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Profit Not Satanic, Says Wealthy Banker
Profit Not Satanic, Says Wealthy Banker
By Paul Smalera
Posted Saturday, November 7, 2009 - 3:22am
The moment everyone expected but no one was waiting for has arrived: Unemployment is in the double-digits. The New York Times says that 10.2 percent is a 26-year high in the 60-year history of government record-keeping. Only 1982, when 10.8 percent of workers were sidelined, was worse. Dampening the bad news, President Obama signed an extension of unemployment benefits for the jobless, allowing them to spend nearly two full years on the dole. The article dives into the metrics but also the psychology of long-term unemployment. It cites one worker who, after a year and a half, continues to drive to his unemployment office, send out job applications, and return home to “his sagging couch and his television, where cheerful news anchors tell him that the economy is looking up.”
But, is unemployment 10.2 percent or 17.5 percent? The latter figure includes underemployment, and that actually beats the high of 17.1 percent set in December of 1982. The discouraged and the part-timers who want to be full-timers are counted in this figure, notes the Times. “Ten percent is a terribly important number,” a democratic pollster noted in the Wall Street Journal’s take on the figures. No word on his thoughts regarding 17.5 percent.
Citigroup (C) is granting its employees options to convince them to stay, the Times writes. Options grants, which the article says have long been criticized as creating perverse incentives, are being presented by the bank as a way for employees to rebuild their nest eggs while remaining with the company. Employee savings were nearly wiped out when Citigroup stock plunged in value during the height of the financial crisis. Despite the long-standing criticisms of options programs, the construction of this one may make sense: It requires three years of vesting, has a strike price slightly above current share pricing, and preserves capital for the bank. As such, one critic of options grants told the paper, “They are trying to reward staff that had the guts to hold onto their stock during this turbulent period for the company.”
Hedge funds are on edge after several high-profile arrests on insider trading charges were made in recent weeks. The Times reports that executives are dropping a dime—to their lawyers—to re-examine their compliance with insider information laws. “Defcon 2” is how one executive described the effort not to run afoul of the rules. Because the executives fear wiretaps, they’re telling staffers to think of phone conversations the way they think of e-mail: as if it could end up on the “front page of The New York Times.” Meanwhile, the Journal says SAC Capital may soon be part of the broader and ongoing insider trading investigations.
AIG (AIG) is profitable again, but executives say the road the company is on won’t necessarily remain smooth. Regulatory filings indicate that its investments are performing well, even as insurance sales are faltering. Looming over future balance sheets is the massive debt the firm must repay to the U.S. government and a $5 billion charge related to its restructuring. A topic AIG didn’t discuss in its filing was employee retention, but the Times notes several executives have jumped ship to work on a competing venture with Hank Greenberg, who was AIG’s CEO for nearly 40 years.
Goldman Sachs (GS) wanted to buy tax credits from Fannie Mae (FNM), which has lost so much money that the credits are useless. The government said no, reports the Journal, because the deal would be a net loss for taxpayers and because it didn’t want to appear to be favoring the pre-eminent investment bank in such savvy deals. Meanwhile the Times says Fannie will soon ask for another $15 billion in bailout funds, on top of the $50 billion it’s already received.
Comments
"...Barclays' CEO...recently
"...Barclays' CEO...recently said, “profit is not satanic.” A Goldman Sachs International adviser seconded the thought, adding, “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for al
This is like a cannibal saying, as he pokes his fork into your face: "I don't know what the fuss is all about--I gotta eat too...and you'll live on inside me anyway."
Profit may not be Satanic,
Profit may not be Satanic, but when it is coming from the privatization of that which ought to be held in common, or from theft from ordinary workers, it is wrong.
This is an excerpt from an essay in the 10/31 Boston Globe by Neil Gabler, entitled "The gaggle of economic sociopaths":
"Garden-variety sociopaths - say,
rapists or serial murderers - are reviled and typically punished. But
when economic sociopaths were plundering the country, they were being
lionized as bold entrepreneurs, financial buccaneers, even rock stars.
In the financial press, they were gods.
Even when the economy crashed, these
sociopaths didn’t receive the full opprobrium they deserve, and they
aren’t chastened. They continue to argue against any serious financial
regulation or reform, and they continue to defend their obscene payouts
on the grounds that the compensated executives are necessary to save
the very economy they helped ruin. There is a Yiddish word for this
sort of audacity: chutzpah.
Unfortunately, this isn’t a matter of a few bad apples or even of an
entire barrel of rotten apples. The real and nearly intractable problem
is that economic sociopathy isn’t an aberration on Wall Street. This
behavior is the very basis of American finance.
Derivatives, credit swap defaults, complicated hedge funds, convoluted
Ponzi schemes - these were all designed to make bankers richer with the
added advantage that they were so complex they couldn’t be policed. The
average American was never part of their calculation, except as a mark."
The prescription from the Obama administration has been tighter
regulation and other reforms. But the likelihood that these would work,
even if the administration were really serious about them (and, after
all, Treasury Secretary Timothy Geithner and economic adviser Larry
Summers move easily in the world of economic sociopaths), is small
since the financiers are not only sociopaths, they are also known
recidivists.
The Economy Causes Me Rage
Man...the economy really makes me seathe with anger.
Bankers giving uproportinate bonuses to employees who got us in the situation the first place. The example of the guy on the coach, is a situation unfortunately found by many. I have also heard the 'green shoots' of recovery are showing, however most people who are unemployed and have been for a while will tell you this is untrue.
Don't even get me started on quantitive easing.
Kind Regards
Neil
Mississauga Mortgage broker
Hmmmmm
Paul:
Where does one begin with this article?
"President Obama signed an extension of unemployment benefits for the jobless, allowing them to spend nearly two full years on the dole."
but:
"'Barclays’ CEO, in defense of his industry, recently said, 'profit is not satanic.' A Goldman Sachs International advisor seconded the thought, adding, 'We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.'”
Profits are not satanic when they are derived from Labor that creates value from the product made and services provided as opposed to asset appreciation derived speculation on CDO falsely AAA rated and insured by CDS having no reserves and little transparency. You might as well go to Las Vegas and play the roulette wheel or craps. And the Goldman Sachs International Advisor indirectly telling those who are living "on the dole" the "inequity must be tolerated" so Labor may prosper. When we see the W$ investments return to US manufacturing that are presently flowing overseas and into derivatives, then we will see Labor begin to prosper. Other wise, Labor has experienced a "permanent" reduction in the amount of people from the NonInstitutional Civilian Population participating in the Civilian Labor Force which started immediately after the 2001 recession.
For starters, lets get back the ~$180 billion loaned to AIG to save Sachs and other investment banks speculating in CDO/MBS, CDS, etc. This would include the $12 billion funneled to Sachs through AIG and the funds funneled to other Investment Banks as well. Until AIG antes up, any talk of TARP making a profit is silly. The new holding banks, such as Sachs, can either be Holding Banks or Investment Firms; but, they should not be allowed to be both and have access to the low interest loans from the government. W$ has proven in the past that what is good for W$ is not necessarily good for Main Street America and Labor. W$'s avenue of profit is not Main Street or domestic Labor producing investments. Manufacturing and Labor needs a TARP fund for itself, completely transparent and not the same as the W$ TARP that lacked transparency. Main Street does not believe anything is being done to reinstitute job creation to get them "off the dole" and in that they are correct.
U3 in 1982 and U3 in 2009 are not the same numbers although they are based upon the same percentage of the NonInstitutional Civilian Population as a part of the Civilian Labor Force. What makes this recession worse is the numbers of people who have dropped out of the Civilian Labor Force and into the "Not In Labor" category. From 1982 onward to 2001, we experienced a growing percentage of the NonInstitutional Civilian Population participating in the Civilian Labor Force. It peaked in the late nineties, through 2000, and into 2001 in a super heated economy that caused many boats to rise but not gain equity. With the 2001 recession, the percentage dropped at the end to a perceivably normal percentage of 66.7/8% (Participation Rate) and continued its downward trend from then until today's Participation Rate of 65.1%, a decrease pf such magnitude not experienced in the US Labor Force and perhaps a new plateau.
The decrease in Participation Rate is ~3.8 million people not counted in the official U3 calulation and not totally picked up in the U-6 calculation. The percentage unemployed is higher then 17.5% when this number is taken into consideration completely and marginally employed are fully accounted for also. From "Calculated Risk" this Graph represents the numbers of jobs lost during each recession since WWII and as you can see, this is the worst recession since WII and it does not taken into account an additonal 800,000 payroll jobs lost which the calculation will appear the beginning of next year in BLS numbers. http://2.bp.blogspot.com/_pMscxxELHEg/SvQmqFmXogI/AAAAAAAAGvE/YQrQHOu9KBU/s1600-h/EmploymentRecessionsOct.jpg Year over Year changes in in employment already make this recession the worst since WWII as relected in this "Calculated Risk" graph: http://4.bp.blogspot.com/_pMscxxELHEg/SvQmp44WUdI/AAAAAAAAGu8/9WcGlAVZjD4/s1600-h/EmploymentOct.jpg
Spencer (Economist) at "Angry Bear" produces a monthly Unemployment Report which goes well beyond BLS or the W$J. http://angrybear.blogspot.com/2009/11/employment-report.html "Employment Report." In Spencer's first graph we can see an improvement in hourly wages earned for the month; but, there is no change in the Year over Year trend. Improvements to the production by fewer workers would cause this to happen; but, it should not be construed as an overall improvement. 24 months out from the start of the recession, we can see the trend in Aggregate Hours worked is still downward http://3.bp.blogspot.com/_Zh1bveXc8rA/SvQ6C4r5uoI/AAAAAAAAA9M/02s3Bq1ic6g/s1600-h/Clipboard02.jpg surpassing any other recession since WWII in the decrease of aggregate hours and in the length of the decrease proving Unemployment is not improving and hopefully is still a lagging factor.
I do not see anything in the news or the W$J to get excited about. Yes Unemployment may be bottoming; but if it bottoms out, the implication put forth by the talking heads is there will be instantaneous job gains. "Not" and we may sit at the bottom for months to come. While profits are not satanic, I find W$. in particular Sach's, attitude to be boorish and rude especially when W$ and banking's lack of fiscal responsibiliy can be linked as a major cause of much of the unemployment experienced today. Reflective of the devil a make care attitude shown by W$ and banks is the recent American Banking Association annual meeting held in Chicago which was kicked off with a Sunday "Roaring Twenties" theme party. If it is believed this goes without notice by the general public, it doesn't. At the same time. thousands of people from all over the country descended upon Chicago to attend "Showdown In Chicago" http://www.showdowninchicago.org/ and they marched to WF bank, Sachs, and the ABA's party and their annual meeting. People such as Senator Durbin came to talk to the assembly of disgusted people who have been foreclosed on, face foreclosure, are fighting with banks and lost jobs. And the ABA's answer to them was "one" rehab home donated . . .
Kind of a long post and I am sorry for its length. You opened a can of worms here. Please make sure this is posted with the proper paragraph breaks!
regards,