Blog on the Run: Reloaded

Friday, June 26, 2009 8:05 pm

Selling bull manure as Belgian chocolate

See, the investment bankers’ problem isn’t that they actually blew the economy all to hell, ruined a ton of people’s retirement or college savings and threw millions out of work. No, their problem is that there has been “populist overreaction”:

Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort.

In memos of confidential meetings with top financial executives, the Securities Industry and Financial Markets Association said it began this month the “execution phase” of the operation, which pledges to “embrace change” and accountability. The plan targets policy makers and the media in New York, London, Washington and Brussels and calls for a “city-by-city, grass roots” approach.

The securities industry “must be perceived as part of the solution, which will allow it to better defend against populist overreaction,” the documents, prepared for a June 17 meeting of SIFMA’s board, said.

The board meeting minutes and staff-written papers, obtained by Bloomberg News, outline the program crafted by polling, lobbying and public relations companies paid at least $85,000 a month. The memos provide a glimpse, in often candid language, into how Wall Street is grappling with its pariah status.

“It is imperative that in this historic period of reform, the industry be recognized as playing a positive role in seeking change and providing solutions to the problems we face,” one of the documents said. “There is currently widespread skepticism about the industry’s commitment to this needed change.”

“There is currently widespread skepticism.” Gee. I can’t imagine why that might be.

But wait! There’s more! (With these cheesemunches, there’s always more.) The guy who’s going to be leading this effort? Doesn’t exactly have a record of competence where the public’s welfare is concerned: “I’m not sure anyone in history has ever helped destroy a brand more thoroughly …”

Those smiles you see belong to lawyers who now understand that banker jokes are going to supersede lawyer jokes for a long time to come.

Wednesday, June 24, 2009 10:14 pm

That plow’s gonna get a workout

Filed under: I want my money back. — Lex @ 10:14 pm
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First Goldman, now Citi:

Citigroup Inc., the U.S. bank that got $45 billion of government funds, will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said.

The biggest increases will go to investment bankers and traders, said the person, who declined to be identified. Workers in consumer banking, credit cards, legal and risk management will see smaller salary adjustments. The New York-based company also plans to award stock options to try to keep employees after Citigroup’s market value plummeted 84 percent in the past year.

Citigroup joins Morgan Stanley and UBS AG in boosting salaries for executives and employees. Morgan Stanley said last month it will increase base pay for many of the New York-based firm’s top executives and double the pay of Chief Financial Officer Colm Kelleher.

Well, sure, because the last time a company I ran lost $28 billion in one year and sucked $45 billion from the taxpayers’ teat, I got a 50% raise, too.

I oppose eliminationist rhetoric, so I’ll have to make do with thoughts of torches and pitchforks and “Let them eat cake.”

The same people who blew up the economy want us to take their advice on economic reform

Filed under: I want my money back. — Lex @ 8:24 pm
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… for which I have six words: not just no, but hell, no:

There are an array of reports today outlining the steps that the banking and financial services industries are taking to gum up various aspects of the plan to beef up Wall Street regulation.

There’s a new industry group — the Financial Instruments Reporting and Convergence Alliance (FIRCA) — fighting an accounting rule change meant “to end a practice that contributed to the risky lending that set off the financial crisis.” Hedge funds, organized into the Managed Funds Association, are mobilizing “money and power to fend off tougher oversight, higher taxes and much greater transparency.”

And of course, banks are continuing to raise a stink about the Obama administration’s plan to create a new consumer protection agency. All of which makes this report from the Research Department at the International Monetary Fund (IMF) (via The Stash) extremely timely.

The paper shows that the financial firms that did the most lobbying from 1998 to 2006 also had lower lending standards, a greater tendency to securitize, a larger presence in areas that are suffering the most from loan delinquencies, and ultimately lost the most money during the financial implosion. The researchers concluded that financial sector lobbying of this sort poses a threat to economic stability and increases systemic risk:

[The results] tend to support a theory of “moral hazard” whereby financial intermediaries lobby to obtain private benefits, making loans under less stringent terms not because they have better capacity to evaluate risks associated with the loans, but because they expect short term gains from these loans during the boom phase, and to be bailed out when losses amount during a financial crisis. These results…provide indirect evidence that lobbying might have the potential to threaten financial stability and contribute to systemic risk.

Of course, no one could have possibly seen that coming.

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