Check out Clyde Haberman’s amusing piece on our new relationship to the banks whose practices triggered our new grand depression. According to his calculations, we all–that is if you’re taxpayer like myself–now hold a $1,785.71 stake in the banks our government bailed out. He figures that as shareholders we have right to question some of their practices, from executive pay to ATM fees:
Let’s start with something really easy. Is it too much to ask that all banks have pens that work on the counters with the deposit and withdrawal slips? In too many places, the pens are useless. How can people feel confident that their money is being managed wisely if those in charge can’t even provide a functioning pen?
Though this line of questioning may be a bit facetious, he does raise some reasonable arguments.
After all, if we don’t begin asking some questions, who will? Do we really expect former Goldman golden boy Hank Paulson to come to our defense and scrutinize the actions of his former colleagues? Paulson wanted to write the banks a blank check with no strings attached until congress pressed for some accountability in the bailout package. If they hadn’t, there would be no possibility that the American people would see any return on their significant investment. Just makes you wonder who’s even watching what’s being done with our money.
Apparently, no one was watching when AIG execs used their some of their newly printed bills to take a decadent retreat during the financial tumult; though in all fairness perhaps undermining the world’s economy is stressful work and they needed some R&R. Recently, some like Joe Nocera at NYtimes, have begun pointing out that despite the ostensible objective of easing the strain on the credit market, few banks are likely to use the bailout money to extend loans any time soon. In fact, many of the banks see the current crisis and fresh funds as an opportunity to fatten their own bottom lines–wasn’t that the attitude that got us where we are today?–by acquiring other less solvent banks. In a recent column, Nocera reports what he overheard during a conference call between JPMorgan executives:
“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive (who I’m not naming because he didn’t know I would be listening in) explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot.
Until someone–whether it’s congress or the new president–steps in and creates some genuine regulation including stipulations for the money we gave them, the culture on Wall Street will remain perversely myopic. These tails we win, heads the taxpayers lose scenarios need to end.
