Madoff-o-nomics

by dday

Paul Krugman had a piece last Friday on the Madoff economy where he asked the key question: “How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?” The financial industry, after all, turned mortgages into mortgage-backed securities and sold them all over the world, based on the obviously false presumption that US mortgages would go up perpetually. They created exotic instruments and spread risk everywhere, covering their bets by over-leveraging and using the money to make side bets on the very securities they were parceling out. And while they were setting up the larger economy for a huge crash, they were drawing enormous salaries, taking fabulous trips and buying multiple homes. In fact, even NOW, after getting billions in taxpayer money in the bailout, they continue to fly corporate jets, evade their taxes and take billions in bonuses.

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Madoff eliminated the middle man, stealing from investors directly instead of tying them up in doomed securities while taking big profits. Whether they were con artists or honest businessmen gone wrong depends on whether you think they knew what they were doing was fated to fail. Either way, the result is essentially the same.

…and if you think you need to know where your taxpayer money is going once the banks get their hands on it, well, you don’t. Hope that clears things up.

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