Tuesday, December 15, 2009

The President and The Fatcats

President Obama had the heads of the Five Famil...whoops, the heads of the largest banks over to the White House yesterday for a chat, a few hours after calling them "fatcats" in a 60 minutes interview. Ever the populist (puke), the President has firmly affixed blame for our fiscal crisis on these men, and then takes great pleasure in criticizing their bonus structure and other aspects of their compensation. A few thoughts.

Firstly, I suppose I wouldn't make a very good Fortune 500 CEO, because if this President ever hauled me in for a chat, I have a feeling that I might not actually be a very pliant guest. Over at Tigerhawk, there's a great post on what someone WISHED Jamie Dimon (of JP Morgan Chase--and by the way Jamie--how about getting that stock price up a bit?) had told the President. My favorite part:

"Also, you sent a clear, unspoken message today that you'll put a big surtax on my bonus if I resist your putting in a new federal bank consumer protection agency -- why don't you just call this new agency ACORN and be done with it? I spent years putting up with Sandy Weill. I already have my "fuck you" money. You may be President, but you aren't President for Life."

Next, it strikes me as impolitic to have call a bunch of people fatcats on one night and then try to persuade them to save your bacon domestically by loosening their loan practices to small business.

Moving on, I am struck by the moral dimension being applied here--which goes something like this. "You got the taxpayers into this mess and they bailed you out. Now you have a moral obligation to loosen your credit rules in order to fund small business loans and help get this economy out of dire straits." Where to begin, where to begin....

First of all, yes, Wall Street has blame in where we are. They saw an opportunity to make money, they failed to accurately and adequately assess risk, and they ignored for too long signals that now appear obvious that their business model was flawed. And secondly, yes, the Federal Government did intervene to shore up the nation's banking system in an effort to stave off systemic failure.

But where we are today is far more complicated than just "burn the bankers". How about John Q. Public's role? You know, the lady we covered here just yesterday, who blatantly speculated in real estate and then decided to simply walk away from their obligations? What about the politicians (on both sides, mind you!) who sought to curry favor with their constituencies by trumpeting "home-ownership" as if it were a human right, only to create a market of people who never should have been mortgage holders to begin with?

Furthermore, this suggestion that "the taxpayers" bailed out Wall Street is way overdone--especially when one remembers that four in ten workers PAY NO FEDERAL INCOME TAXES, and more to the point, it is far more likely that CHINESE TAXPAYERS ought to be thanked for the money, as it is they who bought our debt like it was coming back in style....

Finally, let's say for the sake of argument that everything the President says here is right. That STILL does not levy a moral mandate on the bankers to do anything except PAY THEIR OBLIGATION TO THE GOVERNMENT BACK. That is the most moral thing they could do, and it is to be honest--exactly what they are doing. Are we setting a new precedent here? Is there a suggestion that when someone obtains a $10,000 credit consolidation loan from a bank--that they are somehow MORALLY obligated to do business with that bank EVEN AFTER THE LOAN IS PAID BACK? Because at some level of abstraction, that's what we're saying to the bankers. Worse, the President is criticizing them primarily for failing to do exactly what it is that put us into the place we are--and that is make risky loans. Does anyone really think that these "fatcats" would avoid making a buck if there were a buck to make? Does the President have no sense that his business unfriendly policies are at least as responsible for small businesses not growing as any lack of capital there may be?

1 comment:

"The Hammer" said...

It seems as if he's upset that they are actually paying the money back.
Did you notice who wasn't in attendance? That's right, our old friends at Goldman Sachs. They must be too busy setting up their carbon exchange.
On Animal Farm some animals are more equal than others.

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