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Why Little Will Change in Banking

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August 22, 2008 – Comments (5)

Because the chief knuckleheads who collect nickels in front of steamrollers are rewarded for being leveraged and lucky, not for being smart or responsible. (Chuck Prince, what's-his-name with the doobies... you know, his business went kaput... plus Angelo Mozilo, the list goes on...)

All these guys reaped millions and millions in compensation and scuttled away while their Ponzi schemes fell apart. Even those who were tossed out suffer nothing but the trials of having to survive on piles of money that most people could never dream of.

And nothing's changing that.

“Banks aren’t yet linking individual compensation to the risks of specific deals; rather it is linked to the overall performance of the bank,” says Helen Griffith, a partner in the global markets division of search firm Heidrick & Struggles.

Toss is the fact that we've institutionalized socialism for the rich, by letting Paulson and Bernanke foist taxpayer-funded bailouts onto the enterprises wrecked by these failures for their major mistakes, and you can see why little will change. There's no disincentive to run a big bank into the ground with the wrong risks so long as top managers are allowed to slither away with vast fortunes.

5 Comments – Post Your Own

#1) On August 22, 2008 at 2:12 PM, FleaBagger (29.22) wrote:

In practice, socialism is always for the rich. Some of the rich, anyway.

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#2) On August 22, 2008 at 2:13 PM, Tastylunch (29.20) wrote:

yup the problems are systemic, unless you change the system this will happen agian and again and again and again like it always has.

the real question is why was anyone surprised that this happened? 

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#3) On August 22, 2008 at 5:36 PM, QualityPicks (78.21) wrote:

Yes, that's the way of doing it. If you do crimes, make them huge, so you can connect with important people and buy political power. See, these gusy get away with all this, yet an IRS employee snoops to see how much celebrities make, and he is on probation, fined, etc.

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#4) On August 22, 2008 at 7:00 PM, DemonDoug (80.85) wrote:

SJ-

This is seriously the most perverse part of our current financial system.  Even more perverse the the Lay family getting to keep all their money because Ken died... more socialism for the rich.  I would say it's not even socialism, but straight out welfare/handouts.  Republicans digust me.

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#5) On August 25, 2008 at 5:37 AM, camistocks (< 20) wrote:

Socialism for the rich, give me  break!

What if the government did not interfere? We would have seen bank runs at thousands of banks. Maybe also the stock market would have crashed. So many people in the middle class would have been whiped out...

Who would profit from that?  Maybe a few very rich who shorted the market? Remember that the so called "uptick rule" was abolished in July 2007, just before the market started to crash. A coincidence?

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