October 21, 2009

MSM Hearts the Banksters

Filed under: Bailouts Only Reopened the Casino, Mainstream Media — Tags: — Russ @ 9:36 am


As part of its duty to the public interest, the NYT Dealbook blog has favored us today with some educational condescension by Goldman Sachs board cadre Bill George.
George has clearly put a lot of thought and effort into his educational mission, and with good reason. As comes through very clearly in his remarks, he’s up against some verrrry misguided hippies.
He concedes that, yes, some banks “aggressively hawked” some bad loans and instruments, some investment banks as well were guilty and “paid the price”. The government was “forced” to bail out the system.

There can be little doubt that the excessive risk-taking by bankers who aggressively hawked subprime mortgages and credit cards to earn high fees imposed enormous hardships on the American public. The worst offenders — Citigroup, Washington Mutual and Wachovia — irresponsibly over-leveraged their balance sheets and forced the United States government to step in to avoid complete collapse of the system. These banks and investment bank counterparts like Merrill Lynch, Lehman Brothers and Bear Stearns paid their price.

Unfortunately, the sins of the wrongdoers created a public relations problem for the remaining banks — at precisely the wrong time.

Unfortunately the good, upstanding, responsible banks – Goldman Sachs and JPMorgan, are being tarred with guilt by association. This injustice comes just when these good Lords of the Manor were exercising noblesse oblige, “calling for an industry self-assessment”.
Just by coincidence, George finds this recent speech by his company’s CEO Blankfein to be especially wise and constructive:

Leading bankers like Jamie Dimon of JPMorgan Chase and Lloyd C. Blankfein of Goldman Sachs (where I serve on the board) are calling for an industry self-assessment. Mr. Blankfein’s well-received speech to the Council of Institutional Investors in March was a humble and honest appraisal of the industry’s shortcomings:

“We held ourselves up as the experts, and the loss of public confidence from failing to live up to the expectations that we created will take years to rebuild. Worse, compensation decisions at banks that destroyed shareholder value look self-serving and greedy.”

Good stuff. I can see how I’d be pissed if I were at Goldman and I was being lumped in with those who had done such things. 
Now the good part:

Many pundits are advocating an increased role for government in regulating banking behavior and managing compensation. Past attempts along these lines have proven counterproductive and have produced unintended consequences. Yet in response to the public anger, such proposals are inevitable.

This takes balls. He’s equating the calls for regulation with the previous onslaught of deregulation and lawlessness. Yes, I bet it would be “counterproductive” to you if we shut down the casino once and for all while finally bringing you all to justice.
(Not that that’s what most reformers are really calling for, of course. Let’s remember, he’s arguing here against even a slap on the wrist.)
We see here the most common tactic of any entrenched criminal when faced with the prospect of any reform. He depicts the status quo, that is, the regime of entrenchment and crime which he fought long and hard to establish (that is, they paid a lot of bribes), as some natural, rational, “peaceful” baseline against which all calls for change must be seen as risky, disruptive, prone to “unintended consequences”, and perhaps malign.
I first recognized this line of obstruction where it was argued against environmental reform, but it’s the same across the board. Every criminal uses it, and wherever you see it used you can be sure you’re dealing with a criminal.

The danger is that we will punish healthy banks for the sins of failed banks. Most bankers have behaved responsibly throughout the crisis. This is the wrong time to tie their hands. Instead, we need these banks to get back to their chartered roles: to provide financial resources to consumers and businesses — large and small, new and old.

What a load of crap. No bankers behaved responsibly from any social point of view. What he means is, some were more competent in hedging their bets. But everyone was betting against society and against the people who actually create social and economic value every step of the way.
“The wrong time to tie their hands” – Of course, any time is the wrong time. During the boom, everything’s fine and will be fine forever, so don’t rock the boat. During the bust, now’s when we need bank credibility, and now’s not the time for ill-advised precipitate regulatory initiative (let alone socially divisive finger-pointing), so don’t be hard on those who we need for the recovery.
Either way, it’s never time to restrain them. Heads I win, tails you lose.
Again we see the class war baseline. Their decades of aggressive antisocial warfare is the natural baseline of Orwellian peace, while social activists are divisive troublemakers, warmongers.
Compare this to the arguments for the de jure wars in Afghanistan and elsewhere, and going back to Vietnam. There too it’s never made clear why we need to be doing it, but above all morale and unity, credibility, must be maintained on principle.
But for some reason it’s only the status quo, which is itself a radical and unstable (and democratically unpopular) stance, which is said be the thing around which this trumped up unity and pseudo-principle and tawdry credibility have to be mustered.
Why not truly unify, around a true principle, and create true credibility through our cleansing action of Change toward realizing that principle? Would this not in the end bring us to real credibility, real unity, real virtue?
The villains have no answer to this, and the reason is obvious.

Commercial and investment banks are the backbone of American commerce. They provide the capital for business expansion and new company formation. In the past 20 years, 70 percent of all jobs have been created by start-up companies and small businesses. But the lack of available financing in the past year has severely crimped the ability of small businesses to grow their business and to add jobs. New company start-ups are finding it extremely difficult to get any financing.

This is a flat out lie. The big banks are not the engines of small business and individual lending, and were not even before the crash. The fraudulent bailout alleged it would “get them back” to lending they hadn’t been doing in the first place. According to the Independent Community Bankers of America, over 50% of small business loans are made by community banks. Meanwhile, especially since the repeal of Glass-Steagal, big banks like Goldman have engaged mostly in parasitic, antisocially reckless speculation: in assets, commodities, securities, derivatives, all the scam paper real human beings don’t need to have existing in the first place. 

Continuing to vilify all bankers will create a vicious cycle: It will fan the flames leading to excessive regulations. This will cause banks to pull back and lend less, thereby crimping expansion by small business and shutting down start-ups. This will intensify the jobs crisis and throw the United States into a double-dip recession.

Going with his lie, George claims that imposing constraints on bank gambling and looting will cause them to further cut back on lending. Since they’re NOT lending, I guess he means they’ll use a time machine to go back and call in loans outstanding during the Fifties or something.
As for the double-dip recession, this may be triggered by the unsustainability of the globalist debt system, or it may be triggered by Peak Oil, but it cannot be triggered by any level of reform or justice.
On the contrary, these offer us the only possible path to social and economic sustainability and stability.

But the banks can’t just retreat or lobby to stave off all regulation. Instead, they need to go on the offensive by advocating responsible regulations that reward sound practices and constrain and punish the egregious ones. They need to recognize the desperate needs of small businesses and start-ups and provide the funds they require. And they need to show marked restraint in cash compensation, rewarding only long-term performance with long-term rewards.

That’s written in code. We’ve seen what they really mean by “going on the offensive” where it comes to proposed regulation.
For a Goldman cadre to call for “restraint in cash compensation” is rich. We know how empty such words are, like the way any murderer claims to be against murder in principle.

Let’s stop vilifying the bankers. The current public sentiment towards banks misses the forest for the trees. Anger is rarely cathartic. In this recession, it has become counterproductive.

More patronization. We’ll see how cathartic it is when you’re all swinging.

The economic crisis was set off by an unbalanced approach to risk management, but the “antibank” rhetoric is an unbalanced reaction to the vital role banks must play in rebuilding trust and fueling economic growth. A blanket indictment of the entire system defeats the essential role that well-functioning banks must play in rebuilding the vitality of the American economy.

This wouldn’t have been complete with that same old claim that this was all a combination of natural disaster and honest mistake: an “unbalanced approach to risk management”.
The dirty secret and official lie of “growth” is that there has been no real growth in decades. Rather, we’ve had only phony debt-binging “growth” as a feature of financialization, even as the banks presided over the erosion of wages, labor organization and protections, and the social safety net. Thus they were able, for political purposes, to maintain the pretense of there being a “middle class” even as they hacked away at all the roots of its reality.
Now the game is up, and society totters. There’s no economic basis for our existence under this dispensation. We can reestablish ourselves only by taking our country back from those who have stolen it.
I think that also answers the question of how much “trust” we can repose in the banks.

A blanket indictment of the entire system defeats the essential role that well-functioning banks must play in rebuilding the vitality of the American economy


He closes with an Orwellian fallacy. It was the banks who sapped and poisoned the vitality of the American economy. There is no big bank which functions well or plays any essential role from any social point of view. They only lie, steal, and gamble with taxpayer money. They are predatory and parasitic at the same time. Since they’re realistically insolvent, that’s all they can do even if they wanted to do anything differently.
But they do not and will not want to change, and here too it’s because they cannot. They are existentially criminal. That’s what they are, that’s all they are, and that’s all they’ll ever be for as long as they’re allowed to exist.
Will we let them continue to poison the wells?


  1. Imagine spending all that money to go to Harvard and then listening to this guy? What do you suppose Ken Galbraith is thinking when he reads the works of Bill George?

    Don’t you wish understanding this stuff made it possible to make some money?

    Looking at the real picture, American society is clearly failing for want of noblesse oblige. The question is what kind of system comes next? Don’t be certain it will be a better one.

    Comment by jake chase — October 21, 2009 @ 9:55 am

    • Jake, there’s certain to be a certain amount of collapse. Just about the only thing that we can influence now is the depth of collapse, the nature of it, and how prepared we are personally to deal with it.

      Comment by Yakkis — October 21, 2009 @ 2:13 pm

  2. Jake, you’re right, we can’t assume it’ll be better. But I’m willing to run that risk.

    And like Yakkis said, it’s not like we’re going to have a choice anyway.

    Man, I wish I could figure out a way to make a living from this.

    Comment by Russ — October 21, 2009 @ 3:51 pm

    • Somehow the idea of “making a living” by reporting on how things actually are has fallen by the wayside. Yet another indicator of social failure, and foreshadowing a time when people fight to survive and long for the days when you could “make a living.”

      Comment by Yakkis — October 21, 2009 @ 4:48 pm

    • Yes, I was going to add a comment and link on that. Thanks for doing it for me.

      The ideologues were out in force yesterday, no? They’re not very good though. Trying to still trot out the trickle-down lies with a straight face, referring to “prosperity” which everyone by now knows is a lie, as we enter Depression.

      I don’t envy them that task.

      One of the few hopeful signs is how these things seem to be getting more likely to backfire. The best example was the AHIP extortion attempt, which seems to have made real health reform somewhat more likely than before (though the prospects still don’t look great).

      Comment by Russ — October 22, 2009 @ 3:49 am

  3. There is nothing surprising about the NY Times pandering to the banksters. The owners of media corporations are rich people who insist that their interests be favored in corporate media coverage. Also, the banksters are major advertisers. Remember how far NPR shifted to the right when they started running commercials?

    Comment by libhomo — October 24, 2009 @ 10:32 pm

    • Hi libhomo,

      That’s why the MSM, including more and more of the ostensibly “liberal” media like NPR (did they discover the word “torture” yet?) are another lost cause.

      Meanwhile the real media outlets like Tom Dispatch have to depend mostly on reader contributions.

      Comment by Russ — October 25, 2009 @ 7:39 am

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

%d bloggers like this: