Bank Executives as Geraldine

Yves Smith put up a delightful post at Naked Capitalism casting bank executives as Flip Wilson's immortal Geraldine. It's too good not to share.

The reality is that banks can no longer meaningfully be called private enterprises, yet no one in the media will challenge this fiction. And pointing out in a more direct manner that banks should not be considered capitalist ventures would also penetrate the dubious defenses of their need for lavish pay. Why should government-backed businesses run hedge funds or engage in high risk trading, or for that matter, be permitted to offer lucrative products that are valuable because they allow customers to engage in questionable activities, like regulatory arbitrage or tax evasion? The sort of markets that serve a public purpose should be reasonably efficient and transparent, which implies low margins for intermediaries.

[...]  For banks, the threat is that if anyone puts their finger on the pay dial, the business will be hurt and by implication shrink. But if you are talking about an operation that is destructive, that�s a good thing. The banking industry is bloated and cancerous, sucking talent and resources out of the rest of the economy and allocating capital poorly (examples include the series of bubbles and busts, the way it has become acceptable for bankers to suck so many fees out of deals that they cannot possibly make sense for investors, as in the case with Goldman in the Facebook funding, the destructive impact of turning commodities into an investment).

The EU response to the banking industry's obscene compensation and bonus packages has been rules that limit the size and timing of those rewards. Cash bonuses are structured so that seventy perecent will be deferred for three years before payout, and certain large payouts will also be capped at twenty percent. I haven't studied the details because in the absence of any comparable rules on Wall Street the exercise only frustrates me further.  Here are links for the interested readers.

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Yesterday, January 11, marked another anniversary of FDR's "Second Bill of Rights" speech in 1944. Here we are many years later and the list looks quaint, like something from a work of fiction. Today's pundits would have us believe that these modest expectations are not rights but privileges. Oddly enough, these privileges are  earned by  the birthright of a handful of the population at the top of the economic pile. But those down the hill need to work harder to earn them.

• The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;


• The right to earn enough to provide adequate food and clothing and recreation;


• The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;


• The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;


• The right of every family to a decent home;


• The right to adequate medical care and the opportunity to achieve and enjoy good health;


• The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;


• The right to a good education.