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Niall ferguson is one of the new breed of economic historians and has written two excellent books dealing with both World Wars. He has a piece in Newsweek this week that delivers a scathing attack aginst both the Fed and the Big Wall Street banks arguing that what really needs to be done on wall street is siccing Anti-trust lawyers on the banks that are so large a their failure can drag the whole economy down in the way that Lehman's failure did last year. It is actually a good piece with good ideas and probably zero chance of any of them being enacted.Wall Street?s New Gilded AgeI read this article initially suspicious becfause it was in Newsweek(the same issue has an article titled The Case for Killing Granny, which is why I bought the magazine. It also has an article claiming that America is morally deficient for not providing Universal Healthcare,No Country for Sick Men. The finance article is pretty good though and helps me keep my faith in the historical profession.
But now, barely a year after one of the worst crises in all financial history, we seem to have returned to the Gilded Age of the late 19th century?the last time bankers came close to ruling America. A few Wall Street giants, led by none other than -JPMorgan, are back to making serious money and paying million-dollar bonuses. Meanwhile, every month, hundreds of thousands of ordinary Americans face foreclosure or unemployment because of a crisis caused by ? a few Wall Street giants. And what makes the losers in this crisis really mad is the fact that there's now one law for the small debtors and another for big ones. If you lose your job and fall behind on your $1,500 monthly mortgage payment, no one's going to bail you out. But Citigroup can lose $27.7 billion (as it did last year) and count on the federal government to hand it $45 billion.
I have no problem with generous remuneration for high-performing CEOs. There was a big outcry in Australia a few years ago when Macquarie Bank's CEO Allan Moss was paid USD24.8 million as part of his retirement package. This reaction ignored the fact that from the humble beginnings 14 years before when he had taken the helm of the company, he forged the company to what it is today: Macquarie Bank is a multinational corporation with 12, 700 staff in 28 countries, and last year announced a profit of AUD479 million for the half year to September 2009.However, I do believe that when a CEO underperforms, as reflected in the performance of the company, they should not be entitled to massive payouts. Their salary and any bonuses they receive should be linked to how well their company is performed.
Americans face foreclosure or unemployment because of a crisis caused by ? a few Wall Street giants.
I completely disagree with this. It's the government that caused foreclosure and unemployment because they have to stick their inept hands into everything. It was the governemtn who forced banks (since the 70's) to give mortgages to unqualified buyers (HUD is one example). Now what we have are extremely strict regulations from otherwise qualified homebuyers, Fannie and Freddy are running out of funds (there's another housing crisis coming...my prediction), and banks are holding back loans to otherwise qualified businesses who desparatley need the money now to sustain employment. I think this article is just another of those strings of "the rich are the bad guys" articles, which is typical of Newsweek.
