The Global Financial System Sucks

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Remember the “rogue trader” who wiped out Barings Bank, the oldest merchant bank in London – and hence one of the oldest banks in the world – when he lost well over $1 billion speculating on futures contracts? How about Jérôme Kerviel, who “lost” almost $7 billion playing with futures in 2008? What about the American S&L Crisis that began in the 1980s? That ended up producing losses of around $160 billion – most of which was paid for by a government bailout under President George H. W. Bush, directly contributing to the budget deficit blowout of the early 1990s.

Rogue traders, futures, options and derivatives, housing bubbles, Ponzi schemes, Bernie Madoff, Bear Stearns, AIG, Washington Mutual, Goldman Sachs, the list goes on and on. In the most recent outrage from the financial sector, it looked like some schmuck said “billion” instead of “million” and sent the stock market into one of its worst nosedives in history, though now it seems like out-of-control software may have been to blame. Either way – stupid and sucky.

Stock Selloff May Have Been Triggered by Trader Error: “CNBC.com – May. 06 () – In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points before paring those losses in what possibly could have been a trader error.”

(via NewsTrust.)

How many more examples of the greed, corruption and ineptitude of the global financial system and the people who run it – and on which so much now depends (know anyone who’s lost a job or a house recently?) – do we need before we decide that a root-and-branch overhaul is needed of the whole rotten setup?

And it is clear that Obama – our sexy black president – is not the man for the job. But are we surprised? He’s an American politician, a committed part of a system which is deeply enmeshed with the American and global financial system. And he is perhaps even more in thrall to Big Money than some other presidents. He’s so excited to be making the big bucks and playing with the big boys.

And now he has to worry about the mid-term elections, and after that his own re-election. He’ll be campaigning from now on, more or less continuously, and while bashing banks may have a certain populist appeal, it doesn’t seem to be doable in Congress – too many Congressmen get too much money from those guys, or are those guys or want to be those guys when they get kicked out of office – and failure of another major policy push would be very damaging.

He’ll do good things, no doubt – but to expect a real overhaul of this rotten system is unrealistic. Expect bandaid reform: something that can be sold to voters as reform, but that doesn’t really hit the megabanks and money houses where they live – in their pocketbooks, power and penis-substitutes – and does little to correct the systemic dysfunctionality.

Titans of an Age No Longer Golden: “The top executives of seven major financial firms that have either collapsed, were sold at low prices or have received taxpayer-funded bailouts were paid $464 million in performance pay since 1995. But the same firms have lost over $100 billion since 2007. Critics contend that the well-paid executives either helped create the problems at the firms or simply ignored them.

(via NYTimes.com.)

The Invisible Crazy Robot Hand – Bruce Sterling: “*Nobody is less surprised than me to see that interacting pieces of software can do weird emergent stuff, and act all buggy. This is not, like, some surprising discovery. It’s more like a law of computational physics.

*For the stock market to go into a ‘tornado’ of dark pool trading is not all that great, though. Especially when days tick by, and nobody knows what the hell actually happened. This is not a chaos-theory lab experiment: this is supposed to be the bedrock of global capitalism.

*That is not a stable market, folks. That’s not a free market, either. Why would any sane person have any confidence in the behavior of a creation like that? It’s like a series of mechanized panics waiting to happen.”

(via Beyond The Beyond | Wired.)

Heard the one about the top banker who said sorry? No, me neither: “Many bankers are still happy to live with the consequences of their questionable practices – and keep trousering their bonuses

Don’t mention the crunch!’ hissed the manic hotelier behind the backs of the party of diners from Goldman Sachs. ‘I mentioned it just now but I think I got away with it!’ That’s the sort of thing senior bank employees might have to endure in the coming decades. Top bankers are the new Germans. And the sooner we get to the point where we’re making jokes about the outrages committed in their name, the better. We haven’t got there yet.”

(via Comment is free | guardian.co.uk.)

Paul Krugman – Looters in Loafers: “Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb “sacks,” as in looting and pillaging. The student replies, “Goldman Sachs.” [….]

We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting…

(via Op-Ed Column – NYTimes.com.)

Barclays Capital holds £1.4bn for pay: “Barclays has already set aside a bonus and pay pool worth more than £1.4bn for bankers in its Barclays Capital investment banking arm, after just the first three months of 2010.

The size of the bonus pot shows that BarCap, the operation run by Bob Diamond, continues to be the powerhouse of the high street bank.”

(via guardian.co.uk.)

Bankers overpaid, says RBS boss: “One of Britain’s most senior bankers has admitted that pay in the industry is unduly excessive, hours after the leaders of Britain’s three biggest political parties criticised the sector.

Sir Philip Hampton, chairman of Royal Bank of Scotland, told BBC Radio 4’s Today programme that ‘banker’s pay continues to be astonishingly high, almost certainly too high’.”

(via guardian.co.uk.)

Accenture dropped to $0.01 then popped back up to $40: “We should all be RICH! You think the action in Procter & Gamble was weird, check out the nosedive on Accenture, which plummeted from above $40 at 2:47 p.m. to $0.01 at 2:48 p.m. Had demand for consulting services declined so sharply in that one minute?”

(via digg.com.)

WaMu made subprime loans it knew were likely to go bad: “Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a ‘mortgage time bomb’ by making subprime loans they knew were likely to go bad and then packaging them into risky securities.”

(via digg.com: Stories / Popular.)

The Class Divide: “At In These Times, Roger Bybee writes:

As Les Leopold notes in The Looting of America, the richest 1% of earners collected 8% of national income in 1973. “By 2006, the top 1% got nearly 23% of the pie, the highest proportion since 1929, ” he writes. Moreover, the richest 1% now earns more than the bottom 50% of Americans. During almost exactly the same period, the pay gap between the top 100 CEOs and workers rose from 45 to 1 in 1970 to Himalayan proportions in 2006, reaching 1,723 to 1, Leopold says, citing data from Forbes.

(via Daily Kos)

UK bank bailout cost hits 850 billion sterling: “LONDON, Dec 4 (Reuters) – The price tag for bailing out UK banks has hit 850 billion pounds ($1.4 trillion) but Britain’s spending watchdog says the final cost to taxpayers will not be known for years.

(via Reuters.)

Getting Theirs Cuts Both Ways on Wall Street: “There was none of the old swagger at Citigroup headquarters on Friday. The bonus checks had landed — and some of the bankers were grumbling.

Many of those walking to work on Wall Street in Manhattan are walking away with less bonus pay because of outside pressure.

After a year of yawning losses at the company, employees lamented that times were getting lean. The giant bank, the recipient of two multibillion-dollar rescues from Washington, had paid out only about $4 billion in bonuses.

(via NYTimes.com.)

What are the ten best jokes about bankers?

George Bush was asked what he thought about the credit crunch. He replied that it was his favorite breakfast cereal.

The US Military has invented a new weapon which destroys people but leaves buildings standing. It’s known as the Stockmarket.

Hospitals report that the hearts of bankers are in strong demand by transplant patients, because they’ve never been used.

(via Quezi.)

Billy Bragg to withhold taxes in bank bonus row: “Billy Bragg is refusing to pay his tax unless the government curbs the “excessive” bonuses at the Royal Bank of Scotland.

The singer-songwriter and political activist is urging the public to withhold tax payments to “convince the Treasury to act”.

RBS, which is 84% owned by the taxpayer following a string of bail-outs, is expected to pay up to £1.5bn in bonuses to its investment bankers.

(via guardian.co.uk.)

[emphasis added throughout]

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