“A foul stench in our society”
by digby
Here’s a fascinating piece on the disconnect between Masters of the Universe and ordinary people — and why OWS mystifies the Big Money Boyz. Unsurprisingly, it echoes what I hear from virtually all Republicans: it was the fault of the people who were fools enough to buy what they were selling and the politicians who allowed them to do it. There is zero sense that they may have gone too far or that they endangered the golden goose with their reckless gambling ethos.
“Instead of vilifying our most successful businesses, we should be supporting them and encouraging them to remain in New York City.”
“I don’t say this lightly, but the consumer is simply an income stream and exploiting that is the purpose of the banking organization.”
“I think everyone gets what the anger is about… But you just can’t say, ‘Well I want all debts forgiven.’ That is not happening,”
And they whine and whine about how hard they work and how regulations are making it harder for them to collect obscene bonuses:
To put it bluntly, many on Wall Street still see the events leading up to the financial crisis as a case of banks having legitimately sold something – whether it be mortgages or securities backed by those loans – that someone wanted to buy.
Thomas Atteberry, a partner and portfolio manager with Los Angeles-based First Pacific Advisors, a $16 billion money management firm, says his success “wasn’t a gift” and he had to work hard to get where he is. Atteberry says he understands the frustration many feel about income inequality. But he said the problem isn’t with those who are successful, but rather our “tax codes and regulations.”
While some members of the financial elite say they are willing to pay higher taxes, they note the picture for Wall Street firms is not as sunny as some on Main Street might paint it. Wall Street banks already are beginning to shed jobs, and consulting firm Johnson Associates Inc. is predicting bonuses for those who remain will shrink by 20 percent to 30 percent.
Complaints over new financial regulations burdening Wall Street firms are a major reason blamed for the layoffs. Sit down with a hedge fund manager or a top trader and it won’t take long before he or she grabs some spreadsheet that shows all the new rules and regulations coming out of the Dodd-Frank financial reform bill.
Interestingly, the article quotes Paul McCulley at length. He’s the recently retired analyst who Paul Krugman says was the real brains at PIMCO (which explains Bill Gross’s odd lurching over the past year.) McCulley is unsparing in his analysis:
Some are saying it may be time for the government which has bailed out the banking system to help millions of struggling homeowners.
One of those is former top Pacific Investment Management Co executive Paul McCulley, best known for his analysis on central banks and monetary policy when he worked at the world’s biggest bond fund. McCulley, who retired a year ago from Newport Beach, California-based PIMCO to become a consultant with a public policy firm, enjoys the wealth he accumulated in his old role. He lives in a house by the water where he docks his two boats. But he says Wall Street went too far.
“Our society was ripe for a convulsion about social justice, and Occupy Wall Street was the catalyst for that,” says McCulley. “New York can be very insular. It is not the real world and neither is Newport Beach.”
Now that he’s no longer working for PIMCO, McCulley is a bit more free to speak his mind. And he says the only way to jumpstart the U.S. economy is for the federal government to get behind a serious program to encourage consumer debt forgiveness and principal reductions on mortgages by banks.
McCulley noted that mortgage firms Fannie Mae and Freddie Mac have been propped up by about $169 billion in federal aid since they were rescued by the government in 2008, yet there’s a “a moral overtone” to the argument against reducing mortgage debt burdens for individual borrowers.
“Wall Street capitalism has given us a foul stench in our society,” says McCulley.
Indeed it has.
And this worry about moral hazard for underwater homeowners is simply laughable in light of the whining and sniveling that came from Wall Street at the proposal that they not receive their bonuses in the aftermath of their epic fuck-up. Recall:
The AIG executives see Feinberg’s efforts to save a few million in retention payments, given the billions at stake, as a terrible business decision. “I just don’t understand why you would treat people this way,” one AIG executive says. “It’s economic and financial terrorism on the government’s own investment, by the government.”
Or the ongoing whining over the new tepid new regulations. Here’s “savvy businessman” Jamie Dimon having himself a good old-fashioned cry :
“F.D.I.C. is going to cost us a lot of money. TARP cost us a lot of money. This bank tax, my first reaction was, ‘That will cost us a lot of money,’” Mr. Dimon said Thursday at the bank’s annual Investor Day conference in New York. “I think we are getting into the capricious, arbitrary and punitive behavior.”
The examples of Wall Streeters being hugely rewarded after they crashed the world economy and then whining and sniveling about being called bad names is legion. It’s fair to say that “moral hazard” is no longer operative. Indeed, “too big to fail” negates the very concept.
I keep hearing from pundits on television that Occupy Wall Street has made its point and that it needs to focus on the politicians in Washington. (I hear this mostly from Republicans, which I find interesting.) And it’s entirely possible that the movement will emphasize government malfeasance more overtly in the future. But I hope it doesn’t shift its emphasis entirely. Obviously, I don’t think there’s any margin in trying to convert the Masters of the Universe to the Occupy Wall Street cause. But a continuous focus on Wall Street’s nefarious activities and the fall-out from its ongoing recklessness is necessary to educate the public and create pressure on the politicians from the outside.
As Paul McCulley says, Wall Street capitalism has left a foul stench on our society and it can’t be fixed without a sustained campaign from the people. The technocrats and the elites have proved without a doubt that they are not up to the task.
.