Posts Tagged ‘treasury’
The Times continues its reporting on the Greek crisis:
Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.
These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.
“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.
Fabulous. So let me see if I have this straight: our banks sold Greece predatory loans which they knew Greece would never be able to repay – then they took out “insurance” on those loans, effectively betting against Greece’s solvency. Heads they win; tails Greece loses. It’s important to note that this is the exact same behavior they indulged in during the sub-prime fiasco. They sold loans to people whom they knew would never be able to pay them back, and then bet that those loans would default. If, by some miracle, the debtor was able to pay these banks back, they’d get a nice interest rate. If, as the banks bet, the debtor couldn’t pay them back, they’d get re-imbursed via the Credit Default Swaps. It’s a classic win-win for the banks – and a lose-lose for whatever poor sucker they entrapped.
Only now its happening on the level of entire countries. I want to stress that Greece is neither the first nor the last nation to default on account of the malfeasance of US banks. Iceland came before it, and Spain, Ireland, or even France are likely to come afterward.
It is clear that our banks are purely malevolent forces, who benefit only from the destruction of others, and that, for the sake of the world economy, they must be thoroughly audited and broken up. And it is equally clear that this will never happen.
This is serious. The Asia Times reports today that China is ready to start selling off its US Treasury Notes, ostensibly as a “punishment” for the recent US sales of arms to Taiwan. I and others previously warned about what would happen if China decided to let go of its dollar holdings – the gist is that China is the only thing standing between the US and catastrophic inflation. Previously these fears were pooh-poohed by establishment figures with the familiar arguments: “China needs us more than we need them”, “Who will China sell its surpluses to?” I even heard someone say, “Without us, the Chinese will be cavemen”. Well, it looks like China might have found itself a new trading partner, if this Asia Times article is any indication:
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.
It is not clear whether China’s motive is simple risk aversion in the wake of a sharp widening of corporate and mortgage spreads during the past two weeks, or whether there also is a political dimension. With the expected termination of the Federal Reserve’s special facility to purchase mortgage-backed securities next month, some asset-backed spreads already have blown out, and the Chinese institutions may simply be trying to get out of the way of a widening. There is some speculation that China’s action has to do with the recent deterioration of US-Chinese relations over arm sales to Taiwan and other issues. That would be an unusual action for the Chinese to take–Beijing does not mix investment and strategic policy–and would be hard to substantiate in any event.
Where do you think we’re getting the money to prosecute these $5,000 per second conflicts in the Middle East? Where did the money for our $2,500,000,000,000 (and counting) bank bailouts come from? China. They make our money real. Without their manufacturing powerhouse backing us up, our dollars are worthless. What, you think the world is going to value our “service economy” at $13,000,000,000,000 per annum if that money weren’t backed by Chinese promises? Not likely. And now those promises are now increasingly under threat.
“We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”
- Hank Paulson, Treasury Secretary, March 16, 2008
“We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”
- Hank Paulson, Treasury Secretary, September 23, 2008
“I really didn’t get it until very late in 2005 and 2006.”
Reuters (13 September 2007), “Greenspan says didn’t see subprime storm brewing“
Thanks, Alan. Now back to your regularly scheduled programming.
Bloomberg has a fantastic front-page report on Treasury Secretary Geithner’s latest abuses. I mentioned previously that Geithner was instrumental in AIG receiving 100 cents on the dollar in their bailout. Essentially, the Federal Reserve agreed to print the full value of AIG’s misbegotten “derivatives” and hand it to them, no questions asked. AIG initially indicated it was willing to “get a haircut” (that is, receive 95 or even 90 cents for every dollar they lost gambling), but quickly backpedaled when it became clear the Fed was going to bail them out 100%.
Now Bloomberg reports that in addition to giving AIG an essentially blank cheque, Geithner instructed AIG to deceive the public on who their “counter-parties” were, on who would benefit from the AIG bailout. Much as the Banking Trusts of the 1920s, our mega-conglomerates today are heavily invested in one another – a bailout to one goes to pay back its creditors elsewhere in the banking system. This proved invaluable in convincing the public to bail AIG out. As Machiavelli wrote, if one must rule by robbery, it is best to conduct a big crime all at once, rather than small ones continuously. By giving a massive ($200 billion +) bailout to AIG, the government could thereby distribute their gift to other banks (the “counter-parties”) without the attention of the public, whose ire would be focused solely on AIG.
Later it turned out that Goldman Sachs, the firm which regularly gets to choose the Treasury Secretary (Geither was their first choice, and his predecessor, Hank Paulson, worked at Goldman for 35 years), was one of the AIG counterparties.
One of the most salient passages in Hugh Son’s excellent article, way up high in the 3rd paragraph:
The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
So it seems obvious that Geithner did not want the public to know the extent of Goldman Sach’s involvement with this bogus “derivative” scheme, likely so as not to tarnish Goldman’s image of having never received a bailout.
But whatever the reason, this latest report adds to the already exhaustive list of opacity, malfeasance, and outright cronyism that has plagued this crisis. We cannot approach any semblance of fair economic policy (let alone fantasies of a “free market”), if one corporation regularly gets to appoint Treasury officials and make policy.
The Financial Press is busy crowing over the loss estimates for the Paulson Bailout, claiming that losses have been “cut” by $200 Billion dollars. Of course, this still leaves $500 Billion unaccounted for, but standards for good news have fallen to the extent that a $500 billion loss is considered a ray of hope.
Unfortunately, we will be spared even that brief ray. Research from ProPublica conclusively debunks the claim that TARP losses have been mitigated, if only for the fact that the program has not yet finished.
As they say:
The latest estimate accounts for only the first year of spending, and the TARP’s spending isn’t done. Treasury says it expects the ultimate cost to be higher. Treasury Secretary Tim Geithner extended  the TARP thru Oct. 3, 2010, the TARP’s second birthday, earlier this week. He said, though, that Treasury didn’t expect to deploy more than $550 billion of the $700 billion available. As of today, Treasury has committed a total of about $407.3 billion  (that’s excluding companies that have refunded their bailout money ).
The TARP still has a little less than half its funds to distribute; meanwhile bank failures haven’t even begun to slow (three more failed this Friday, bringing the total to 167 this year), and unemployment still hovers around 17-20 per cent. It seems a bit premature to be declaring victory for the TARP.
You may recall Obama’s war speech last week wherein he set a definite timetable for withdrawal from Afghanistan. Specifically, his words were:
And as Commander-in-Chief, I have determined that it is in our vital national interest to send an additional 30,000 U.S. troops to Afghanistan. After 18 months, our troops will begin to come home.
Straight, direct, no real room for ambiguity there. “After 18 months our troops will (not “might”, not “could”) come home.”
How, then, to explain this article in today’s New York Times with the headline “No Firm Plans for a US Exit From Afghanistan”? Well, let’s see:
In a flurry of coordinated television interviews, Defense Secretary Robert M. Gates, Secretary of State Hillary Rodham Clinton and other top administration officials said that any troop pullout beginning in July 2011 would be slow and that the Americans would only then be starting to transfer security responsibilities to Afghan forces under Mr. Obama’s new plan.
Clever, clever Obama! The soldiers will begin coming home in July 2011, but he never specified how quickly! By this logic our presence in Afghanistan could still be unlimited. We only have to send one soldier home per year.
Here’s some justification from an important-sounding General:
“We have strategic interests in South Asia that should not be measured in terms of finite times,” said Gen. James L. Jones, the president’s national security adviser, speaking on CNN’s “State of the Union.” “We’re going to be in the region for a long time.”
See, it’s okay! We’ve got “strategic interests” in South Asia, apparently so important that they must be measured in infinite terms. Just don’t bother trying to find out what those “interests” might be.
Mr. Gates said that under the plan, 100,000 American troops would be in Afghanistan in July 2011, and “some handful, or some small number, or whatever the conditions permit, will begin to withdraw at that time.”
When Obama thundered to West Point that US troops will begin coming home in 2011, he neglected to mention that “handful” bit. But who can blame him – the speech sounded so much better with the deception left in.
Well at least we might have a chance at catching Osama Bin Laden. Isn’t that right, Mr. Gates?
Mr. Gates said it had been “years” since the United States had had reliable intelligence about Mr. bin Laden, but he said it was still the assumption of American intelligence agencies that he was hiding in North Waziristan, in Pakistan.
The Times ran a fantastic article last week which I think deserves a careful look, as it presents in uncharacteristically sharp terms the economic situation before us.
They begin with some fun facts:
With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.
In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.
$700 Billion, as many must recall, was the magical “really big number” Bush and Paulson sold us last September, promising that we likely shouldn’t spend it all, and will probably “see a return on our investment”. I remember the awe with which we once held the TARP program: “$700 Billion, have they lost their minds?” None of us (certainly not I) could have fathomed such a large sum being spent at one time. It is a testament, then, to our infinite ability to adapt that $700 Billion no longer seems so very great, and we can swallow easily the prospect of such an annual payment.
The Times is somewhat disingenuous in claiming $500 billion a year to be “greater than the combined federal budgets for… Iraq and Afghanistan”. As The Times are surely aware, President Obama recently signed a $680 Billion war bill in October, with (according to The Times), “$550 billion for the Pentagon’s base budget in fiscal 2010 and $130 billion more for the wars in Iraq and Afghanistan.” But I digress.
Much of this new debt, as The Times is kind enough to report, has to do with the massive dumping of cash onto the open market via the Federal Reserve. Euphemistically, the article states:
“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”
“Teaser rates” of course, means lending at 0% interest, essentially lending for free. This is the policy our Fed has chosen over the past year. It, combined with the trillions of untraceable dollars injected into our five major banks, have expanded the Treasury beyond anything previously imaginable. As the article claims:
On top of that, the Fed used almost every tool in its arsenal to push interest rates down even further. It cut the overnight federal funds rate, the rate at which banks lend reserves to one another, to almost zero. And to reduce longer-term rates, it bought more than $1.5 trillion worth of Treasury bonds and government-guaranteed securities linked to mortgages.
What this all means, what the Times doesn’t see fit to mention, is that the US government is bankrupt. That’s it. Our liabilities overshadow our assets, our debts are greater than our ability to pay them; we are underwater, over our heads, sunk.
And we aren’t the only ones:
The United States will not be the only government competing to refinance huge debt. Japan, Germany, Britain and other industrialized countries have even higher government debt loads, measured as a share of their gross domestic product, and they too borrowed heavily to combat the financial crisis and economic downturn. As the global economy recovers and businesses raise capital to finance their growth, all that new government debt is likely to put more upward pressure on interest rates.
It looks like the US and Europe will be coming to terms with some hard realizations next decade.
I missed the last three failed bank Fridays, so here are all seventeen that failed in the past three weeks in a row. As always, from the FDIC:
|Pacific Coast National Bank||San Clemente||CA||57914||November 13, 2009||November 18, 2009|
|Orion Bank||Naples||FL||22427||November 13, 2009||November 17, 2009|
|Century Bank, F.S.B.||Sarasota||FL||32267||November 13, 2009||November 18, 2009|
|United Commercial Bank||San Francisco||CA||32469||November 6, 2009||November 9, 2009|
|Gateway Bank of St. Louis||St. Louis||MO||19450||November 6, 2009||November 9, 2009|
|Prosperan Bank||Oakdale||MN||35074||November 6, 2009||November 9, 2009|
|Home Federal Savings Bank||Detroit||MI||30329||November 6, 2009||November 9, 2009|
|United Security Bank||Sparta||GA||22286||November 6, 2009||November 9, 2009|
|North Houston Bank||Houston||TX||18776||October 30, 2009||November 3, 2009|
|Madisonville State Bank||Madisonville||TX||33782||October 30, 2009||November 3, 2009|
|Citizens National Bank||Teague||TX||25222||October 30, 2009||November 3, 2009|
|Park National Bank||Chicago||IL||11677||October 30, 2009||November 3, 2009|
|Pacific National Bank||San Francisco||CA||30006||October 30, 2009||November 3, 2009|
|California National Bank||Los Angeles||CA||34659||October 30, 2009||November 3, 2009|
|San Diego National Bank||San Diego||CA||23594||October 30, 2009||November 3, 2009|
|Community Bank of Lemont||Lemont||IL||35291||October 30, 2009||November 3, 2009|
|Bank USA, N.A.||Phoenix||AZ||32218||October 30, 2009|
The policy blogs are abuzz with the recent news that the Federal Reserve System might finally undergo an audit. The bill, sponsored by Ron Paul and endorsed by nearly everyone else, passed with a lopsided 43-26 victory in the House and would be the first comprehensive inquiry into what the Fed does with the trillions of dollars it commands. Glenn Greenwald has the best dissection of what went down.
Our leading media outlets are capable of understanding political debates only by stuffing them into melodramatic, trite and often distracting “right v. left” storylines. While some debates fit comfortably into that framework, many do not. Anger over the Wall Street bailouts, the control by the banking industry of Congress, and the impenetrable secrecy with which the Fed conducts itself resonates across the political spectrum, as the truly bipartisan and trans-ideological vote yesterday reflects. Populist anger over elite-favoring economic policies has long been brewing on both the Right and Left (and in between), but neither political party can capitalize on it because they’re both dependent upon and subservient to the same elite interests which benefit from those policies.
Beyond the specifics, a genuine audit of the Fed would be a major blow to the way Washington typically works. The Fed is one of those permanent power centers in this country that exert great power with very little accountability and almost no transparency (like much of the intelligence and defense community). The power they exert has exploded within the last year as a result of the financial crisis, yet they continue to operate in a completely opaque manner and with virtually no limits. Its officials have been trained to view their unfettered power as an innate entitlement, and they express contempt for any efforts to limit or even monitor what they do.
The Times reports on a recently released audit which concludes, beyond the shadow of a doubt, that Timothy Geithner (now Treasury Secretary, then President of the New York Fed) voluntarily gave up vast negotiating powers when choosing to shower AIG with billions upon billions of dollars.
The article is written in standard Times-ese, which is to say that it seeks to relate truly scandalous information in such a way as to cause as little uproar as possible, but although it must be translated into standard English, some truly damning testimony emerges:
Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.
UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.
The Fed “refused to use its considerable leverage,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report to be officially released on Tuesday, examining the much-criticized decision to make A.I.G.’s trading partners whole when people and businesses were taking painful losses in the financial markets.
So this means: The New York Fed decided to print 100% of the value of AIG’s investors’ bad loans in order to get them to divest from AIG, and (hopefully) save the money-laundering giant. Realize, now, that the Fed was under no obligation whatsoever to guarantee these loans with taxpayer dollars, and certainly not guarantee them at full value. Given that these CDS loans were later revealed to be totally fraudulent, this decision makes even less sense.
If I convinced you to give me real dollars for Monopoly Money, and then you complained to the government that the Monopoly Money you received was actually worthless, would you expect them to just print 100% of the value and give it to you, no questions asked? Or would you expect them to give you nothing and tell you, in effect, to be smarter next time?
What’s truly astounding about this episode is that some of the banks offered to take less than 100% of the value of their worthless investments, but Geithner refused! He said to them, essentially, that “oh well, it doesn’t matter – it’s taxpayer dollars anyway! Go ahead, take the full value!”
This is the man who is now our Treasury Secretary.
As I mentioned in an earlier post the FDIC has seen its reserves dwindle under the weight of this year’s bank failures. Well, the day of reckoning has come, according to The New York Times, who reports that the Federal Deposit Insurance Corporation will fall into deficit this week.
The speed with which the FDIC has eaten through its $50 Billion slush fund should alarm, but after three successive Trillion-dollar bailouts, mere billions fail to awe. Rank-and-file depositors probably have no reason to worry, however – the missing cash will most likely be “borrowed” (at no interest) from the Treasury or from our bailout-bloated mega-banks, in a maneuver only one step removed from simply printing more cash.
Our federal balance sheet has already loosed from any anchor to reality it may have once had, so, the argument goes, what’s a few billion more? But take this as an indication that the glut of bank failures, far from slowing amid last year’s bailouts, has continued at a steady clip.
So this is how China plans to release itself from its dollar obligations.
China, for the past decade and more, has gorged itself on US Treasury Securities, investing heavily in the dollar and amassing by now over $2 Trillion in US assets. They represent the single largest holder of US dollars, and they’re not happy about it.
Oh, it was well and good while the US consumer economy boomed (up to 2007), but now that our economy has slowed, our deficit has soared, and our National Debt has loosed from the realm of reality, China is seeking a way out of its US holdings.
Indeed, as early as March 2008 China expressed its “worry” as to the health of their US investments and the ability of the US to pay back its debt. They have since sounded a steady drumbeat in favor of an international currency, or even a basket of currencies. A recent spat over tariffs exacerbated the tension. It should suffice to say that China is deeply unhappy with its investments in the US dollar, and, after seeing Obama’s $9.2 Trillion deficit projections, seriously doubts that the US will be able to pay back its debt.
At the same time, China is trapped. They hold $2 Trillion in securities and cannot get rid of them. As the largest holder of US assets, the rest of the world takes their lead when it comes to US investments. If China were to suddenly sell their US Treasuries, or even hint that they were about to, the rest of the world would likely follow suit, crashing the dollar and rendering China’s investments worthless.
Likewise, the US economy itself would collapse, along with our consumer power, should China decide to dump its US assets. Since China’s economy is “export-oriented” (their prosperity depends on a huge export vs. import ratio), collapsing the dollar all at once would be tantamount to shooting themselves in the foot.
So for the time being, China has no choice but to play our game. But there are indications that they’ve decided upon a solution: a Global Shopping Spree. The idea, so far as one can ascertain, seems to be to spend as much as possible on commodities and hard resources (as opposed to “soft” resources, such as security-backed assets), thus converting their dollars (which they perceive as worthless) into tangible items (factories, coal, oil, etc.)
Once they’re satisfied they can simply dump their Treasury bonds, and provided they can stoke domestic consumption to make up for a decline in US consumption (we’ll all be poor by that point, remember), they should emerge as the undisputed economic hegemon.
From the article I link in the opening paragraph:
Late last month, PetroChina made a $1.9-billion bid for a majority share of two Alberta oilsands projects–a deal to buy a 60% interest in Athabasca Oil Sands Corp.’s MacKay River and Dover projects.
CIC made its first major investment in a Canadian company in July when it acquired a 17.2% stake in Teck Resources, Canada’s largest diversified mining, mineral processing and metallurgical company. Teck also holds a 20% interest in the Fort Hills oilsands project owned by Petro-Canada.
(CIC is the Chinese Investment Corporation).
China has also expressed interest in converting its dollars into US property assets:
As the CIC turns its attention to America’s damaged real estate assets, there is little information regarding how much the fund is willing to invest, but the potential firepower of the sovereign fund is huge. Some have suggested that it could be upwards of $10-billion (or more) by 2014.
The CIC this year has invested money in a real-estate trust in Australia and bought an indirect stake in Canary Wharf Group in London. In addition, it has put some money into a global property fund run by Morgan Stanley. Clearly, China will continue to pour billions, if not trillions, of dollars into direct investments around the world.
I wonder how hard it is to learn Chinese.
The New Republic has often drawn my ire for its steadfast support of the status quo, its corporatism, its hostility to the consumer, and, at times, its open agitation for war. I therefore take all the more pleasure in directing you to this informative piece on the Federal Reserve and its bungling of our current crisis. One would hardly expect such clear analysis from a publication whose role is to manufacture consent for the Fed’s policies, and one hopes such criticism portends a more vigorous phase in the magazine’s long and illustrious career.
After a short outline of the Fed’s birth and original purpose, TNR focuses on the organization’s role in the various booms and busts of the past 30 years. Startlingly, TNR asserts the Fed’s centrality to the boom-bust cycle, overturning the conventional wisdom that our central bank is merely an observer, able to lend a push in one direction or a pull in another, but largely helpless to shape the overall landscape. In their words:
The decisions he made during the recent crisis weren’t necessarily the wrong decisions; indeed, they were, in many respects, the decisions he had to make. But these decisions, however necessary in the moment, are almost guaranteed to hurt our economy in the long run–which, in turn, means that more necessary but harmful measures will be needed in the future. It is a debilitating, vicious cycle. And at the center of this cycle is the Fed.
Strong words; and a few even stronger:
Enabled by the Fed, our system’s tolerance for risk is out of control. This is an increasingly dangerous system. It is only a matter of time until it collapses again.
The New Republic attributes this risk to the age-old complaint: bankers and CEOs are simply not punished for poor performance – on the contrary, they are rewarded with dollar amounts we mere mortals can hardly fathom. For evidence they cite Citigroup’s $100 million CEO pay packages to Robert Rubin and Chuck Prince – some of the main architects of our current boondoggle.
When discussing solutions, unfortunately, TNR once again displays its establishment colors. The recommendations it puts forth are mostly watered down, and appear limp when compared to the magnitude of the problems they address.
“Reasonable personal liability” for failing CEOs sounds nice, but will inevitably translate to a small slap on the wrist. Contrary to popular belief, there is not a large difference between a $200 million annual paycheck and a $100 million paycheck. What seems like “reasonable liability” to most CEOs still leaves them unconscionably rich. We must truly divorce ourselves from the idea that as a financial leader you can bankrupt thousands of people and still walk away rich as a Midas. If this means the CEO goes bankrupt with his shareholders – well, so be it. Nobody said banking was a safe business.
Likewise with their reccomendations regarding conflicts of interest. The New Republic advises a “cooling off” period for public servants who enter a regulatory position after making their fortune in the private sector (for example Hank Paulson, who retained his Goldman Sachs holdings while serving as Treasury Secretary).
This is not enough. If our crisis has taught us anything (something which remains to be seen), it is that financial ties run deep, and are often not erased by time. It is ludicrous to appoint to a regulatory position anyone who has ever had anything to do with the financial industry. Such conflicts of interest are inherent – “cooling off period” or no.
A weak finish to an otherwise outstanding article.
I found this great chart at Federalbudget.com which I think illustrates our government’s priorities far better than dry prose. In particular, please note the huge commitment to the Treasury Dept. (bank bailouts) and the Department of “Defense” (war spending). For contrast, please observe the pittance given to the Department of Education, the Environmental Protection Agency, or the Department of Energy. Who says the system doesn’t work?
The G-20 economies are set to meet in Pittsburgh in three weeks to discuss various matters, among the most divisive of which stand the obscene “bonuses” awarded to the executives of our once-failing financial institutions.
What the Europeans want, according to The Times, are “‘global standards on pay structure, emphasizing long-term results in awarding pay and urging provisions to take back bonuses if bank profits tumble”, along with “limits on guaranteed bonuses”.
Reasonable enough. However, according to an anonymous source from The Times, the US is reluctant to accede to such requests (in essence, allowing bankers unlimited pay completely divorced from performance), for the following reason:
American counterparts were seeking to sidestep the bonus issue out of fear the White House could be accused of yielding too easily to European pressure, which might endanger progress on health care reform.”
A likely story. It would be useful to contrast The Times’ coverage with that of Al-Jazeera, who wrote a similar story on the upcoming G-20 summit, but with a far different interpretation. To them, US reluctance to restrain the scandalous pay of its reckless bankers is attributable to its desire “to protect the status of Wall Street and the City of London as the world’s leading financial centers“.
Now that seems to make a bit more sense.
As an addendum, I would like to again point my readers to the Institute for Policy Studies report which informs us that the top five executives at the 20 banks that received the most federal bailout funds received an average of $32 Million in annual personal compensation.