Wednesday, May 06, 2009

Remember: Bankers Are Bad

I see Guido has consigned my vocation to the dustbin of history. But I take some comfort from the Center for Public Integrity, a journalists' organisation that does stuff no blogger will ever do. Notably, today, they are responsible for this story. The top 25 subprime lenders, backed or owned by the big banks, spent $370 million over the past decade lobbying against attempts to regulate their industry. We have been in danger, lately, of easing off on our banker loathing. Indeed, if, as now seems possible, the recession has bottomed out, there is a real danger that we shall just let them go back to business as usual. So it's as well to be reminded of the fact that they were - are? - a bunch of incompetent shysters.


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  2. Forget the Center for Public Integrity. For the moment. The Center for the Digital Future's latest World Internet Report holds some hope for newspapers, at least if they are willing to make very rapid changes:

    In a year when the woes of newspapers -- layoffs, consolidations, and outright closings -- are more extensive than in any period in memory, strong evidence of the changing nature of media use in America may be found in a single statistic ... Internet users read online newspapers for 53 minutes per week, the highest level thus far in the Digital Future studies. In contrast, Internet users in 2007 reported 41 minutes per week reading online newspapers.

    The Media Guardian cited this on Monday and went on

    The recession is accelerating the demise of print newspapers but simultaneously driving usage of the internet. The new report suggests that far from facing extinction, newspapers are facing "the greatest opportunity in their existence", because of the significant increase in people reading online. "The key to success will be making bold moves entirely into the digital realm." And one way publishers could do this is by harnessing the advertising opportunities provided by online video.

    As I see it, this needs to be combined with location-based ads on mobile devices (thus beginning to overcome the stranglehold of Google nonlocal context ads) ... and viola, your job is saved. No problems there then.

  3. news just in - industry lobbied against legislation it expected to reduce its profits.

  4. Back to the Center for Public Integrity and assumed badness of the bankers. The Economist won't let me read the article with subscribing so I don't know if any of the journalists of great integrity were also intelligent enough to ask the key question: how much of the $370 million was spent trying to persuade the government to stop forcing them to lend to people they didn't want to give mortgages to, in other words, to reduce their exposure to subprime? Since 1993 much US regulation had become tied to forcing lenders to be 'kinder' to the poor, to the previously undeserving. Any money spent trying to stop that kind of pressure would be evidence of goodness, or at least basic competence, not badness. Without making such a distinction, the $370 million figure is worthless. But such is the sloppiness of the print media so much of the time, at such a moment of crisis.

  5. No, anon, you miss the point - the news is bankers lobbied to lose as much money as possible.

  6. That was the point Bryan, the politicos including the lorded Barry thought it was a jolly good idea to lend money to poor people.

    CRA community reinvestment act, the loathed bankers wanted in on that piece off market distortion.

    From the POV of the Paradigm it was money well spent?

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  8. ...btw, Its quite simple, just get rupert to work out a way of making sure you view a advert before reading on.

  9. bankers: I hadn't forgotten but what's the choice? business as usual it will be.

    who are these ads aimed at? they seem like dumb ads for a dumb audience. I mean, who would buy an expensive iPhone to watch ads for trainers or soda pop? not me. the future's dumb.

  10. news just in - bankers' expectations, concerning what would turn out to be profitable, were wrong

  11. I'm no fan of banksters but that $370 million, though it sounds a lot, is a fairly meagre sum spread over ten years. I'd bet that big pharma, IT, agriculture and food, perhaps defence and maybe others have spent far, far more than that lobbying Congress and others over the same period. Many large outfits turn over billions per quarter alone, so in some ways huge lobby fees - aka bribes, and to governments all over the place - are just a normal business overhead. Normal, that is, if you second name is Capone.

    Maybe the banking industry didn't need to pony up much because, as others have suggested, Don Politico and his pals were already banging on their door.

  12. Bryan, I am with Mark. What you are noting about the bankers is only a symptom of a much larger malaise: Bad business practices in the financial sector and just about every industry you can name. The days of trusting the businesses you deal with are gone; you cannot hope to be treated fairly.

    You saw "Michael Clayton," right? Best example I can think of, for it also implicates the legal profession -- the lawyers are the ones who are enabling this terrible behavior.

  13. Doesn't really matter what Guido does, does it?

  14. Come on Bryan, most of us are really to blame. As a whole, we wanted fast access to easy money, we wanted more spent on public services, and finance was delivering the goods to the public purse. Most people will lobby for less regulation in any area of life - journalists (often those who wilfully ruin the lives of others) are no exception. You're fixated on bankers when the wider culture was willing them on.

  15. I don't buy any of this 'we're all guilty' stuff. To some extent we may be but look at what these guys actually did - they mis-sold mortgages to people who could not conceivably afford them. This put themselves and their borrowers at risk. They then securitised these mortages, putting everybody at risk. I may be guilty of many things but I've never done anything that bad.

  16. I agree, Bryan. I disagree with what some are writing here in that I do think that there are lots of people who just want to save up for the usual stuff while they work - ie kids' university education and perhaps to help them get a bit of a start in life, one's old age (ie not being a drag on them financially if you go gaga) and maybe the odd post-retirement holiday or two. People don't want all this slick ad "lend lend" crap and to have to get a degree in internetology to open a bank accont and be subjected to barrages of crap. Even now when I log onto my bank account I have to go through a page of "buy credit card" persuasion first. You can't take out an old-fashioned savings account but you have to open a "linked current account" first. I just want a simple, basic, no-frills savings account, and I want the banks to loan money to people and organisations that pay it back (and can pay it back). I think it is terrible that the banks seem to be getting away with it all. I am so disappointed in all the political parties- nobody is putting forth a proposed alternative, they are all mud-slinging at each other and tinkering about the edges with *their* armies of hideous lobbyists and yes-spinners.

  17. Bryan,

    what percentage of "bankers" do you think were involved in the sale of mortgages that ought not have been sold, and then the securitization of said mortgages in a fashion that led to trouble? A bit more needs to be added to the story - there's nothing wrong with securitizing mortgages so long as the people buying the securites know what they've bought, and the people who buy them can cope with the consequences of losing money on them. The problem being, it was in large part the banks that bought and held the securities as assets, which turned out to be worth less than they thought, and they did so in such a way as to ensure that the banks were wiped out when the value of those securities collapsed. So you need to throw in all the bankers that were responsible for all the irresponsible decisions involved in all that - i.e. what you said, plus those bankers who decided buy and hold the securities. (A very readable account of all that can be read here - which explain why popular explanations are wrong, or rather incomplete)

    What percentage of bankers had anything to do with the above? I don't know either, but my guess would be say 5%, perhaps lower. And that's not including tellers, clerks etc. - I mean 5% of highly paid bankers (traders, analysts, managers etc.) most of whom work in equities, corporate finance and other unrelated fields. Perhaps your answer would be higher; it be interested to know your guess. However, if the true answer is of that order, does that affect the wisdom of referring to 'bankers' as one undifferentiated lump?

    There's a secondary question, which is the extent that bankers realised the implications of what they were doing, but let's accept the idea that ignorance is no defence.

  18. What can anyone capable of drawing breath not understand about the guilt of those in the banking industry responsible for the present sorry state of a large percentage of western economy.
    Millions of decent hard working people have had there lives ruined as a result of the actions of these people, politicians, regulators and banking business leaders.
    No rational person could possibly dream up excuses for them, this would be akin to blaming the victims of crime for the criminal act.
    Enough already, many in the banking industry, the leaders, their minions who cheerfully went along with them expecting the rich rewards to filter down to their moth a three series would sit on their drive.
    "Blame", no, simply justice please.

    Stop press...another RBS scumbag is about to retire on £500,000 PA pension

  19. Sorry to labour the point chaps but there are two diametrically opposed explanations of the crisis: too little regulation or too much.

    Whatever the bankers were up to lobbying government, in the Clinton years, between 1993 and 2001, US home ownership went from 63% to 68%. Under Bush it rose again to 69%. By that time, as a direct enabler of that expansion, 40% of all US mortgages - 25 million of them - were subprime. That drastic statistic is the most fundamental cause of the current crisis.

    Was subprime madness caused by lack of regulation or government interference? Peter Wallinson makes the case convincingly for government interference in February in The American Spectator and Forbes Magazine. If he's right the answer is addressing those distortions in the market.

    In October George Calomiris of Columbia Business School, agreeing with Wallinson on the problem being too much regulation, including from the Basel accords, asked the obvious question in the Wall Street Journal:

    So why blame deregulation and small government? The social psychologist Gustav Jahoda says that unreasonable beliefs often arise in circumstances where people lack control and need to believe in something to get them through a highly stressful situation.

    Calomiris goes on to cite Machiavelli as another perspective on this strange emergent belief system in the West, that regulation would have saved us. Whatever the psychology, we need to come into line with reality and fast. Because we could inflict far more damage with more the wrong measures now.