Bill Bonner: bankers pull another fast one
By
Bill Bonner Feb 13, 2009
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This week, The New York Times proposed ten "questions bank CEOs should face". Among them: "The Treasury has proposed a $500,000 cap on executive compensation... Many of you have complained that you will lose your top talent. Are those the same people that helped lose your banks billions?"
Oh, you jokers at the NYT. Touché! And check the new dictionary. The word 'banker' has become synonymous with 'reptile' or 'scalawag'. Drivers will soon be using it on the street. "F***ing banker!" they will yell to the car that cuts them off. "Scumbag millionaires," The Sun called them. The poor British bankers got slapped around on Monday. On Wednesday, it was the Americans' turn, summoned to Washington by Congressman Barney Frank. Be prepared for a "public flogging", The New York Times warned them. Everybody wants to kick the poor bankers when they are on the ground. Heck, we'd do it too – but the crowd around them is so thick, we can't get a boot in edgewise. Besides, there are bigger charlatans still standing. After all, bankers were just doing their jobs – separating fools from their money. What about those who were supposed to be protecting the fools?
But it is a depression we are in. Everyone has to play his part. The politicians feign moral outrage. The bankers feign contrition. The spectators feign to know what was going on and have a good time. In the interest of seditious mischief, here we undertake to deconstruct the plot. First we begin with a critic's remark: this is a well-rehearsed storyline. When the losers are unhorsed, they are almost always spat upon. Louis XVI's severed head was held up and subjected to "atrocious and indecent gestures"; Mussolini was hung on a lamp post. The bankers seem to be getting off easy.
Now, an odious comparison: the farce of 2009 is nothing compared to the great show put on following the 1929 crash. The weakness of the present spectacle is the cast. The chief American protagonist – Barney Frank – is no match for his role model, Ferdinand Pecora, who was "the most brilliant lawyer of Italian extraction in the US", said the Time magazine report of 6 March 1933. He "finished public schools at 12. At 18, after loping through his brother's law books, he was managing clerk of a law firm. Even on the most complex cases (which he, tireless, likes best) he never needs notes, never forgets a word of testimony once it is on the record... At 47, his black eyes flash, his black hair bristles."
But then, the victims are no match for Charles Edwin Mitchell either. "Billion Dollar Charlie" earned more than $1m in 1929. Senator Carter Glass said that he, "more than 50 other men, is responsible for this stock crash". Still, as Time reported, "neither the directors nor any other Manhattan banker knew anyone who, they believed, could do an equally good job of carrying the bank safely through storm and strife. That he has done the job, Ferdinand Pecora would be the last to deny. The statement of National City Bank [Mitchell's] was, on 31 December 1932, the envy of nearly every bank in the US."
But the Depression was on and Mitchell was damned for it. By 1933, he was out of a job. Now Jamie Dimon, Andy Hornby, John Mack, Vikram Pandit, Lord Stevenson and Sir Fred Goodwin are in the dock. Yes, we have erred and strayed like lost sheep, the bankers chant. "We are profoundly, and I think I would say unreservedly, sorry..." said Lord Stevenson, formerly of HBOS, on Tuesday. But "UK bankers find sorry is not enough", judged a headline on Wednesday morning. "I want grovelling," wrote an opinionist to the Los Angeles Times. "I want show-trial sweating and stammering. I want their nine-figure bonus checks endorsed over to the rest of us... I want blood..."
Be careful not to over-act, is our advice. Viewers might catch on. Here, The Guardian announced its own 12 questions, including "why should profits be private, but losses be socialised"? Uh – that is a good question, but it is put to the wrong person. Why the bankers would want to offload their mistakes is a question even a Guardian reader could answer. Why else would they humiliate themselves publicly? The politicians control the money now; the bankers want it. The question is better put to the inquisitor than to his victim. Why would the government wish to take on the losses? There, the answer is easy too – power. Besides, it's not their money; it belongs to the same mouth-breathing yahoos who are enjoying the show.
We have other questions we'd like to put to Congressman Frank, Labour MP John McFall and the rest of these sanctimonious meddlers: if you're so smart, why didn't you warn the public about the housing bubble and the toxic asset meltdown? And if your armies of regulators at the Securities Exchange Commission, Financial Services Authority or other agencies could do nothing to prevent the crisis, what good are they? And how cometh it to be that the biggest financial fraud of all time took place right under your own employees' noses?
How deliciously the plot turns. In the bubble years, the bankers ripped off the public, pretending to make them rich, while the regulators looked the other way. Now, the politicians create a distraction, pretending to punish the bankers, while together they pick the public's pocket for $3trn or $4trn more. The bankers are convicted, but the spectators hang.
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