Here's a future news story that should make the American public, pundits and politicians happy:
"Banks announce record losses today and cancellation of all bonuses.
The Dow Jones plunged to below 4,000 with resulting massive losses in all 401(k)s, employee pension funds and other pubic investment vehicles.
Housing prices dropped another 40% with complete shutdown of lending by weaken banks.
Jobless rate approaches 20%."
At last the public, pundits and politicians are happy because they really socked it to Wall St and those Bankers. Boy does that feel good.
Eric
Haha... so how do you solve the PR problem if you're working for a bank right now?
ReplyDeleteThe banks big profits this year are largely based on the leverage generated from cheap money offered by the government (e.g., under normal economic circumstances they would have had a much smaller spread between their cost to borrow and fees to lend). I wouldn't argue that we shouldn't have given them the cheap money - we needed to for the good of the system - but should the bankers themselves be rewarded on the same scale regardless of the source of their capital? Shouldn't there be some sort of restraint exercised on the part of the institutions when they were clearly given an "edge" for the "good of society as a whole"
Thoughts?
Colin
Yes, but that same cheap money is why all of our interest rates are low. That is the basic business of banking -- they borrower from you and I ( bank accts,money market accounts, CDs etc. and the fed or other banks) at a rate lower than what they lend out at. After paying expenses , that is there profit. Not really a very glamorous or complicated business.
ReplyDeleteIf they didn't get cheap money , our mortgage and other interest rates won't be so low.
Also here is a link to a Huffing Post article about the 46 Billion Dollars the Fed made on the bank bailout. The "windfall" gets turned over to the US Treasury.
http://www.huffingtonpost.com/2010/01/11/federal-reserve-profit-fe_n_419517.html?view=screen