Volatility

December 4, 2009

The Gods Must Be Crazy

 

“How much should Goldman Sachs pay Lloyd C. Blankfein?” This question kicks off an earnest analysis of one of corporatism’s pressing issues. How much should a temporarily legalized robber get to openly steal? The piece takes this very seriously. They’re clear that they consider this purely a tactical question, a PR issue. There’s no morality or justice involved, of course.
 
It’s silly to be so serious about such an absurd question. How much?
 
1. He “should”, by the standards of himself, the government, and the NYT, take all he can get, just as Goldman Sachs does. By that standard he is indeed the most “talented” of them all.
 
2. The real answer, which any human being would give when asked “What does he deserve?”, is a noose around his neck. (Or a prison term if you’re a pacifist, I guess.)
 
“Let each man be paid in full.”
 
So the question is rather incoherent when they pretend it’s not a class war question. But like I said they’re offering PR advice. How do you least rile up the peasants?
 
Their advice: Throw out the “bubble year” 2007 where Blankfein extracted $68 million. By the percentage of income measure he’d get $64 million this time around. Too much. Those populists will go nuts. And yet proven losers like Richard Fuld and Jimmy Cayne got a higher percentage in 2007 than he did. (Blankfein’s $68 million was only .6% of GS’s net income, whereas Fuld got 1.2 and Cayne a whopping 1.9% for running their banks into the ground.) So yes, Lloyd, life’s not fair sometimes.
 
The piece does concede that GS as well is a ward of the state. Blankfein should therefore do the noble thing and take far less than his dazzling talent deserves. Would $9 million be good, the nice symbolism of a single digit?
 
“But critics of Wall Street and executive pay probably would oppose a $9 million payout almost as much as one that was twice as large.*” That’s true, some of us would. Nine cents is too much for these villains. But the higher it goes, the more obvious it is to more people.
 
Blankfein has to be worth more than Benmosche at AIG at $9 million. The logic is irrefutable. Even the NYT thinks Benmosche’s worthless.
 
“The right number for Mr. Blankfein may be around $20 million.” Ninety percent in stock, vs. 60% in 2007; .2% in profits.
 
So that’s expert advice from professional journalists who wish “Mr. Blankfein” well.
 
It looks like there’ll be a lot more executive freedom to ponder pay once Bank of America pays back the TARP. Citi as well is looking for a way out.
 
It’s simply insane that this is where we still are after all that’s happened. In every case every banker’s sole concern regarding the TARP, which was supposed to help recapitalize these things, is “How will it affect my pay”.
 
As Yves Smith said today, this is pure looting.
 

The Bank of America stock offering, which will be used to repay the TARP, went off well, so surely this means the Charlotte bank is on the mend and its finances are sound, right?

Chris Whalen, who is an expert on the banking industry and has a proprietary database that measures the risk of individual banks, doesn’t buy it:

We are reaffirming our “negative” outlook on operating results for BAC….

We…look at the specific transaction proposed by BAC, we see the repayment of government TARP equity and a $20 billion reduction in the overall capital of BAC at precisely the time when the Fed is withdrawing many forms of subsidies for the largest banks. Assuming that BAC can place $18.8 billion in new securities and sell $4 billion in assets at valuations that do not generate capital losses, the consolidated entity ends up with $20 billion less capital on a consolidated basis than today.

Ahem, the point of this exercise was to make sure the banks came out sounder, and did not weaken themselves by paying back the TARP funding. Instead, the reverse is happening. A company that threw a fit to get funding from Uncle Sam early this year is now depleting its capital….so it can pay executives better than if it was on the government short leash.

Scrimping on capital to show better returns to allow for bigger bonuses is looting, and it’s what got us in this mess in the first place. But here the authorities are now enabling this process, because “paying back the TARP,” no matter what the true costs and risks are, validates Obama’s economic programs.

 
According to the TARP principle, and the propaganda of the bailout in general, the only measure should be the health of the balance sheet. But just as with the phony “stress tests”, so here the government and the media are going along with systematic looting fraud.
 
BofA is clearly weakening its financial state in order to facilitate looting by its executives and cadres. Citi is looking for a way to do the same thing. Otherwise its traders are said to be gearing up for an “exodus” next year if this year’s bonuses are too insulting to their “talent”.
 
We get the standard lies about how paying the TARP will render Citi free and clear, and never mind the continuing $300 billion in government guarantees plus god knows what Fed support.
 
Once they succeed the way Goldman did we’ll be able to read analyses on how much Pandit and whoever succeeds Lewis should go ahead and plunder, based on the political cosmetics.
 
The MSM already can’t wait, judging by the tone of these articles, which are both opinion pieces masquerading as journalism. Even at this late date they’re still solemnly using the Orwellian term “talent” with nary a quotation mark in sight. The very headline of the BofA piece decrees that it will now “shed its stigma”, and the celebration continues from there.
 
“Its recovery, while many ordinary Americans are still struggling, is an important milestone in the government’s yearlong effort to stabilize the nation’s financial industry.” How many lies in that sentence? BofA recovery, milestone, effort to stabilize….The sentence does, I imagine inadvertently, starkly juxtapose the struggling of real Americans with the fact that the government does not care about Americans, only big banks.
 
We’re treated to the opinion that Citi has “a clear strategic direction”. This is, to say the least, highly disputed. Many commentors have said that Pandit’s proclaimed strategy is just as incoherent and senseless as this assemblage of this Frankenstein’s monster in the first place.
 
And then there’s the bizarre ongoing spectacle of the MSM openly admitting, as if it’s a matter of course, that the whole bailout premise of “getting the banks lending again” was a fraud.
 
“Citi’s fortunes have slipped recently as rising consumer losses overshadow gains from its trading activity”. I thought the point of bailing Citi out in the first place was to improve the fortunes of Main Street, of the “consumer”. If the bailout was ever anything other than a lie, then what possible meaning could it have to even talk about “Citi’s fortunes” other than from the point of view of its consumer lending? Yet here we are right back to casino business as usual, trading activity shows gains, everything’s great except for that stupid bank lending stuff…
 
Same here:
 

Indeed, Merrill’s businesses have improved this year as Wall Street’s traditional business of trading and deal making picked up. At the same time, Bank of America’s core consumer lending units suffered greater losses as the economy weakened.

 
How many lies in there?
 
Why is the casino still open AT ALL? There’s only one answer: our government is irremediably corrupt.
 
“Core consumer units” – you mean the one and only thing the bailout was supposed to be about? They got the bailout, they were supposed to lend. PERIOD. What’s this garbage about “losses”?
Again we know the answer. The bailout was a LIE.
 
“Suffered greater losses as the economy weakened”. Yeah – it’s a force of nature, and it’s all impersonal.
 
Try this way of phrasing it: Criminal robbers continue to rob  and to party with the loot while the real Americans who actually create 100% of the wealth freeze and starve.
 
It’s like when 9/11 was supposed to mean the end of all frivolity and stupidity in the media. America in general and the media in particular were finally going to grow up. Strike One!
 
And now the financial crisis and the alleged “need” for the bailouts were supposed to accomplish the same thing. Strike Two!
 
I don’t know about you, but I don’t think I need to wait for the next pitch.
 
After all that, it shouldn’t be surprising to see Ben Bernanke compare himself to a bank robber. I didn’t know he had such a lively sense of irony, although it could mean that political tutorial isn’t coming along so well.
 
At his reconfirmation hearings, which are getting a little bumpy what with holds by Sanders and Bunning, as well as the Paul/Grayson Audit the Fed amendment and Dodd’s plan to strip the Fed of much of its regulatory authority looming in the background.
 
How does Bernanke defend his atrocious record? He uses the stupidity defense: “I did not anticipate a crisis of this magnitude.”
 
Then there’s the old I’ve-learned-my-lesson. Subprimes and reserve requirements? “That is a mistake we won’t make again.”
 
Then you claim things would’ve been much worse. You claim credit for “significant improvements”.
 
Apparently no one asked him, worse for whom? Improvement for whom?
 
We don’t have to ask him, since even in his political discomfort he got to his real agenda: the great call for cutbacks in the hated Social Security and Medicare.
 
I really can’t improve on Bernanke’s own larcenous frankness here, so I’ll let him speak for himself:
 

Ben Bernanke has overseen the greatest expansion of the Federal Reserve’s balance sheet in its history, pouring trillions of dollars into Wall Street firms at roughly zero interest rates.

His generosity, however, has a limit.

In testimony before the Senate Banking Committee today, where he’s seeking re-appointment as the Fed’s chairman, Bernanke called for cutbacks in Medicare and Social Security even as unemployment rises and the middle class is endangered.

Citing legendary bank robber Willie Sutton, Bernanke said of the retirement and health care funds that are the legacy of the New Deal: “That’s where the money is.”…

“Well, Senator, I was about to address entitlements,” Bernanke replied. “I think you can’t tackle the problem in the medium term without doing something about getting entitlements under control and reducing the costs, particularly of health care.”

Bernanke reminded Congress that it has the power to repeal Social Security and Medicare.

“It’s only mandatory until Congress says it’s not mandatory. And we have no option but to address those costs at some point or else we will have an unsustainable situation,” said Bernanke…..

“Willie Sutton robbed banks because that’s where the money is, as he put it,” Bernanke said. “The money in this case is in entitlements.”

 
And what about the Fed’s vaunted political “independence”? It’s non-politicality? Well, Bernanke is very clear on how much he hates civilian entitlements, and how much he loves bankster entitlements.
 
Yet when he’s asked about instead taxing the rich for their fair share? “These decisions are up to Congress.” But what about Greenspan’s advocacy of tax cuts in 2000? “I have not done that. I’ve done my best to leave that authority where it belongs, with the Congress.”
 
So with the political advocacy of Ben Bernanke and his highly politicized Fed, disaster capitalism seeks its next big scalp: entitlements. This assault is coordinated in the Senate with a right-wing “bipartisan” goon squad led by Kent Conrad, where they’re demanding an extra-legal, unconstitutional Star Chamber empowered to gut Social Security and Medicare.
 
With this assist from Bernanke and the Senate, Obama hopes to succeed where Bush failed, to destroy these programs completely.
 
This is class war at its most vicious short of actual violence. Bernanke is a cadre. Bernanke’s mission in life, as a mercenary and as an ideologue, is to steal as much as possible from the Americans who create America and convey it to rich parasites. If we always keep that fact in mind, and apply it to every last thing he says and does, we’ll always understand him perfectly.
 
The same goes for a guy who, as the Greatest Depression sets in, as millions of jobs continue to be destroyed, with a $27 trillion bankster bailout as the centerpiece of his entire policy, can convene a “jobs summit”, look America in the eye, and say: “It’s important to face the fact that our resources are limited”.
 
It’s a flat out LIE. The bailouts prove he has infinite resources for anything he wants to do. So anywhere he starts crying poverty, that means nothing other than he DOESN’T CARE.
 
Well, Obama does care about one thing here. No matter what comes out of this job summit, the first priority is corporate profit. He likes “cash for caulkers” because big box stores like Walmart and Lowes can be “contracted” to “advertise” it.
 
More generally, he emphasized that he wants the corporatized private sector to rule. “Ultimately true economic recovery is only going to come from the private sector.”
 
Would that be the same corporatist private sector that destroyed it? Who have done all they can to destroy as many jobs as possible for nearly forty years now? Who are only gearing up to destroy more jobs now?
 

“I want to be clear: While I believe the government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector,” he told his audience, which included critics as well as executives from American Airlines, Nucor Corp., Google Inc., Walt Disney Co. and Fed-Ex.

Mr. Obama told the chief executives that he wanted to know: “What’s holding back business investment and how we can increase confidence and spur hiring? And if there are things that we’re doing here in Washington that are inhibiting you, then we want to know about it.”

 
WTF is this, Bush?
 
Since we’re doing the flunkey round, how about the elaborations on Obama’s war speech the other night? Gates has gone before Congress and assured everyone nothing Obama said about timelines has any real meaning. 2011 is an “inflection point”. Actions will be determined by “conditions on the ground”. “Gradual”. Zero timetable.
 
Hillary, same thing. No timetable, and everything depends upon “requests for logistical support” from the corrupt client. If that’s true, forget about it. We’d still be in Vietnam today propping up the South if Nixon and Kissinger hadn’t lied to Thieu about that.
 
Also, “civilian commitment must continue” indefinitely, which of course will require military protection, which won’t be included in the “withdrawal” schedule, and so on. She even patronizes Jim Webb, one of the handful in Congress who actually know something about this stuff. He asked her a “profoundly important question”, according to her. Another Fuck You from a chickenhawk. (I hope it’s not just my own pet peeve when somebody replies “that’s a good question!” There’s no way that’s not patronizing, since the question usually wasn’t any good at all, but rather stupid or pedestrian. Or if it really is a good question then you’re basically saying, “That really is a good question. I never expected that from a moron like you.”)
 
Admiral Mullen of the JCS also said “conditions on the ground” will decide. So we have confirmation that whatever they really intend, whatever happens, the notion of a firm 2011 timetable is simply feathers thrown into the wind.
 
So there’s a rundown on what Bernanke, Obama, and some lesser flunkies have been up to as their masters work out the details of how to get their bonus mojo back.
 
One last thread of the constricting ropes. At the Dallas Morning News they’ll be reporting more directly to their masters.
 

In an interview, Bob Mong, the editor of The Morning News, stressed that no other parts of the paper would report to people outside the newsroom, though advertising managers had been assigned to work with several other areas, like health, education, travel and real estate. Asked if there were plans to apply the structure in sports and entertainment to other parts of the paper, he said, “not at this time.”

 
It looks like a wedge. Soon the ad department, really just in-house corporate lobbyists, will have to directly vet editorials. And then on to all the newspapers.
 
I guess it cuts down on some of the farce. 
 
[*The kind of lesson “progressives” absolutely refuse to learn.]
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8 Comments

  1. Well, that was refreshing. What can I say except if America really wants “change you can believe in”, then they will have to do it by extralegal means. When citizens can’t change things at the ballot box-and Lord knows they can’t- they must resort to draconian solutions.

    Are you listening America, or are you just listing?

    Comment by Edwardo — December 4, 2009 @ 4:10 pm

  2. I think little by little people will understand that the country has been stolen and the system is simply there to protect the thieves.

    It’ll just take time, and in the meantime those who do understand should organize the anti-banking and debtor revolt movement.

    So I’m planning to focus more on writing about that, and not just commenting on the “current events” of what these guys are doing.

    Comment by Russ — December 4, 2009 @ 5:08 pm

  3. Well, you are doing excellent work. Keep it up. Not that you need my encouragement.

    Comment by Edwardo — December 4, 2009 @ 10:06 pm

    • Thanks, and same to you.

      Comment by Russ — December 5, 2009 @ 3:53 am

  4. Russ,

    As much as I enjoy your stuff I begin to fear for your mental health. While what is being done is of course disgraceful, the things being said by those in ‘leadership’ roles and those pandering to public appetites in the MSM are far worse and indeed enough to make you pull out your own teeth. Once you understand that the problem cannot be solved and that every solution being retailed will simply make it worse, the sensible approach is to say f**k it and go about your own life.

    Last night I was rereading To the Finland Station. In the 1840s Marx invited Proudhon to participate in a correspondence that would elucidate the issues facing the nacent radical movement. Proudhon replied that he would be glad to help so long as the effort was limited to exploding the myths and fantasies around which the existing order was constructed, but that if the intention was to construct a new scheme of any kind, however logical and well intentioned, he was definitely not interested and strongly counseled against it.

    How many millions of people would have benefitted from Marx taking Proudhon’s advice?

    Comment by jake chase — December 5, 2009 @ 12:02 pm

  5. Although my own politics are alot closer to Proudhon, I still greatly admire Marx’s accomplishment.

    It’s true that his diagnosis is vastly better than his prognosis, but whose isn’t? (That seems to be a law of critical writing.)

    So I find him an inspiring example.

    As for getting on with my life, I suppose if I could somehow get some farmland I’d be happy to go off and farm it and maybe even forget about some of this.

    But today, and for the forseeable future, I’m pinned down in the free-fire zone. Maybe it doesn’t sound like it, but writing about it is the only thing that makes me feel better, more in control of something. God knows there seem to be few outlets in existing activism. But I wasted enough time just being passive and frustrated.

    So far I’m not satisfied with this stuff, but I’m finding my way, and I expect to get better at it with practice.

    And, little by little, I do think I’m finding my way toward some constructive ideas on what we might be able to do here.

    At any rate, that’s my goal.

    Comment by Russ — December 5, 2009 @ 4:26 pm

  6. Personally, I think the best hope for future survival lies with action in small groups. A half dozen people can operate a subsistence farm. What is probably doomed is the competitive individual actor.

    I spent years trying to imagine a business opportunity that really made sense. Everywhere I looked, there was too much of everything. These days I suspect a good many people are realizing how little a person really needs. Too much economic activity is idiotic, pointless, insane! What are all those people who were selling houses and mortgages and title insurance now doing?

    Have you noticed that television advertising is utterly unchanged? Big business seems to think renewed prosperity (for them) is just around the corner, that today presents a great media buying opportunity. What I see is all the air rushing out of the American consumer balloon. Wait until Obama begins counting next year’s tax collections! These corporatists are in for a surprise, or at least I hope so.

    Comment by jake chase — December 6, 2009 @ 7:56 am

  7. All of that resonates, and I think the key to the future is relocalization, small groups and community networks.

    One way or another we’re going to have to revive the old civic organizations, either new ones or revive the old ones.

    I don’t watch TV, but I would’ve bet the commercials are all the same. (Actually, whenever I’m around a TV they always seem to have those mortgage commercials on, some outfit trying to profit off the mortgage bill they passed in the summer of 08; I forget what it’s called.)

    I can’t imagine what they can even tax anymore. There’s depressed activity, and what activity there is they tax-credited and tax-breaked out of taxability. And the American consumer is finished. These guys are nuts.

    I try to imagine business opportunities as well. Services that might see revived demand in the times of economic and energy downturn. Ways to help achieve this economic and political decentralization and restoration of community, resiliency, self-reliance for smaller groups.

    At any rate it’s only when thinking about stuff like that that I can see any hope.

    Comment by Russ — December 6, 2009 @ 12:20 pm


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