Big Bucks to Bad Actors: Does the Business Press Consider the Human Cost of Economic Rescue?
David Leonhart in the New York Times tells us that the saviors of the financial system were in fact the same people who got us into the mess, referring to Paulson, Bernanke and Geithner. Paul Krugman agrees that the it was big government that saved the banksters and the rest of us from financial disaster.
I’m not thrilled with Leonhart’s choice of words. We all believe that it is a mistake to let the screw-ups who caused the problem through their ignorance and greed keep their jobs, let alone their gigantic paychecks or any role in revisions to the regulatory structure. That makes Leonhart’s praise feel like a slap at us. It is also symptomatic of the narrow focus of the business press, which measures the success of the bailout by its impact on banks and brokers, and has failed to connect bank and broker profits with customer abuse.
The problem is that last fall, in the midst of the misery, no one thought about anything except preserving the system for the benefit of the financial elites. No one gave serious consideration to the outrageous compensation for failure, or to the inevitable torrent of unemployment with its fallout for housing and credit card debt, and certainly not the trillions it would take to save them. Most important, no one asked who should pay the enormous cost. It was a given that taxpayers would eat the losses.
As the bank and broker profits have recovered, major media has refused to focus on the central questions: Exactly how did they make all this money, and who is really paying to restore their coffers? I have pointed out that it is the customers who are providing those obscene profits, for example, here, here, and here.
Banks refuse to negotiate with homeowners to make mortgages affordable, and defeated a cramdown proposal that would have forced them to negotiate. They jacked up interest rates on credit cards. They jacked up fees on all kinds of services. Brokers make money at our expense, through high frequency trading, currency and commodity speculation and other useless activities that do nothing for anyone but themselves.
At least Krugman recognizes this obvious fact.
Neither the administration, nor our political system in general, is ready to face up to the fact that we’ve become a society in which the big bucks go to bad actors, a society that lavishly rewards those who make us poorer.
And they thumb their noses at us:
“We move faster, smarter and understand risks better than other investors,” said one [high frequency trader guy]. “As long as everyone is subject to the same rules, I’m not concerned. Profits have always flowed to whoever dominates the marketplace, and we have a technological advantage that it costs millions to match.”
And they are actively studying ways to keep paying exorbitant sums to traders and speculators.
Some of the biggest bonus commitments are being made to bond sales staff workers and traders in currencies and derivatives, and to computer programmers and others who support those operations. Trading has been the main source of the banks’ recent profits.
The only flicker of hope is to tax them. At least that way they will be paying something towards the monstrous costs they have inflicted on the rest of us.