Monday, 28 November 2011
You really need me to tell you about the economy? You really don't. But it drives me crazy when bankers tell me that current problems is caused by governments misallocating capital. Bankers have seriously told me this.
1. Still, this Bloomberg piece is a proper piece of proper reporting. In 2008, under Bush, the banks took tens of billions of secret loans, told the world they were healthy, lobbied hard for no change in regulation and paid themselves fortunes out of this borrowed money. The kicker is in the line that banks paid the money back - because people realised that banking was virtually riskless since governments would back them up however badly they screwed up:
While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo.
2. Reporting is a real issue. There are endless stories about government waste, but we can't find out about the similar waste in private companies. Do you think private companies don't waste a fortune implementing new IT systems?
3. Business and banks say they need their silly pay because that is the only way to attract talent. They're bright enough, but they aren't that special. People just as good as good as them would do the same jobs for less.
I am not pretending that it's easy to intervene in this flawed market. I suppose it might be the shareholders job. But shareholders are a smokescreen when they is quoted as any kind of actively assenting body - it is simply too much trouble for shareholders and the people voting for their own extraordinary, un-performance-related pay know it. I'm just saying that there should be no problem calling them a cabal of self-interested plutocrats lining their own pockets and not paying their dues.