Wall Street Journal commentator: Greed is not good.

Princeton economist Alan S. Blinder recently wrote a notable op-ed at the Wall Street Journal. It was notable because Blinder's theme runs counter to the mantra of the many free market fundamentalists who got us into the big mess we are in. In his hard-hitting piece, Blinder argues that greed is not necessarily good:

When economists first heard Gekko's now-famous dictum, "Greed is good," they thought it a crude expression of Adam Smith's "Invisible Hand"—which is one of history's great ideas. But in Smith's vision, greed is socially beneficial only when properly harnessed and channeled. The necessary conditions include, among other things: appropriate incentives (for risk taking, etc.), effective competition, safeguards against exploitation of what economists call "asymmetric information" (as when a deceitful seller unloads junk on an unsuspecting buyer), regulators to enforce the rules and keep participants honest, and—when relevant—protection of taxpayers against pilferage or malfeasance by others. When these conditions fail to hold, greed is not good.
Blinder's article is not optimistic that we will be able to seize the moment by "slamming the door on the lobbyists" and enacting strong financial reform.

Continue ReadingWall Street Journal commentator: Greed is not good.

Wall Street, redux

Chris Hedges pulls no punches at Truthdig when he discusses what's wrong with Wall Street banks:

These deeply stunted and maladjusted individuals, from Treasury Secretary Timothy Geithner to Robert Rubin to Lawrence Summers to the heads of Goldman Sachs, Morgan Stanley, J.P. Morgan Chase and Bank of America, hold the fate of the nation in their hands. They have access to trillions of taxpayer dollars and are looting the U.S. Treasury to sustain reckless speculation. The financial and corporate system alone validates them. It defines them. It must be served. This is why e-mails from the New York Fed to AIG, telling the bailed-out insurer not to make public the overpaying of Wall Street firms with taxpayer money, were sent when Geithner was in charge of the government agency. These criminals sold the public investments they knew to be trash. They used campaign contributions and lobbyists to turn elected officials into stooges and gut oversight and regulation. They took over retirement savings and pensions and wiped them out. And then they seized some $13 trillion in taxpayer money so they could lend it to us with interest. It is circular theft. This is why we will endure another catastrophic financial collapse. This is why firms like Goldman Sachs are more dangerous to the nation than al-Qaida.

These corporations don't make anything. They don't produce anything. They gamble and bet and speculate. And when they lose vast sums they raid the U.S. Treasury so they can go back and do it again. . . . The foundation has not changed. The regulations are bullshit. The old assets are still crap.

Why does any of this matter? Because dollars are fungible, and so are tax dollars. They are not pre-marked for specific uses such as paying someone tens of millions of dollars in a "bonus" that is unwittingly financed by taxpayers. Those dollars that are being wasted on Wall Street banks could be going to critically important purposes, such as developing new methods of producing energy, researching new medicines, retraining workers. Or they could be providing better nutrition to people in need, including children. Of course, those dollars would be better used than they are currently being used even if they merely remained in the possession of the workers who earned them, rather than taxing those workers and then handing those dollars to too-big-to-fail banks.

Continue ReadingWall Street, redux

Strange bedfellows fight for reform of Wall Street

Huffpo's Ryan Grim brings us up to speed on a broad coalition that is revving up to reform Wall Street:

On Thursday evening, a roomful of people more accustomed to fighting each other met to unite against a common enemy: Wall Street. The forces that are gathering against the bankers include energy companies, airlines, truckers, farmers and other end users of derivatives, along with unions, consumer advocates and a host of progressive organizations.

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Newly released AIG emails further impugn Tim Geithner

What would you think about the Federal Reserve Bank of New York telling AIG to intentionally withheld from public scrutiny that AIG was paying 100 cents on the dollar for credit default swaps at the same time that AIG was crying for a bailout from the public, thereby hiding from the public that the public was functionally bailing out Goldman Sachs and other large banks? What would you think about the fact that Tim Geithner headed the New York Federal Reserve when this was going on? Eliot Spitzer, William K. Black and Frank Partnoy sum up the issue:

Today, a Bloomberg story revealed that under Timothy Geithner's leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
Who owns AIG? The taxpayers own 80% of it. Therefore, AIG should release the emails. Who can and should make this decision?
The taxpayer's stake in AIG is held by the A.I.G. Credit Facility Trust, whose three trustees are Jill M. Considine, a former chairman of the Depository Trust Company and a former director of the Federal Reserve Bank of New York; Chester B. Feldberg, a former New York Fed official who was chairman of Barclays Americas from 2000 to 2008; and Douglas L. Foshee, chief executive of the El Paso Corporation and chairman of the Houston branch of the Federal Reserve Bank of Dallas. We call on these three officials (interestingly all former Fed officials) to immediately release the documents we request. The value of these documents, if it were ever in doubt, was certainly proved by today's revelations. Release the emails.
See also, this earlier post on a NYT op-ed by Spitzer, Black and Partnoy.

Continue ReadingNewly released AIG emails further impugn Tim Geithner

Retaliate against too big to fail banks by moving your money

What can we do about the reckless and corrupt practices of big banks? Arianna Huffington and Rob Johnson suggest that you move your money:

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It's time for Americans to move their money out of these reckless behemoths. And you don't have to worry, there is zero risk: deposit insurance is just as good at small banks -- and unlike the big banks they don't provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion. Think of the message it will send to Wall Street -- and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill.

The four too-big-to-fail banks are JP Morgan/Chase, Citi, Wells Fargo, and Bank of America. If you have money in these banks, consider moving it to a local bank, where it has more of a chance of helping local businesses. For a video explaining this simple plan further, and for the names of your local banks based on zip code, go here.

Continue ReadingRetaliate against too big to fail banks by moving your money