Good Banker, Bad Banker
April 9, 2013
It’s important to draw a line between two very different flavors of banker: "restrained" (Dr. Jekyll) and "unrestrained" (Mr. Hyde).
Those who read The Proper Use of Credit (April 4, 2013) know that I see a vital role for credit and yes, banks, in a sustainable economy. But as many observers have pointed out, banks must be controlled lest the predatory, parasitic Mr. Hyde replaces the proper Dr. Jekyll role of providing capital to worthy enterprises and households.
In response to Debt = Serfdom (April 2, 2013), longtime correspondent Jeff W. delineated the difference between Good Banker (restrained) and Bad Banker (unrestrained). Unfortunately, as Jeff explains, it is Mr. Hyde (unrestrained banker) who has captured the political and regulatory machinery of governance.
Here is Jeff’s commentary:
"I distinguish in my mind two different kinds of bankers: I’ll call them "restrained" and "unrestrained."
The restrained banker loads up the debt serfs with debt up to their Plimsoll Lines or credit limits. Then he stops. He knows that if he keeps loading more debt onto them, they may go bankrupt, and he wants to avoid the mess and losses that come with that.
The unrestrained banker has a completely different skill set. He will make high-interest loans (Payday Loans) to insolvent borrowers. He is not afraid of bankruptcies; bankruptcies are part of his business model. He knows how to take advantage of borrowers who are desperate, ignorant, or impulsive (or all three). He knows all about asset stripping. He knows how to unload bad loan paper on suckers. He thrives in an environment of chaos and desperation, where his customers are often at the end of their ropes.
In the old days, the restrained bankers and community-minded Americans used to put controls on the unrestrained bankers. There were usury laws that made it illegal to charge interest above a certain rate, such as 15%. Unrestrained bankers were not welcomed into polite society, and people were warned against doing business with them.
Which of the two kinds of bankers operate the Federal Reserve and have seized control of the Federal government? I say it is the unrestrained variety. I say that the securitization of mortgages was, all along, a scheme to unload bad mortgage paper on suckers, such as pension funds and the U.S. taxpayer.
Obama’s stimulus was the work of unrestrained bankers. The Obama deficits have been the work of unrestrained bankers. The Simpson-Bowles Commission was an effort by the restrained bankers to keep the U.S. debt below its Plimsoll Line, which Reinhart and Rogoff have put at 80% of GDP. But the unrestrained bankers have not hesitated to blow right past that.
If my observation is correct that the U.S. government has now been subverted by unrestrained bankers, it means that:
- Our nation’s fiscal policy is being dictated by people who are not afraid of the chaos of bankruptcy, but who thrive in that environment.
- Federal policies are being dictated by people who like to deal with debtors who are desperate and at the end of their ropes.
- Federal policies are being dictated with a view of future asset stripping.
- With this group in power it means that In a future bankruptcy scenario, everyone is going to come out a loser except the unrestrained bankers.
Where restrained bankers might be compared with bloodsucking fleas or lice, who are parasites on healthy bodies, the unrestrained bankers can be more aptly compared with maggots, who feast on the bodies of the dead.
So I say it is important to know what kind of bankers you are dealing with. If you are dealing with unrestrained bankers, it can bring nothing but bad luck."
Thank you, Jeff. As correspondent Lew G. noted, the key feature of a sustainable, non-parasitic banking sector is that banks and bankers have "skin in the game," i.e. they personally suffer losses when their loans and bets go bad.
This is the essence of moral hazard: the separation of risk from consequence. Put another way, those who are insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government: this is known as "privatizing profits and socializing losses."
As Lew G. also observed, if players (in this case, bankers, legislators and regulators) "have a choice of games, they will play the one with the best payoff," i.e. the one in which they have no skin in the game and the Central State/bank will backstop/ socialize their losses to the Tax Donkeys (taxpayers) while they keep the ill-gotten gains.
The Federal Reserve, the Obama Administration, the housing agencies and the U.S. Treasury are all offering bankers and financiers high-payoff tables that require no skin in the game. No wonder our system is dominated by the unrestrained bankers, sociopathological Mr. Hydes who offer a few coins in compensation for running down the nation.
Statistics: Posted by yoda — Tue Apr 09, 2013 12:19 am
View full post on opinions.caduceusx.com
Banker who jumped from rooftop London restaurant was under ‘enormous amount of pressure’ in his job
Charlie Cooper Friday 11 January 2013
Nico Lambrechts, 46, fell seven floors from the Coq D’Argent at No 1 Poultry in the City of London
A banker jumped to his death from a rooftop London restaurant after coming under “an enormous amount of pressure” in his job, an inquest heard today.
Nico Lambrechts, 46, fell seven floors from the Coq D’Argent at No 1 Poultry in the City of London months after starting at investment bank Investec. The venue has since closed all rooftop terraces and ordered a barrier to be installed after four deaths in the last five years.
His widow wept as City of London Coroner’s Court heard how the father of three died of multiple injuries, including severe head wounds, after jumping from the terrace in October last year. He had a long phone conversation with his wife, Adele, moments before his death.
In May 2007, City employee Richard Ford died after jumping from the restaurant’s terrace onto a bus below. Two years later Anjool Malde, 24, killed himself at the same spot after being sacked from Deutsche Bank in July 2009. A third person, businesswoman Rema Begum, 29, committed suicide in the same way only a month before Mr Lambrechts.
The inquest heard how Mr Lambrechets, from Cobham, Surrey, had contemplated ending his life after he was unable to transfer cash from his native South Africa to pay for school fees for his children.
The man who hired him at Investec Asset Management, Domenico Ferrini, told the court how Mr Lambrechts had moved to the firm, which was due to move back to Cape Town, on 1 July last year, after years at rival company Merrill Lynch.
“I think there were a few things he was worried about,” he told the inquest. “Relocating back to South Africa concerned him and the political climate there – was it the right thing? The transition of being very successful in his previous job, and having to re-establish himself at Investec. I tried to help him find his feet, that kind of thing.”
The City of London’s health and safety officer, Rachel Sambells, said talks were underway to raise the height of the wall on the terrace to 2m by using metal bars.
“The terraces have been closed off in the main part and a security guard has been employed to patrol the area,” she said. “If anyone is up alone up there he approaches them and makes sure they don’t have the same intention.” Volunteers from the Samaritans have also spoken to staff at the restaurant to train them in what to do if anyone tries to jump from the terraces, she added.
Coroner Dr Roy Palmer said he was sure that Lambrechts, of Hillview Place, Cobham, had intended to take his own life on 11 October and was “very sorry” that his widow had lost her husband in the tragedy. “I have to be sure, and I am sure, that he intended to die by his actions,” he said.
“You don’t fall seven floors and go over a wall without that. I do not doubt that he was seriously stressed but I conclude that he killed himself and I am very sorry that he did so in such sad circumstances,” he added.
Statistics: Posted by yoda — Sat Jan 12, 2013 1:07 am
View full post on opinions.caduceusx.com
Written by Jeff Nielson
Monday, 21 May 2012
As we watch the absurd melodrama surrounding JP Morgan’s multi-billion dollar “trading loss” unfold before us, there are many things we still don’t know. However there is one thing we do know: that the truth is totally different than what is being depicted by JP Morgan and the talking-heads of the mainstream media.
To understand that this is pure financial farce requires putting numbers into perspective. Let’s start with this one: JP Morgan’s derivatives portfolio alone amounts to more than $70 trillion in highly-leveraged, ultra-risky bets. That is the amount JP Morgan admits to. Thus whether we are talking about a “$2 billion” trading loss or the $4-5 billion figure now being rumored is irrelevant. These are trivial numbers.
Even if we assume a $5 billion loss that would be equal to less than 1/10,000th of its derivatives portfolio. If the media Chicken Littles wanted to really stoke some fear they would be talking about the imminent risk of JP Morgan (and its Wall Street cronies) being forced to make good on $trillions of (ultra highly-leveraged) credit default swap contracts – should one of Europe’s other (larger) Deadbeat Debtors “go Greek” and default.
So we can now conclude this is a totally staged event. If there were any doubts about this, Jamie Dimon himself has put an end to them with his poor job of acting. For nearly four years Wall Street has fought even the tiniest bit of re-regulation of their sector, simply restoring a small portion of the banking regulation regime which used to be in place.
This fanatical obstructionism – led by Jamie Dimon and JP Morgan – has occurred despite the $15+ trillion bail-out package heaped upon the (surviving) Wall Street Oligarchs after they had completely wiped-out their own sector (and themselves) with $100’s of billions of bad bets which had all detonated simultaneously in 2008.
Thus what we are to believe is that despite the fact that JP Morgan saw no need at all for any regulation following the Crash of ’08 that this tiny “$2 billion” trading loss has caused JP Morgan to do a 180-degree turn on the subject of regulation. Jamie Dimon has suddenly been born again, and now he “sees the Light”: the bankers need some regulation. It is about as plausible as a bull volunteering for castration.
Knowing that this event has absolutely nothing to do with how it’s being depicted in the mainstream media (and by JP Morgan itself), we must now speculate on what is really going on here. I’ve formulated several viable theories which are consistent with the facts as we know them:
1) This is nothing but a sleazy political ploy by JP Morgan to skewer the Republican Party, and ensure the re-election of Barack Obama.
2) Knowing that some re-regulation is inevitable, Wall Street’s new strategy is to support that re-regulation, but as a “club” to be used to kill off its remaining smaller competitors.
3) The trading loss is much, much larger than what JP Morgan admits.
Taking these possible scenarios in order, (1) would seem to be the most plausible scenario, unless further facts should emerge which lend additional credence to one of the other two theories.
As Wall Street has spent the last four years saying “no” to any and every piece of proposed re-regulation, a large group of sycophants were nodding their heads in agreement every step of the way: the Republican Party. Indeed, it is only Republican obstructionism which has prevented even some minimal level of re-regulation from taking place to date.
While the Democrat Party has shown itself to be extremely reluctant to engage in any re-regulation (after all, it was Wall Street campaign donations which elected Barack Obama in 2008), they were prepared to pass all of the Dodd-Frank window-dressing – simply out of shame and embarrassment. Conversely, when it comes to serving their banker Masters, Republicans are totally immune to shame.
They stood shoulder-to-shoulder with Jamie Dimon: no regulation was necessary. But the born-again Dimon is now “pro-regulation”, and in engaging in this transparent flip-flop Dimon has effectively inserted his stiletto into the back of the Republican Party. While Wall Street can now don their phony halos and rehabilitate their image at least somewhat by becoming pro-regulation, the Republican Party is in a no-win situation.
If it continues with its anti-regulation stance, Republicans now stand alone. With even the bankers now voicing support for the need of some re-regulation, the Republicans would look like nothing but clueless obstructionists. On the other hand, if they immediately flip-flop on the issue of regulation themselves right after Dimon’s re-birth(?), it only reinforces the image of Republicans being little more than banker hand-puppets.
Worse still, they would have to smile and support the same Democrat legislation which they had been fighting and denouncing for nearly three years. How could they possibly justify stalling this legislation for years and then supporting it, even with their own constituents – let alone the broader electorate?
This theory is further reinforced by the fact that Wall Street has once again stuffed Barack Obama’s election coffers with their dirty money, and bought his re-election. What is so ominous about this theory is that it seems like political overkill.
The Republican Primaries were set up to be a sleazy knife-fight among a field of light-weights and outright clowns. Literally every candidate (except Ron Paul) was portrayed as “the leader” by the media propaganda machine at some point in this Munchkin Derby – in order to ensure that he/she would be attacked by all the other candidates, and politically damaged beyond any possible rehabilitation.
Inevitably, whoever emerged as winner would have so many puncture-wounds in their back that he/she would be no competition for a Wall Street-backed incumbent, especially a polished orator like Obama. Thus what readers should be asking themselves is this: what “storm clouds” do the bankers and/or Obama see between now and election day that convinced them Obama would need the additional political capital afforded by Dimon’s betrayal of the Republican Party?
While a political motive may be most likely at this juncture, we can’t rule out that Dimon (and the rest of the Wall Street cabal) may have decided that some re-regulation would be just the tool they needed to further decimate the numbers of their smaller competitors in the financial sector, and complete their consolidation. These regulations would either be drafted in such a way that they only ensnared Small Fish, or simply only enforced against the Small Fish.
For an example of the latter approach to “culling the herd” of financial institutions we need look no further than the CFTC. With the CFTC maintaining that it is “unable to see” any evidence of illegal/improper market manipulation in the precious metals sector (and the silver market in particular) , many may have assumed this regulator to be nothing but a collection of see-no-evil, hear-no-evil, speak-no-evil monkeys. That would be erroneous.
In fact, the Monkeys at the CFTC often “see” misdeeds occurring within their regulatory realm. However, the CFTC Monkeys suffer from a particularly unusual form of myopia, whereby they are only capable of “seeing” misdeeds by Small Fish – and never those committed by Large Fish. Thus it is entirely plausible that any new regulation in the banking sector could put the squeeze on smaller banks considerably, while (miraculously) leaving the Wall Street Oligarchs totally unscathed.
Lastly, we also can’t rule out what is the simplest and most obvious answer to our question of what is really taking place here: that the “trading loss” is much, much bigger than what Dimon and JP Morgan have led the market to believe at this date. Then our follow-up question would become: “how big?”
Recall that even a $5 billion loss would amount to less than a microscopic 1/10,000th of JP Morgan’s collection of derivatives bets. To be “significant”, we would have to assume that the real loss would amount to at least ten times the $2 billion loss originally reported, in other words a minimum of $20 billion. That would still amount to a tiny 1% of the “assets” which JP Morgan claims to possess.
However, the spineless Democrats and slavish Republicans have allowed these Banking Oligarchs to continue to operate at a ridiculously over-leveraged, under-capitalized level. JP Morgan’s derivatives portfolio alone amounts to nearly 40:1 leverage of its asset base – acceptable for a “riverboat gambler”, insanely reckless for a “bank”. Thus even a relatively small $20 billion loss could be a life-threatening event for an absurdly over-extended casino operator like JP Morgan.
What is interesting about the three theories of which I have postulated is that none of them are exclusive of the others. Any two of these theories could be correct, or even all three simultaneously. However, as I noted at the very beginning we are simply not in possession of enough facts to determine the Truth with any certainty – except to state that we haven’t heard any of it so far.
In the meantime, if the mainstream media actually wanted to do something useful (for a change) then they would start asking questions themselves, and not simply lining-up like obedient lap dogs to parrot Jamie Dimon’s next self-serving remarks. That’s called “journalism”, and we could use a lot more of it.
Statistics: Posted by yoda — Mon May 21, 2012 8:21 pm
View full post on opinions.caduceusx.com
Banker Occupied Europe and America
The Intel Hub
February 18, 2012
Money power rules. Across Europe and America, governments follow banker diktats. They demand economies and people suffer to assure they’re paid.
Money power in private hands and democracy can’t co-exist. It buys what it wants at the expense of government of, by and for the people. It never was and isn’t now.
Wall Street and major European banks usurped unprecedented money making power. With complicit politicians, they make it the old fashioned way. They steal it.
As a result, ordinary people are harmed. They’ve lost jobs, homes, savings, and futures to let privileged elites get richer and more powerful at their expense.
At issue is banking giants controlling money, credit and debt for private enrichment. Used lawlessly, they bribe politicians to pass business friendly laws and turn a blind eye to massive fraud, abuse, and grand theft.
Greece is the epicenter of Europe’s crisis. It’s being strip-mined of all material wealth. It’s life force is being drained to pay bankers. Its citizens face destitution and neoserfdom with no rights. Democracy’s just a figure of speech. In its birthplace, it no longer exists.
Attorney Dimitri Lascaris has family in Greece. His sister’s letter explained harm times there, saying:
In fall 2009, their family income declined. Their carpentry business only works sporadically. Customers with outstanding balances can’t pay. They prioritize other obligations like food, rent, mortgages, water, electricity and health insurance, etc.
“Slowly, cash has become more and more scarce for our customers, and therefore for us.”
In 2012, empty stores with rent signs are everywhere. Businesses still operating feature sales with 50 – 70% discounts. Once crowded markets became “deserted urban centers.”
“Suicides, drug abuse, prostitution, and crime have infiltrated village life….Other friends of ours have died of heart attacks, stressed to the limit by debt, or worse, the loss of their cars, homes,” and livelihoods.
Businesses have to beg customers to pay something, anything “because food or heat in the dead of winter has become an issue for us….We are all now at the mercy of anyone with money at hand to help our family survive, let alone aspire to a better life.”
The same scenario threatens Europe, especially in troubled Eurozone countries and Latvia where wages were slashed 30% and people haven’t enough to live on.
The more pounds of flesh extracted, the less able economies can grow. Greeks must either leave or rebel. The alternative’s letting politicians and bankers bleed them dry. There’s no in between, and what’s happening there’s heading for Portugal, Italy, Spain, Ireland, and eventually all Europe, Britain, and America.
Class war rages. Western society futures face high unemployment, poverty, less government help, low pay for employed workers, few if any benefits, and higher prices for basic services like food, healthcare, transportation, electricity, heating oil, and water.
Households with below subsistence incomes will be hard-pressed to survive, and governments don’t care enough to help. They’re extracting maximum wealth to pay bankers and force austerity when stimulus is needed to create jobs and growth.
At the same time, while the Fed and ECB can print money, they can’t create wealth by letting bankers use it for speculation, greater consolidation, and big bonuses.
Greece is ground zero, a poster child for destructive economic/political policy. Austerity destroys growth. Its depression level exceeds the worst of America’s 1930s.
Government then created jobs. In Greece, they’re vanishing and with them the ability to survive. Moreover, bankers impose impossible demands. New ones add greater burdens. At issue, of course, is bleeding Greece dry en route to entirely destroying its economy and people.
Despite contracting nearly 20% since 2007, former senior World Bank official Uri Dasash expects further decline to 30%. No matter, EU/IMF/ECB Troika bandits demand continued wealth extraction until bled dry Greece collapses. Then expect greater pillage elsewhere.
America’s future looks no better. Around $2.2 trillion in deficit cuts are mandated post-November 2012. Expect weak economic conditions to worsen en route to greater trouble when another $4 trillion in cuts are made.
Progressive Radio News Hour regular/economist Jack Rasmus says downturns only reverse two ways – by reflating economies stimulatively or liquidating bad assets.
Since crisis conditions began in late 2007, Fed policy struck out. Instead of stimulating growth, it gave bankers trillions of dollars, bought their toxic debt at near full purchase price (instead of around 15 cents on the dollar), and fueled global speculation.
Moreover, instead of liquidating bad debt, banks were rescued by lavish funding even though they’re technically insolvent. Toxic debt’s still there, and the public’s on the hook for amounts the Fed bought.
As a result, the public sector’s fragile like banks, says Rasmus. People are paying for their losses. Greece is the epicenter of global pillage, but it’s heading across Europe toward America and will arrive with a bang.
A Final Comment
Obama’s proposed budget imposes hundreds of billions in social spending cuts at the worst possible time. It adds another $638 billion to already agreed on $1 trillion in cuts over 10 years.
Medicare and Medicaid are hardest hit. Obama wants another $360 billion cut besides earlier reductions. Healthcare providers will be most impacted. As a result, fewer doctors and hospitals will treat patients for payments not covering their opportunity and out-of-pocket costs.
Another $278 billion less over 10 years is earmarked from other domestic programs. Those mostly affected include federal worker pensions, the Pension Benefit Guaranty Corporation (private pension insurer), farm programs, and Postal Service being readied for privatization at higher costs and less service.
Obama officials claim his proposal’s designed to create jobs, expand public services, and make America’s rich pay their fair share. In fact, expect few job gains, and those created mostly low wage/low benefit temp or part-time ones because most higher paying full-time ones went offshore.
As a result, ordinary people face greater burdens. Retirees, the disabled, and poor households are hardest hit, and proposed tax increases on America’s rich either won’t pass Congress or will be largely offset by new loopholes.
In addition, alleged defense cuts won’t happen as long as imperial wars rage and proposed Pentagon Middle East/East Asia expansions proceed as planned.
Overall, Obama’s budget combines greater pain for ordinary people with business as usual for Wall Street, war profiteers, other corporate favorites, and America’s rich.
At the same time, debt reduction’s more smoke and mirrors than real. Expect annual increases to outpace cuts as far ahead as can be projected.
On February 15, bipartisan complicity agreed on sharply reduced jobless benefits duration. Long-term unemployed Americans will be harder pressed to survive. More on the deal below.
On February 15, a New York Times editorial headlined, “A Rare Deal,” leaving unexplained what matters most. Instead it claimed:
“The agreement is imperfect but sound. It will help struggling Americans and the struggling economy. It is also a political win for Democrats and” Obama. Republicans dropped their demand to offset concessions with comparable spending cuts.
Times editors never miss a chance to praise Obama instead of opposing his destructive/harmful policies and proposals.
Formerly, jobless benefits ran 99 weeks. Now they’re 73 weeks in states with unemployment levels above 9%. Only 14 states qualify. Duration elsewhere drops to 63 weeks. As a result, unemployed workers lose 30% of their benefits when most needed.
Moreover, they’ll have to provide more proof they’re actively seeking work, and states will be able to impose drug tests. At the same time, federal workers pension program costs will increase to offset continuing unemployment benefit programs.
Obama’s plan comes at a time America’s headline 8.3% unemployment rate masks the real 22.5% figure. It includes discouraged, marginally attached, and other workers without jobs long-term, as well as those wanting full-time jobs forced into part-time/temp ones. It also excludes up to 48,000 falsely created monthly jobs based on new business birth-death ratio calculations at a time accurate measures show losses, not gains.
Whatever’s finally enacted, expect poverty levels to rise. Already, around half of US households earn below subsistence incomes or border it, according to US Census figures. New cuts will push many more over the line to greater hunger, homelessness and despair.
Obama, most congressional Democrats, and Republicans serve America’s aristocracy at the expense of popular needs gone begging.
Planned cuts will force greater than ever burdens on households struggling to get by. As a result, the worst’s yet to come.
Forewarned is forearmed. The mother of all struggle’s needed to change things. It requires activism, not wishing, to get results.
Statistics: Posted by yoda — Sat Feb 18, 2012 2:23 pm
View full post on opinions.caduceusx.com