect a different (albeit not exactly unrelated) bunch of morally-bereft intellectual midgets to run the country, in the hopes that would fix everything. Ah, democracy!