By Dave Anderson:
Jim Cramer is shocked, aboslutely shocked that there is gambling going on in the casino, and that the banks are acting as internally captured parasites instead of competitive firms that respond to market pressure and incentives:
The financials are "by far the worst performing group" in the S&P 500 index, down 3.98 percent in the last year and 25 percent over the past three years. These assets pay almost no dividends to the shareholders...
"All these guys did was take the government money to stay in business, crush their own stocks, get rid of the dividend and now reward themselves with fortunes,"
In a functioning society that basically follows basic incentives while avoiding massive principal-agent problems, the financial industry should have either been taken over in 2008 by the government or private investors who scented blood. The new owners of the stock and the new majorities on the board should have cleaned out almost all of the senior management and a decent chunk of the middle management for gross negligence, sloth or general incompetence. The goal would be to find sufficiently intelligent idiots to replace the sociopathic morons to make money in a simple business where idiots can make moeny. Most of the C-level leadership should be speaking with high priced defense lawyers at the moment as they'll be preparing the idiocy and incompetence but not fraud defense.
None of this has systemically happened. Instead, the same class of managers (slightly reshuffled of course) has continued to hold the rest of the economy hostage as there are plenty of systemically important landmines in their balance sheet and if anyone besides the DFHs and a couple of financial bloggers act against their captured interests, bad things might happen. We're paying $100 billion or more in financial extortion payments to a bunch of incompetent, greedy parasites who could not even fill out basic paperwork correctly.
>> We're paying $100 billion or more in financial extortion payments to a bunch of incompetent, greedy parasites who could not even fill out basic paperwork correctly.
ReplyDeleteActually, we're paying $144 billion for their compensation packages and bonuses, $66 billion in profit, and keeping them accommodated in high style by paying for the buildings they're housed in, the maintenance, utilities, and property taxes for those buildings, their expense accounts, and on, and on. And that's just for one year.
>> [They continue] to hold the rest of the economy hostage[,] as there are plenty of systemically important landmines in their balance sheet[;] and if anyone besides the DFHs and a couple of financial bloggers act against their captured interests, bad things might happen.
Humph... From what I've heard and read, a smidgen of enlightened self-interest should now be telling them that, if they continue to hold the economy hostage, bad things are very likely to start happening -- to them. And when if those things do start happening, they won't be economic.
The problem is not the "incompetemt parasitic managers," the problem is that the entire financial industry itself is parasitic and adds nothing to the economy. It is entirely a drain on the economy, and its entire purpose is to generate an image of increases in wealth which are entirely ficticious, and to generate wealth in the form of fees for the "parasitic and incompetent managers."
ReplyDeleteThey are indeed parasitic, but they are not incompetent in the least, because their purpose is to make themselves wealthy and they do that very successfully.
As to the increase that is created in the economy with all of the "financial instruments" that are created, how real is the increased value of a house that cost $80,000 to build and two years later is "worth" $500,000? That is not "real money," it is an illusion which, as we now know, can vanish in a heartbeat. Those CDO's, CBS's, and MBS's are pieces of paper which have even less real value that that house which, if nothing else, can be sold as firewood.
Risk Management: Deciding that the risk of loss, lawsuits, and criminal penalties are offset by the cost savings of breaking the law.
ReplyDelete