In Defense of Bankers

A CEO who can turn around Citigroup???which could save tens of billions in taxpayer funds???is worth a lot more than $500,000? Oh, yeah? What about the surgeon who saves your chld's life? A fireman who rescues your bedridden grandmother from her burning apartment? Not to mention an airline pilot who lands your plane safely in an emergency. Only someone deep in denial living within the fold of NYC's financial culture would make such an arrogant and delusional claim.

if you don,t think 500,000 is a good bonus then you are not living in the real world.let those bankers work in something else and have him make his boss lots of money and see what kind of bonus he gets. his paycheck is all he gets and its whts most of us are working for.

Until we have 100% public financing of campaigns we can't possibly expect anything approaching real representation. I think the Democrats have more of an interest in improving things at this point, as the Rebublican't party wants any plan to fail to try to dupe The People into voting for them in 2010, but partisanship is just a brand of the same ignorance of the real issues that face our country.

With the clear connection between having the most money and winning an election, we can't get our supposed leaders to think clearly about the right thing to do, they have to weigh every vote against how it will effect their contributions.

The idea that banking should be a bloated for profit industry is a fallacy, makes far more sense to streamline the banking industry, as well as health care so that we can actually build a stronger and better society for everyone and not just keep building the wealth of those who already have more than they can possibly spend in 100 lifetimes.

We already have nationalized Military, Police, Fire and Rescue, Highway/Transportation system, Schools and much more, none of these things are perfect, but they work better than having only private companies running all these things, a lot less expensive too.

If private companies want to keep running some banks in direct competition with one run by the Government, they'll have to stay lean, if they can't compete with what a Bank Of The American People would be able offer, I guess that would be because too many folks were trying to pad their pockets, rather than run a lean company...it shouldn't be like it is, take from the People through taxes and keep being greedy, we all know that's what got us into this mess and it needs to end before our economy is sucked into their Swiss Bank Accounts.

Everyone is fussing over 15 million dollar payouts to bank management, but at the same time investment bankers are still writing Credit Default Swaps, CDS's. Haven't these things been made illegal or at least they should be regulated. Can I write a CDS. I could sell you a CDS on my life insurance. Maybe I could sell about 100 of them. Then I could survive this economy like an investment bank.

clarissal, though I agree with you in normal circumstances, I must point out that these companies are just nominally solvent. The risk or opportunity cost for a new captain to drop in and save the ship is huge. The cap might make sense for the current captains, it is not attractive for outside talents.

Ha, Greenspan said "It may be necessary to temporarily nationalize some banks..." and "...that once in a hundred years this is what you do." Although I agree with him, it is still sad. Of all people, he is probably with the most to blame. He was the master referee for the world's financial game. He failed to adapt the rulebook as crucial componets of the game changed. It is analogous to not consider adjusting the 3 point line of the basketball court when 90% of the players could score 3 points 90% of the times. More seriously, he mistakenly followed the philosophy that the basketball players could create new rules and take as much steroids or other substances as they pleased. He forgot he was the referee...

Jacob Weisberg assumes in his article that anyone who would take $500,000 or less to lead a bank is either stupid or incompetent. That's just not true. Weisberg also says that the cap will institutionalize failure. That's not true either. Because the cap isn't a true cap, it is a starting salary. As long as a CEO is taking $ from the government, they will be limited to $500,000/year. But they will be also be simultaneously amassing stock that can be sold once the bank turns around and pays back the government. So there really is an incentive to succeed. What the cap does is get back to common sense about how people should be compensated. People should be compensated for success. Most workers get a basic salary to start off their careers and then they get reviewed every year. And if they are successful, they get to keep their job and get a raise and possibly a bonus. What has been happening with CEOs and many bankers is that the process has been working backwards - large salaries and bonuses before any accomplishment and even after failure. That just has to stop and that is what the salary cap does. If someone actually turns Citibank around, they will be compensated handsomely. But they shouldn't be compensated extraordinarily well before ever lifting a finger.

oh, by the way. the title is "In Defense of Bankers", NOT "In Defense of iBankers". For all the iBankers and their political allies who brought about this crisis, there is indeed no defense.

when you have the Postal Master getting paid by congress for more than 750K per annum claiming market dynamics, and apply a different set of rules to government invested banks, something is wrong. if the banks fail, e.g. unable to keep minimum capital reserve, etc..., seize them. there is well established mechanisms via the FDIC/Feds to do just that. what is done now is just throwing good money after bad.

billions of dollars gone. investors left with nothing. the little folk weisberg worries so much about , out of a job. and no one seems to be responsible? don't like the publics reaction to ceo business as usual behavior? don't ask/take the tax dollars that business tries so hard not to pay. worried about big gov in private business after the raid on the treasury? go bankrupt and start over. and if we in the hinterlands do not realize that regular AIG core business is still making money why do they not use that money to recover rather than raiding the treasury? are we paying tax dollars because of accounting principals ? these companies did not fail. these companies ran crypto-criminal operations designed to fail. these guys were 'bare knucke capitalist' up to the point their criminal activity crashed. no more lectures from these "titans of wall street" they are just criminals in nice suits.

1. nationalize the troubling banks. this is temporary. it is a controlled coma for the next step.
2. get rid of the toxic assets from these banks. this is the tricky part, since there is no easy methodology to valuation.
3. sell the normalized parts of the banks back to the private sector. the government might end up keeping the toxic assets. these will be sold as soon as valuation is possible.

Q.E.D.

So kchan, what is your suggestion specifically? Let's get the discussion going on how to fix the problems instead of complaining about what the government is doing wrong.

Everyone seems to forget that government bureaucrats putting limit on the pay/bonuses only serves to ensure mediocre bureaucrats will run these institutes from now on. The culprits have long since left the crime scene. So punishing the crew left on the sinking ships would help!? All Jacob has done is to point out the absurdity of Washington fumbling along in saving the world, once again.

Thank you dburgejr1. It is easy to feel overwhelmed and helpless in the current economic and political climate but I do feel we peasants do and can have a say. Remember, we do have a government of elected, by the peasants, officials. Individually it is difficult to make a stand. But, collectively, we can make a change. We now have in office a leader who mobilized the masses though the internet and broke all fund raising records with donations that were less than $20. This was the peasants speaking. We need to be vocal and stay in the game. There will be another election in November. If the politicians now in office are wasting this opportunity for change, let's vote them out. Wringing our hands and doing nothing will get us nowhere.
The fundamental problem to this very complicated mess is that we have lost sight of the fundamentals. When economists talk about Keynesian economics and how throwing money at the problem will not get the economy started they are right because they don't take into account the entire equation that Keynes spoke about. Keynes's theory of the multiplier effect of pumping government money into the economy to create jobs was based on a few premises. Two that I do not hear mentioned are income and savings. Keynes's theory worked when people had savings and income kept up with consumption. He stated that people would spend 80% of their income. So as long as income increased (new jobs and raises) the economy would grow.We became convinced that we could spend 125% of our income and not save and the economy would grow forever as long as people continued to spend. This works like a Ponzi scheme until people can no longer spend because their incomes don't keep pace. This is where we are. Keynesian economics will not work unless we address income and saving. This cannot be addressed with government spending on new projects alone. We have to get the debt load paid off back to where people are spending just 80% of income. Credit card debt has to be reduced as well as housing debt. People are spending but they are spending to pay back debt on past purchases. It will take awhile to catch up.
We need to bring those interest rates down so people can get their debt paid off. There has been a lot of discussion about mortgage interest rates but none on credit card interest rates.Make a couple of late payments and the interest rate pops to 25% plus on many credit cards. Read the fine print. Credit card companies (banks) offer consolidation opportunities at lower interest rates but then don't close off the original line of credit. When consumers get in trouble they use all their lines of credit.
We need to get back to fundamentals. Obama needs to take a stand and get the scalpel out as he promised and make the hard decisions he promised to do. And we need to keep making our voices heard just as we did in the election process.

jedwards very nice post by far one of the best I have read over the last week. I agree totally with what you have said. I find it hard to believe that even after the first 20 billion dollars they can even begin to think of giving them more money. All you have to do is be in high finance and you are safe. It is a shame we peasants have no control or say in how it all should be done. What worries me is it is super rich helping super rich and peasants will never see the benefits like the rich folks will. Aagin some things never change.

Socialist ideas and thinking is how we got here in the first place.

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63

Or, if video is more your thing, see what many of these same members of Congress said earlier on C-Span:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Just plain obstinate? Okay, well then see and hear Obama in his own words.

http://www.youtube.com/watch?v=Lr1M1T2Y314&feature=related

Congratulations to Jacob Weisberg. Ironically, he has succinctly summarized precisely what Wall Street doesn't get about the taxpayers' anger. I do believe that the majority of taxpayers understand it is a small minority within the financial district that have caused a significant portion of our current fiscal crisis. However, on Main Street and in the factories if poor decisions are made by management everyone feels the pain. The taxpayers don't come to rescue the poor "peasant" that labored everyday, saved his/her pennies to scrounge for a house and send their kids to college. Even though they may have done their job well and made money for the business they are still out of a job or are losing their home. They are deciding whether to buy medicine for their kids or drop cable for their tv. When they are asked to bail out companies who have made poor decisions and then learn that the employees are still getting multi-million dollar bonuses they are justified in their anger. There has to be accountability across the board with peer review. The folks getting those bonuses did work hard but they sure have a much larger cushion to fall back on than the average "peasant". They took the risk with the opportunity of big bucks. But, where's the risk?
Let's go back to the partnership system where the owners know what's going on in their company because their own money is at risk. Personally, this "peasant" is ready for another Boston Tea Party. Lets all keep our tax payment and pay down our bills and stimulate the economy in a way we see fit. Let the bankers dig themselves out. Maybe they could use some of that bonus money to invest back into their company to keep it afloat just like every small business has to do!

These Great Leaders of finance have taken money in the billions from the government to supposedly bail out their financial empires. After doing so spent 3.6 Billion to give themselves huge bonuses this is not about companies it is about people basically steeling money. If I had stolen the money from my company I know where I would be In Jail. As far as them going bust do you think those who lost their homes care if they go bust they have already mad a shambles of peoples lives. Who will look out for them? No one because they are not high finance they are regular people loosing everything and nothing to show for it but a mark in history. Screw the Bankers let them dig ditches and earn an honest living for once intheir silver spooned life. Geez I am amazed at how people forgive and are willing to forget.

You forget, these "bailouts" are for those companies that would otherwise go bust. The reason for them is to avoid a great depression, not keep afloat great companies so to speak. It is like Jay Leno getting the Tonight Show. He didn't. He got Johnny's time slot, but it wasn't The Tonight Show starring Johnny Carson.... he had to sink or swim in his own show. These are new companies now that have to earn their greatness again or sink forever. 1/2 million is fine, because it was one of the great ones who sank each one of them. They earned the big bucks to watch over that which they failed to do. They need t move on, we always have to move on when it is over.