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We Attacked the Bankers, but Took Our Eyes Off the Whole Rotten System
Prince Andrew says that bonuses are minute 'in the scheme of things'. He is half-right. We must take the focus off individuals
"These people who were (often) truly not worthy of the education they received (or supposedly received), rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behaviour supporting the aristocracy only made it easier for me to find people stupid enough to take the other side of my trades. God Bless America."
The fruit doesn't hang much lower than Prince Andrew. The best education money can buy and an intellect worthy of the gene puddle from which he was fished. Few look on him for leadership. But the apparent absence of a filter that might temper the more blatant expressions of his regal privilege, makes him an interesting indicator of class entitlement at times. "I don't want to demonise the banking and financial sector. Bonuses, in the scheme of things, are minute," he told the Daily Telegraph this weekend.
"They are easy to target. A number will have abused their privilege of a bonus, so get rid of the excesses, but don't throw the baby out with the bath water." For a man who used £30,000 of taxpayers' money for a 50-mile helicopter ride so that he could have lunch with Arab dignitaries, the million-dollar bonuses received by bankers probably do seem trifling. But the rest of us see extortionate rewards for incompetent people not as the "abuse of privilege" but of abusive privilege – wanton venality embedded in a corrupt system.
Bonuses are the most stark illustration of an economic culture that treats those who actually create wealth – workers – with contempt, while handsomely rewarding those who profit from that wealth. While perfectly competent public sector employees who are doing useful jobs face lay-offs because of the economic crisis, the overpaid people responsible for creating the crisis are getting huge rises.
Resentment is both justified and predictable. On its own, however, it is not particularly productive. The furore over AIG bonuses in March, or Royal Bank of Scotland's former CEO Fred Goodwin's lavish pension, provided an effective vent for widespread outrage. Governments joined in their expressions of disgust, as though the issue were one of bad manners, and then floated all sorts of palliatives that they knew would offer no cure.
Today the bonuses are back because banks that were too big to fail are even bigger, having swallowed the minnows and basked in the oligopoly that greeted the survivors. One of the few things that has changed since this time last year is that we now know just how completely rotten this system is.
So the populist anger at inflated executive pay acted as a diversion from the crisis, rather than tackling the root causes of the popular distress it had caused.
For there is a difference between class envy and class struggle. The former is rooted in the popular antipathy towards the rich on account of their wealth; the latter, meanwhile, targets the system that makes some people rich by making others poor. Envy can lead to struggle. But it doesn't have to.
As a means of propaganda, class envy has its uses. The sight of David Cameron and Boris Johnson in bow ties as members of Oxford University's Bullingdon Club – a high society drinking fraternity where members routinely got trashed, then trashed restaurants and often paid for the damage in full, in cash – certainly whets a class-conscious appetite. But it should never be mistaken for the main dish. The problem is not that they are toffs, but that their expressed aim is to further the political and economic interests of toffs.
By shifting the focus from the institutional to the individual it is easy to identify a potent symbol while ignoring the substantial flaws that made those symbols possible. So while we were directing our anger at bankers, banking and finance has returned to its old ways.
This contradiction has been most obvious in the US, where the administration last week ordered swingeing cuts in the boardroom pay of those companies still dependent on the public purse. But the plan, announced with great fanfare, only actually affects 175 people and even then allows for "exceptions where necessary to retain talent and protect taxpayer interests".
When asked if he thought it would make a difference, Obama's pay tsar, Kenneth Feinberg, said: "I hope so, but that would be voluntary. It's not the government's business." Voluntary regulation with loopholes for all – haven't we been there before? Meanwhile the Federal Reserve has announced plans to crack down on pay deals that are related to excessive risk. That could make a slight difference, if it were to be properly enforced. Yet few believe it will be.
But the most plausible reform that would have the greatest effect is to break up the banks by banning them from owning and trading risky securities. This is not a particularly radical suggestion. It's not an alternative to capitalism – just a change in capitalism as we have come to know it. Versions of it have been championed by, among others, former Fed chairman, Paul Volcker – Obama's most senior economic adviser – and the Bank of England chairman Mervyn King.
"The banks are there to serve the public," Volcker told the New York Times last week, "and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties," and it ultimately fails.
"People say I'm old-fashioned and banks can no longer be separated from non-bank activity [but] that argument brought us to where we are today."
Back in 1933, during his first presidential inauguration address, Franklin Delano Roosevelt, aimed to do just that. "The money-changers have fled from their high seats in the temple of our civilisation. We must now restore the temple to its ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit ... There must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money."
This time, the outcome of our economic crisis has so far been almost exactly the opposite. The money changers not only remain in their high seats but our governments have bought them cushions, at our expense, that they might perch more comfortably. The last year has seen not a restoration of ancient truths but a resurrection of decrepit institutions and a decaying ideology. Pumping public money into their sclerotic veins, we brought them back from the dead. We have literally paid for the right to be exploited by a system we know doesn't work.
The prince was half right. In "the scheme of things" bonuses are an easy, if legitimate target. So the sooner we address the scheme of things the better.
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23 Comments so far
Show AllThis article is a pile of rubbish. All that had to happen was to not give the banksters any bailout. They could have been just left to fail. Instead, Gary the Obama apologist fails to mention that Congress and the White House proudly voted to bail them out with our tax dollars. It's no different from war funding except Washington has been bailing out Big War for decades. It doesn't take a lot of effort to smash a rotten system. LET IT FAIL !
PS: Maybe doing away with the income tax is what's really needed to keep the banksters from getting our loot. It works in Texas and Florida.
libertarian?
Nope !
On the issue of letting banks fail, progressives and libertarians actually agree albeit for different reasons that banksters deserve no bailout, period. No, he's not a libertarian. Do a lookup on his posts here.
I would vote for a libertarian over an Obama Democrat any day.
Steal a loaf of bread and go to jail. Steal 10 million from a company for holding down a chair and get people praising you. Put the income tax rates back where they were before Reagan and see if that doesn`t fix the problem. No one needs to be handed 400 times the pay that the average working person can make.
Quotes from the article
'I was in this game for the money," wrote Andrew Lahde, a hedge fund manager,... "The low hanging fruit, ie IDIOTS whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking.
"These people who were (often) truly not worthy of the education they received (or supposedly received), rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behaviour supporting the aristocracy only made it easier for me to find people STUPID enough to take the other side of my trades. God Bless America."
... the administration last week ordered swingeing cuts in the boardroom pay of those companies still dependent on the public purse. But the plan... only actually affects 175 people and ... then allows for "EXCEPTIONS WHERE NECESSARY TO RETAIN TALENT AND PROTECT TAXPAYER INTERESTS".
So the article basically says we are allowing huge bonuses to be paid to people that are proclaimed to be STUPID IDIOTS by an insider to that very system. Yup, God Bless America.
I don't know if people should be completely disgusted or be ROTFLTAO. I guess how people react to this situation would depend on if they were getting one of these juicy bonuses, or not.
Notice that Younge mentions that David Cameron and Boris Johnson want to further the economic interests of toffs, while conveniently glossing over the fact that Obama and Gordon Brown don't just want to further the economic interests of toffs, they are actually doing so. It is Obama and Gordon Brown that are in power, not David Cameron. It is Obama and Brown who have worked together to block every international attempt to place restrictions on the banks.
David Cameron might have nefarious intentions, but he isn't in power; whereas Obama and Gordon Brown are in power and are committing nefarious acts.
As a writer, when it comes to analysing Cameron and the Conservatives, Younge engages in very good sharp analysis, but then when it comes to Brown and Labour he starts making apologias. When it comes to Obama, he is reduced to pathetic fanboyism.
Yet another article that criticizes "the system" but fails to identify precisely what it is. It is a privatized monetary system subject to interest; a system that creates money as debt. The central banks - e.g., the Fed, Bank of England - are not national banks, they are private banks posing as national (government) institutions. Contrary to the Volcker quote in this article, that "The banks are there to serve the public," the opposite is the truth. Banks are there to serve the bankers; more precisely, the central bankers. The "scheme of things" that needs to be addressed is the private control of currency and national monetary policies via institutions like the Fed; the creation of currencies subject to interest; the creation of money as debt. The Fed and other private central banks should be eliminated and interest-free currencies and public-interest monetary policies should be established.
The government has been the source of mortgage-backed securities and other mixing of banking products and complicated investment products. Their regulation of the past created them. It is a nice and simple story to basically say bankers are evil and greedy, so the government must oversee them and make sure they don't get away with anything. More specifically the simplification says that deregulation of the seventies led to the S & L Crisis and deregulation of the past ten years led to this crisis. The fact is and this is a simple fact that can be easily confirmed although you will never see it mentioned anywhere because it ruins this whole little fairytale is that the deregulation of the seventies was just cancelling very strict regulation of the sixties. In the sixties congress imposed strict regulation with interest rate ceilings. This step by the US was stricter than any other first world country. In the seventies it became obvious this was a mistake and they removed the regulation. The reason for all this is complicated but it squarely lies with government subsidies and legislation from the New Deal and after the war.
The bottom line is the government has played an essential role in our financial system for a century. They make and guarantee all sorts of loans and financial products themselves. Just the sort that causes the problems today. And it is a problem, but to argue that it is the honorable govt vs. the evil bankers is completely absurd. The government is just like the banks and does exactly what the banks do and encourages the banks to do it. If anything the banks follow the government's lead. The legislation of the seventies was actually more of a subsidy than deregulation and an effort the save thrift banks, what it ended up doing with such outrageous corporate socialism was create a moral hazard that encouraged Wall Street to get involved in all sorts of shady speculation. And that is what has happened again. But you don't have to believe me or anyone else who tries to point out the truth just watch what happens. The government will blame the bankers pass some legislation and everything will get worse and there will be another financial crisis.
And one of the comments today is absolutely right, there would be no need to discuss any of this if we had simply let the banks fail. That is so obviously an example of how the government only makes things worse I can't imagine why we would want even more government intervention. And the ironic fact is the US banking system is the most regulated system in the first world. And as this article points out, the most messed up.
Can't see many here who "argue that it is the honorable govt vs. the evil bankers".
They are in it together. Once civilization's greatest swindle will receive appropriate awareness amongst the masses, matters will change.
The monetary system, made possible by an incestuous relationship between corporate and political masters and key people in the financial world, is the true curse and cause of misery.
"THE EMPIRE OF 'THE CITY' "
http://video.google.com/videoplay?docid=4675077383139148549
True, now even the government knows that they are owned by the big Financial Banks.
But the most plausible reform that would have the greatest effect is to break up the banks by banning them from owning and trading risky securities.
--------
Close, but not quite right.
The reform with the greatest muscle is HARD TIME IN PRISON.
Nothing else even comes close.
Don't forget we must take their ill gotten gains so they don't have the money waiting for them when they get out.
Otherwise prison will just be time spent earning hundreds of millions per year.
"don't forget we must take their ill-gotten gains..."
yes. rico statutes allow for treble damages.
these are just the type of crimes (although not the class of criminals!) for which the rico laws were written.
now if we only had a justice system that worked for us instead of them...
From the article:
'I was in this game for the money," wrote Andrew Lahde, a hedge fund manager, in a letter to the Financial Times last year as the global economy went into meltdown. "The low hanging fruit, ie idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking.
"These people who were (often) truly not worthy of the education they received (or supposedly received), rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behaviour supporting the aristocracy only made it easier for me to find people stupid enough to take the other side of my trades. God Bless America."
At the risk of exposing my class envy, it seems that the Harvards of this world have a knack for producing affluent, arrogant, well-connected, superbly credentialed (because they graduated from Harvard) nincompoops.
and in the USA - the Temple of TEmples of Addiction to Profit at societies' expense -
the CHIEF enabler is POTUS.
We attacked the banksters? Really? How so? As far as I can tell, they're still robbing, rapping and ridiculing us and laughing all the way to...well, the bank! Nothing has changed, except for their portfolios and their bonus which are both bigger, much, much bigger today because of us suckers and our misery. So, yeah, I'd love to be 'attacked' the way they were and be doing as well as they are.
The only way to declaw the banksters is to A) remove their power of fractional reserve lending which has created a house of cards, and B) end the tyrrany of the Federal Reserve system, which is as Federal as Federal Express. END THE FED or make it truly Federal.
The FED is at the root of all our financial ills like a fungus. Allowing private banksters to control the issuance of fiat currency and charging US interest on every dollar has destroyed this country. The worth of the dollar since the Fed was illegally created has plummeted to something around 4% of its pre-1913 value. How's that for a mission statement?
President Thomas Jefferson highlighted the danger of the Federal Reserve with "I sincerely believe that banking institutions are more dangerous to our liberties than standing armies." He is no doubt rolling over in his grave. The banksters now have the puppet police state they needed to continue raping and pillaging on a global scale.
I URGE EVERY CITIZEN TO INVESTIGATE THE FEDERAL RESERVE SCAM AND SUPPORT HR1207 and S604. The Fed is scared to death of this bill. Indeed they should be. They've never been truly audited. Congress has no authority over the Fed.
Write your congressperson in support, and do a search on "END THE FED."
You nailed it!
We need to support these bills vigorously.
H.R. 1207 and S604: Federal Reserve Transparency Act of 2009 & Federal Reserve Sunshine Act of 2009:
To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.
Also, let's watch carefully where the opposition comes from on these bills. The opposition will be fierce! That will tell us who is focused on our liberty and who is enabling those that want to manipulate us. Play close attention to who tries to change the bills so they can be watered down to the point where it is ineffectual.
As I see it, any elected official who is truly not aware of what is really going should not be there. And, any elected official who does see what is really going on and supports its continuation should be identified and exposed. All others should fighting to protect and pass these bills as a first step to reversing the erosion of true liberty in our country.
The jemmy that will pull them to bits might just have been forged:
The Steelworkers Union and Mondragón have just agreed an initiative to create socialist businesses in the US.