New York Times Pulls Punches On Wall Street Bubble Era Pay

Why is no one willing to call things by their proper names, and instead resort to euphemism and double-speak?

A New York Times story today, “On Wall Street, Bonuses, Not Profits, Were Real,” makes its most important point in its headline, and managed to get some good data points on how rich investment bank compensation was in the peak years, but otherwise glosses over the fundamental nature of what went on.

It was looting, and it is high time the media starts describing it in those terms.

Let us turn the mike over to Nobel Prize winner George Akerlof and Paul Romer. From the abstract of their 1993 Brookings paper:

Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

Bankruptcy for profit occurs most commonly when a government guarantees a firm’s debt obligations. The most obvious such guarantee is deposit insurance, but governments also implicitly or explicitly guarantee the policies of insurance companies, the pension obligations of private firms, virtually all the obligations of large or influential firms. These arrangements can create a web of companies that operate under soft budget constraints. To enforce discipline and to limit opportunism by shareholders, governments make continued access to the guarantees contingent on meeting specific targets for an accounting measure of net worth. However, because net worth is typically a small fraction of total assets for the insured institutions (this, after all, is why they demand and receive the government guarantees), bankruptcy for profit can easily become a more attractive strategy for the owners than maximizing true economic values…

Unfortunately, firms covered by government guarantees are not the only ones that face severely distorted incentives. Looting can spread symbiotically to other markets, bringing to life a whole economic underworld with perverse incentives. The looters in the sector covered by the government guarantees will make trades with unaffiliated firms outside this sector, causing them to produce in a way that helps maximize the looters’ current extractions with no regard for future losses….”

Re-read the key phrase: “pay themselves more than their firms are worth and then default on their debt obligations.” This has happened en masse in what formerly were investment banks who have now become wards of the state.

But no one is willing to call this activity for what it was. In fact, some are still urging that we not squelch “financial innovation,” which Martin Mayer described as

… a way to find new technology to do what has been forbidden with the old technology….Innovation allows you to go back to some scam that was prohibited under the old regime.

But we digress. Dick Fuld reportedly spends much of his days allegedly wondering why he didn’t get a bailout. He should instead be thanking his lucky stars he is not in jail. Bankruptcy fraud is criminal, and fraudulent conveyance is subject to clawbacks. How could Lehman possibly have been producing financials that showed it had a positive net worth, yet have an over $100 billion hole in its balance sheet when it went under? No one has yet given an adequate answer on where the shortfalls were.

Commonwealth countries have a much simpler solution. If a company is “trading insolvent,” that is, continuing to do business when it is in fact broke, its directors are personally liable.

We have said repeatedly that one of the triggers for the crisis was permitting investment banks to go public (prior to 1970, no NYSE member firm could be listed). We had dinner with one of our long-standing colleagues who was responsible for Sumitomo Bank’s investment in Goldman Sachs and had (and continues to have) close and frequent dealings with the firm. He said that the change in the firm’s behavior after it went public was dramatic. Before, it would deliberate (one might say agonize) important business decisions,. Waiting two years to enter a new field was not unheard of. But after the partners cashed in and were playing with other people’s money, the firm quickly became aggressive in its use of capital in expanding the size and scope of its activities.

But the New York Times article gives an anodyne portrayal:

As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.

Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning…

For Wall Street, much of this decade represented a new Gilded Age. Salaries were merely play money — a pittance compared to bonuses…

While top executives received the biggest bonuses, what is striking is how many employees throughout the ranks took home large paychecks. On Wall Street, the first goal was to make “a buck” — a million dollars. More than 100 people in Merrill’s bond unit alone broke the million-dollar mark in 2006. Goldman Sachs paid more than $20 million apiece to more than 50 people that year, according to a person familiar with the matter. Goldman declined to comment.

The bulk of the piece is about Dow Kim, former co-president of Merrill’s fixed income business, and does deliver some detail about how Kim and his subordinates were paid. But it fails to delve into how the profits were illusory, the bad decisions made, how the fixed income area in particular lead to the end of Merrill’s independence. Perhaps the author, Louise Story, assumed the tale has been well told elsewhere. However one effort to demonstrate the business was on the wrong track, falls woefully short. It discusses a CDO deal that went bad, but fails to establish whether Merrill took losses by virtue of retaining a big interest (“The losses on the investment far exceed the money Merrill collected for putting the deal together” does not clearly say that Merrill, as opposed to investors, suffered. One assumes so, but the drafting is ambiguous).

Even more glaring, the story mentions Merrill’s disastrous, end of cycle $1.13 billion acquisition of mortgage originator First Franklin, without mentioning that deal came a cropper (Merrill shut the unit down only a year and a couple of months after it completed the transaction).

Other stories have given some of the sordid details about Merrill’s ill fated mortgage expansion (a Wall Street Journal piece, “Merrill Upped Ante as Boom In Mortgage Bonds Fizzled,” is one of many examples), Giving short shrift to the staggering level of strategic errors and lax risk oversight means the article fails to pin responsibility clearly for the mess on Kim and his fellow business heads. The article simply assumes the connection, but by talking about the profits without giving sufficient detail on the colossal errors, it makes Kim and his lot seem far more innocent than they really were.

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  1. Anonymous

    I have been saying for a while that the relationship between government and banking is the closest thing to organized crime taken over society…

  2. killben

    yves …

    essentially the whole show is emperor has no clothes …..

    What foxes me are ..

    how come taxpayers are allowing … or they just bystanders … their job being just to put the money on the table and ask no questions to be asked how it is spent

    how come fed, treasury, congress are just simply mouthing a few politically correct words but allows business as usual

    unless someone acts we will all be posting only ..

  3. g

    Hi Yves,

    Many thanks for your insightful comments and perseverance. I don’t know when you sleep. I write from Australia and am frequently disappointed when you do not update in the early morning (our time), yet you have updates late in (our) evening. I guess you must arise very early.

    Hopefully these great excesses will lead to prosecutions when the panic is over and St Obama’s efforts have led to little other than 20% unemployment. Then, we hope, the journals of record will be important blogs such as this and not 20th Century newspapers run and regulated by the same crooks that have led us blindly into the abyss at the same time as the major perpetrators pocket their illicit winnings.

    One of your bloggers wrote that all great collapses are marked by fraud and corruption, although, sadly I missed the link. However many have reflected on the importance of the “bezzle”in bursting bubbles and this time looks no different. Personally I got out of shares when I read that today was the greatest disparity in wages (quaintly called “compensation” by the elites) since the late 1920’s, and some hedge fund managers were collecting over a billion a year. Anyone who appreciates just what a billion is knows that this cannot be sustainable.

  4. fresno dan

    Well, I am thankful you bring it up. It does seem amazing the questions that don’t get asked. Like, “Did Hank Paulson know how Goldman made money?” or “Did Rubin think anything Citi was doing was risky?”
    “The article simply assumes the connection, but by talking about the profits without giving sufficient detail on the colossal errors, it makes Kim and his lot seem far more innocent than they really were.”
    There is way too much of this “whoculdhavnode” as an excuse given by CEO’s as well as goobermint officials. Its there job to know. And many, many people did know (see calculated risk) about MBS’s being all BS.

  5. Anonymous


    By far this site is the most intellectually honest and your presentation of a scholarly oversight: money in America, is spot on.

    Thank you.

    You may wish to address this work, a link to Madoff, et al:

    The Talmud, the Stock Market and Bernie the Goniff

    My cousin once removed was/is Karl Marx. He was anti-ISM, in actuality.

    We in the US must come to realize that this 60-plus year slow takeover of our country was carefully designed.

    The model? Palestine.

    Time to fire each and every oppressor of Palestine since the one and the same are oppressors of earth and the weapon of mass global destruction, the “credit crisis,” is and has been, a highly sophisticated global overreach and Bush just said it on CSPAN: “We have half the globe.”

    Time to hold the “globalists” accountable for high crimes against humanity.

    Thanks for your brilliant intellect and genius in writing how it genuinely happens.

  6. Anonymous

    I wonder when more people will start to realize that such scams – and a variety of others – are all but inevitable with fiat money combined with fractional reserve lending.

    Without the ability to create endless amounts of money out of thin air, all of the debt financing and all of the bailouts would be impossible. By the same token, with that ability, the temptation to play these games becomes irresistable.

    Sure, you can regulate for a while, but people forget and the pressure of those that stand to profit, along with their bribes, will win out causing the massive disruptions and destruction we are witnessing now and have been witnessed many times before.

    While we’re on the subject of calling things what they truly are, how about “counterfeiting”? How about an undemocratic transfer of wealth from productive people to scammers? etc., etc. and so forth.

    Yeah, I know, hardly anyone wants to hear it – such has been the effectiveness of high powered propaganda over the decades if not centuries. Maybe someday.

  7. Jim

    I remember some fifteen years ago when I was in business school we were expecting to hear a speaker in my debt markets class who ran a prominent fixed income hedge fund. It was big for the time–around $500 billion–and used lots of derivatives and the dicier tranches of mortgage backed securities. A week before the presentation, his fund vaporized overnight, all money gone, so he didn’t show.

    It became clear to me then that leveraged fixed income is the height of folly. The players pretend to be rocket scientists, but in fact rely on mean variance optimization, which works until it doesn’t work. While it works, the practitioners earn huge amounts of money, and when it doesn’t work, they hunker down with their lawyers and try and keep what they’ve extracted in past years, while their investors go bust. The key personal characteristic needed to do this is to have no shame.

  8. Sandi Rubinspan

    One of the great unspoken truths of this decade is that the wall street financial looting represents the single largest threat to the long term security of the Unites States.

    Homegrown financial terrorism trumps the old fashioned muzzy variety, by a mile.

  9. Mark

    “The key personal characteristic needed to do this is to have no shame.”
    One might wonder if our economy has been trashed by sociopaths?

    Or is it simply that the repercussions are sufficiently slight and distant that they can be ignored.

    Much like firing missiles from over the horizon without having to look the “collateral damage” in the eye.
    (In a world where the media (SEC) doesn’t to follow up reports of atrocities.)

  10. Elliott

    So if you steal a TV during the aftermath of Katrina you are a criminal, you should be shot on sight, and it signals the utter breakdown of our society.

    If you steal billions of dollars as these people did, its fine because they were working hard? No… Contributing to the economy in meaningful way? No…

    Oh right, they were friends with the elite and were making lots of made up money for everyone. It really steams me when the talking heads talk about all of the great profits of the the peak years. HELLO, they were based on a bubble, so in reality they created no wealth.

    I’m not afraid that this country is going into its final downturn from superpower status because I think we’ll come out a much better place.


  11. River

    It takes a minimum of two parties to make a deal. Obviously there must be greed by both parties to complete deals that seemingly are too good to be true.

    The sellers are well versed in how to close a sale on baloney dressed as caviar.

    The saps need more education and a tad of self restraint. Lost opportunity is preferable to lost capital. If an item for sale is too complicated to understand, it is too complicated to invest in.

  12. Anonymous

    I’m listening to Rick James’ Bustin’ Out.

    “We’re bustin out
    And we don’t give a damn…
    …Take your stuff and scram!”

  13. Anonymous

    Why is no one willing to call things by their proper names, and instead resort to euphemism and double-speak?

    For the same reason The Street’s presstitute press is promoting the ridiculous partial cover-up of the Bernie Madoff affair. Harry Markopolos’ 2005 letter to the SEC gives the real explanations.

    For purposes of analysis Markopolos considered “Ponzi Pyramid” or stock trade front running as separate explanations. Given Bernie’s decade plus longevity through several stiff downturns the real explanation will be found to be c) Both.

    Both also explains why Bernie had his own kids turn him in to the feds. With a cooperative regulatory and legal structure Bernie can possibly take a Ponzi entirely on himself. Routine front running requires active participation from officers and traders in his broker-dealer firm. In which firm his kids are also officers.

    And of course “Ponzi can be scape goated onto Bernie alone by the broader “Wall Street” community. Whereas once a genuine investigation of trade front running starts many more firms than just Bernies will get nailed.

    New York New York, your day is past, your goose is cooked! Stick a fork in you, you are done. Who in their senses will ever again trust that bottomless cesspool of lies, self-dealing and shameless thievery?

  14. M.G.

    It will take time, if ever happens, for people to understand some of the inconvenient truths: it was a scam, a fraud, corruption, a Ponzi scheme, or whatever… So let’s not call it recession, deflation, crisis, risk management, model, regulatory, etc. failures. The sooner we call it with the right name and admit the inconvenient truth the better

    Recession uncovers what auditors can’t
    The alchemist

  15. Independent Accountant

    I’ve been saying things like this for years. Among the problems of the “Street” is poor cost accounting. I doubt most traders have any idea what cost of capital means. Does say Merrill’s treasurer? But traders went to: Wharton, Harvard, Northwesten, Chicago, Tuck, etc. So?
    Next, where were the CPAs? AU 314.125.A5 states in considering an entity’s risks “an auditor may consider … Key performance indicators. Employee performance measures and incentive compensation policies”. Well Mark Olson of the PCAOB, will you look at all audits done of major investment banks and see where they fell short?

  16. Anonymous

    “New York, how do you screw me? Let me count the ways:”

    1. Unearned salaries and bonuses exceeding public firms’ capital, let alone earnings.

    2. Naked short selling.

    3. Front running stock trades.

    4. Outright Ponzi Pyramids.

    5. Unregulated derivatives sold into pension funds, insurance companies and any place else “widows and orphans” can be found.

    6. Tired of the “risks” of equities? Want the safety of secured debt? Well step right up and sample some collateralized securitized mortgages!

    The solution to the abscess that has formed in metropolitan New York and then spread its infection is simple. Just say no.

  17. Anonymous

    Why is US justice currently asleep at the helm?

    Banks 2007 accounting records were false in an Enronesque way.

    I just cannot understand it. Is it a cost issue. Do you REALLY need to be rich to sue?

    An appalled foreigner

  18. Anonymous

    Killben wrote:
    “””how come taxpayers are allowing … or they just bystanders … their job being just to put the money on the table and ask no questions to be asked how it is spent

    how come fed, treasury, congress are just simply mouthing a few politically correct words but allows business as usual

    unless someone acts we will all be posting only “””

    Many of us tirelessly called, wrote, re-wrote and wrote again our congresspeople and representatives urging them not to do this.

    But apparently to no avail. We will, however, vote them all out next go-around.

  19. Anonymous

    Calling it looting — while basically true — only serves to inflame. We are in dangerous times. I personally appreciate it when the press and politicians restrain themselves from inflamatory labeling.

  20. S

    Watch the US ride the dollar down and then try and issue in yen and euro to try and backstop the liquidity flight as the debt machine gets rolling. TPTB in those coutnries ought to be thinking about the Fed next move to try and protect dollar flight. The idea of us issuing foreeign bonds is coming and they will try to drive dollar down and then issue to try and capture upside.

  21. Anonymous

    In January of 2007, as a soon to be retired Wall Street equity analyst, I attended a large lodging industry conference that was attended by both companies and financiers. At the conference, I listened to a panel (comprised of investment bankers from most major houses) discussion on how long the good times would last. At that moment in time, CMBS and cheap bank loans were washing over the lodging industry and CFOs stumbled around in disbelief of the affordability of money. Bankers stumbled around in disbelief of the outsized year-end bonuses (they had just or were about to receive) and the willingness of their firms to keep shoveling money out the door.

    When panel members were asked about when the good times would end, the group unequivocally and unanimously agreed that not until a disaster occurred would the money stop flowing. The group was in essence saying that they couldn’t figure out when liquidity would tighten or what was a good investment, so why try? As long as they were all in it together, no one would be faulted. For me the implicit admission that they (bankers) were not even going to try and stop the train wreck was appalling. However, given that they were so over compensated, it was probably imprudent for them to try and stop the train. Any mid level-to-senior banker who was taking home $2 to $5 million per year wanted to keep the train moving at full speed (if only for another year) and not impede its progress….even if it meant shooting off the rails and into the abyss.


  22. Anonymous

    thank you so much for this article. Like so many others it sheds more light with precise language for what can only be perceived emotionally and therefore be poorly communicated if at all.

    It is imperative to assign language to these mass movements and the group behavior that characterizes them.

    One can feel the looting, the colonialization of the American people over the last 25 years by corporate run government, the creation of a dumbed down elite …

  23. Anonymous

    The sad thing is in the long term things will not change. This is Amnerican capitalism at work. It was already like this 100 years ago, the only difference might be the scale of things now with two ponzi schemes within a decade: first making money selling the worthless dot com stocks, now selling wortless mortgages. Bloomberg reported this week that bonuses on Wallstreet will be half of last year. That’s right, not zero, just half, giving traders and investment bankers still bonuses of 1 to many yearly salaries. Wall street traders are the heroes of young people in University, who want to follow their footsteps of becoming rich in their twenties or thirties. If you really want change, you need a revolution in American society, turning it for example in more European style captitalism. But that is seen as socialism or communism in the US, and therefore bad, and this belief is deeply rooted in American society. Summarizing: things will not change, wallstreet is already looking out for the next big thing, the next ponzi scheme.

  24. wintermute

    Spot on Yves.

    I wonder whether the regulators should be forced to sit down and watch Danny DeVito's move "Other People's Money"

    It just might give them the clue they need to understand what went wrong – especially the wildly floating exchange rate between OPM and USD which can be 10:1, 100:1 (or more in the case of GS, MS & co).

  25. S


    One derivative of this is the entire OPE complex. i am always reminfed of the panamsat, Yell, and hertz (?) deals. The PE scam was worse asit continues. buy lever up and destroy the balance sheet with dividends to yourself (reduce equity exposure) and then use cov light financing for a back end cram down. The PE craft was really the high art of robbery. Shameless. but they add value…right..

  26. Anonymous

    Americans are too complacent and still believe that their elected officials are doing the right things as their proxy in the democratic process. Maybe when the breadlines return to America will Americans get angry enough to march on Washington & Wall Street demanding justice for the fall of the house of cards. In the meantime, blog away.

  27. Sandrew

    This made me think of this quote, from LOSC, in which I detected no intended irony: “If firefighters are some of the highest paid people in your county or state, with salaries well into low-six figures, great benefits and true pensions that allow you to retire at 50 and receive salaries (in perpetuity) above what they made in the 4 yrs they actually worked…well, then your your state had better be on fire or beset by fire-breathing dragons like in Reign of Fire because that’s the only way to justify that level of compensation.”

  28. cent21

    How has the banking industry’s bonus pay differed materially from Bernie Madoff’s?

    Books will probably show Madoff only took fees supported by his reported assets under management, if they can ever figure that out.

    I guess banking bonuses were at least based primarily on real market quotes, however distorted the quotes were. So they were more like a gamble; heads, we get big bonuses and the economy putters along as usual, because interest rates are low and real estate values never fall; tails, we get big bonuses and then get somewhat smaller bonuses funded by taxpayer bailout dollars while the economy goes into free fall.

  29. Francois

    “Why is no one willing to call things by their proper names, and instead resort to euphemism and double-speak?”

    Who owns the news media today? Do they move in the same circles than the bankers? Do they meet at the x-mas parties of their elementary school children? Do they shop at the same spots? Live in particular neighborhoods?

    If yes to several of these questions, then the answer to your question is obvious.

  30. Anonymous

    “It became clear to me then that leveraged fixed income is the height of folly. The players pretend to be rocket scientists, but in fact rely on mean variance optimization, which works until it doesn’t work. While it works, the practitioners earn huge amounts of money, and when it doesn’t work, they hunker down with their lawyers and try and keep what they’ve extracted in past years, while their investors go bust. The key personal characteristic needed to do this is to have no shame.” – Jim

    100% on the money.

    The reason this can occur is human nature. The quants always have a willing audience they can scam. All they have to do is throw up a track history of say…5-10 years…and it is human nature for people to say…AH HA…this guy knows what he is doing. He has figured out all these models that show this is a free lunch.

    In fact…the quant himself believes it…because that is the dogma he learned in his Ivy League B School.

    It is human nature to assume that the near future (or even distant future..) will be like the recent pass.

    Of course in reality the quants are collecting nickels in front of bulldozers…as Taleb says.

    To me, whether they know it or not is immaterial. Either they are thieves or morons in my book.

  31. Anonymous

    I so agree with Yves, M.G., and several other posters: the kind of language we use in describing this calamity is crucial. And I strongly disagree that using the correct words is ‘inflammatory’. That’s absurd. It isn’t inflammatory to call John Wayne Gacy a murderer; it certainly isn’t inflammatory to call those who’ve stolen billions upon billions of dollars, thieves. We need to use the right, strong words: theft, looting, gambling, Ponzi scheme– not because they are punitive or self-righteous–but because they are the only accurate ones to use. If we describe the problem with weak, foggy euphemisms (regulatory failures, lack of oversight, excess, blah blah) the severity of the problem and its essentially criminal nature can’t be seen, let alone dealt with. Say it loud, say it proud, and say it whenever media people euphemize or minimize: what has been going on is simply, bluntly, crime!


    These bankers are simple criminals that have looted us. They need to go to jail. Instead, Fuld is rich and Paulson is King.

  33. Anonymous

    There is plenty of fraud to go around in this collapse. And it should be properly called out and prosecuted.

    But there is also plenty of gambling with absurd amounts of leverage and misguided, but not criminal, trust in flawed models. For those people, they should be fired and bonuses should be clawed back and/or paid in the same crap assets that they accumulated.

    Calling everyone looters may just make people angrier when we need cool heads to get past this.

  34. CTMM

    “It was looting, and it is high time the media starts describing it in those terms.”

    Anyone else think Yves is sexy(er) when she gets angry?

  35. Anonymous


    Per usual I find your insight spot on. But I think the reason we have not seen a more vocal protest–or in fact why people are not out for blood–is that the average American just doesn’t understand the gravity of the situation and cannot comprehend that we’ve created a financial structure that institutionalized and rewarded fraud, greed, deception, duplicity, and downright theft. The arcana of it all is simply too baffling to ordinary Americans. Not until there is truly personal suffering–mass personal bankruptcy, foreclosures, resource shortages, rationing, and other things that affect the daily lives of average Americans–will people come to their senses and realize we’re living in a time of the most profound theft of wealth from society at large into the hands of less than 1000 people. I can think of many revolutions on the European continent that were started over far less offences.

    When will the rest of us wake up?

  36. Anonymous


    Thank you for speaking truth to power, or in the current case, fascism. You can dance prettily around the term but it is an apt description of the private/public relationship that enables crimes such as we are seeing.

    Because the fascists own the media they are, so far, able to convince the public that the hypocrisy about the treatment of the financial companies and the automakers is logical. Even with the scale of the past and current effects to the economy of the financial crimes in relation to the auto/oil co-fascists the media is able to pretend like everything is peachy.

    Thank you again for your postings!!!

  37. Gentlemutt

    Bankruptcy for profit: any lawyers/judges on this thread who can opine on the probability of successful civil or criminal actions on the basis of thatkind of argument?

    Any informed opinion on the merits of some kind of class-action lawsuit on behalf of, say, all US taxpayers against all financial industry employees who received more than $XX amount in 2005-06-07?

    There is not much doubt about the moral/ethical failures of this crowd, but those of us not waiting for final judgment (and many of us who do) don’t get much satisfaction from that. How about their legal vulnerability as a class?

    If current law protects them, can future legislation actually reach back and clawback anything?

    Or are we just getting ourselves in a huff so as to lock the proverbial barn door going forward… with regulators from the Clinton era? :)

    Please advise.

  38. Anonymous Monetarist

    Yves given your article I thought you might find interesting this translation of the recent Testimony Of Interim Assistant Secretary For Financial Stability Neel Kashkari Before The House Committee On Oversight And Government Reform, Subcommittee On Domestic Policy:

    ‘Piacere. It is a deep and moving honor to discuss the waste mangement business with all of youze.
    These are trying times for this thing of ours. Credit markets were saying ‘va fa napole’. The Borgata was approaching a stage of crisis…
    Let us not forget the Code of Silence. Anti-Trust violations aside… Those that go oobatz get pinched.
    Our capo in his esteemed wisdom gave the crew a taste without excessive vig. There was initally discord on points and even unfortunately a necessary message job for those that had not in the past paid tribute. But that jamook Fuld got his, buon’ anima.
    The shylock business continues.
    The necessary themes musciata are expressed by us. The cafones and poveretts, for whom the books are always closed have been told ‘col tempo la foglia digelso diventa seta’
    Gentleman, this Golden Age is quickly coming to an end. It is imperative upon us to complete our spring cleaning for it is possible that there might be mannagge with the tizzun. Already the fanook is getting all chiacchierone on the shy. That NY strunz. This is causing much agita I know for there could be predicates. None of us wish to be guests of the state. This is not the time to eat alone.’

  39. luther

    "Just say no."

    as someone who lives & breathes in the eye of the abcess, let me say that the medicine you prescribe works wonders…

    …even (especially) here.

  40. Jojo

    It’s not just a failure of kapitalism here. There should be little doubt that the leaders in socialistic societies are also prone to looting.

    Greed seems to be part of the human condition and will always be with us.

  41. DanyBoy

    Yves you are right that the Times is pulling punches.

    Permit me to articulate some outrage:

    <<"This crisis has turned out to be much broader than anything I could have imagined.">> -Alan Greenspan, Congressional Testimony

    Well Imagine THIS:

    Mr Greenpsan, you have indeed learned nothing at all and worse, you have allowed the once bottled genie of corrupt capitalism back out of the bottle and into our lives.

    I contend that the damage to America's financial health is irreperable for at least a generation. No matter what hokus pokus numbers they throw at us and no matter how many times they try to pull a rabbit out of a hat, WALL STREET NO LONGER EXISTS!!
    It is so unthinkable, horrid and sad that EVERY once mighty Ibank either has vanished, no longer exists as an independant entity or else has been forced to change it's business model under threat of insolvency!

    It is so sad to realize that one of the jewels in America's crown since the beginning is missing, vandalized. Americans under 20 have been robbed of the future they were promised. Americans over 40 have been robbed of retirements they were promised. We have all suffered a loss that was so big we have not fully realized it yet. But we will.

  42. Jmd

    @ Independent Accountant
    Startlingly, one of the most senior auditors at Lehman – a non-lawyer – was put in charge of a large proportion of the Legal department over two years ago. It was one of the most reprehensible instances there of the business trying to tamp down any ‘legal bottlenecks’ but of course it was also signed off on by the GC, Mr. Davos. And now she’s at Barclehs. La plus ca change.

  43. Anonymous

    The recipients of the “proceeds from theft”, er, bonus knew all too well where the ship was headed. They fully intended to bail out, and, thus, according to theories of cooperation, one can defect when one knows one ain’t comin back.

    As for someone’s question as to why we all just seem to be standing around taking this, I think that it’s because our current mindset makes us believe that representation (as in House of Representatives) serves our hopes and dreams. Why can’t we present, rather than be represented as one of my brilliant mentors often asks?

    Good luck to us all, as we will need plenty of it.

    Doble M

  44. Anonymous

    “Do you REALLY need to be rich to sue?”

    YES. Public interest companies have been fighting banks over foreclosures. Public interest companies have been WINNING, because many of the loans are blatantly fraudulent.

    Economic crisis hits: we all know who got the bailout money. Guess whose funding got cut?

  45. Glen

    You'll be pleased to know that in Australia, the Commonwealth Banks highly paid executives thought that it immaterial to tell the market about a 20% increase in bad debt provisions while trying to raise an additional $2 billion incapital. It's not hard to see where the $2 billion would go. Thankfully our toothless tiger the Australian Securities & Investments Commission are on to it. Bet the CBA must be running scared from this pack of sops.

  46. M.G.

    Excellent. The economy has gone Mad-off!!! Eventually the Nobel Prize Krugman also writes HERE the inconvenient truth. But now you have to draw the consequences of this, and somebody’s else, written truth about fraud and corruption economy: a) what is the point and macro arithmetic of a 600 Billions fiscal stimulus when Madoff with just a pen writes off about 10% of that “wealth”? b) What about progressive and financial transactions taxation? c) What about better allocation of now scarce resources to productive investments? What about accountability and transparency?

  47. Anonymous

    Ah yes … let’s get real with the language … Scamerica, where the rich man owns the scam ‘rule of law’, lock stock and barrel …

    Those that look for meaningful and positive change in the scam courts, or scam electoral system for that matter, are caught up in the illusions created by the rich man’s scam 24/7 infomercial – now totally disgusting – media.

    This is a strong and insightful post that needs to be taken much further than screwing the public with bankruptcy ‘laws’ to diss on retirement benefits. A lot more dots need to be connected that will explain the current ‘credit crisis’ which in real language should be called a global financial coup.

    Yes, this is an intentional global financial coup meant to eliminate the expensive managerial middle classes entirely and create a two tier ruler and ruled world with the ruled in perpetual conflict with each other – and all managed by a much lower cost to operate law enforcement class. Go back and read Henry Kissinger’s recommendations for limiting world population to eight billion, get up to speed on Strauss neocon elite philosophy (especially PNAC), take a good hard look look at earth sustainability if current trends continue, and then realize that a gangster government that would kill over a million Iraqis without batting an eye, for oil and more direct military outposts in the Middle East, would have no qualms about decimating its own domestic population and the domestic populations of other western ‘democracies’.

    Yes, its honest language time. Deception is the strongest political force on the planet.
    More political analysis, rather than financial, is required.

    i on the ball patriot

  48. Charles

    I am waiting for someone to look at private equity funds’ compensation. remember those $20b mega funds riased in 2006 and 2007? They pay 1 to 2% annual management fee regardless of whether the funds are investing and regardless of performance. Now 1.5% on Blackstone or TPG’s $20b fund works out to, hmmm, $300m a year? And that’s just one fund, these PE firms have at any one time, maybe 3 active funds. Go figure! Maybe the taxpayers should ask where their pension money have all gone to, on days when Harvard and Yale’s endowment assets are 25% to 30% down, what is left of the public pension funds? Are these funds continuing to pay the management fees to the PE firms?

  49. Waldo

    Very insightful and intellectual group producing this blogosphere.

    I have had this insight now for about 7 years. I want to share it.

    [I posses an MBA from the most reputable finance department in the world (Midwest local; very windy).]

    This is the insight:

    The behavior of the oil group specifically within the power based facilitated by the Presidency has performed the most historic heist of all times.

    There cannot be one intellectual reading this little blog comment who can defend the price of crude from $147 a barrel to $33 in less than 5 months this year. From a free market point of view – truly impossible. Supply and demand cannot produce this variance. Yet all of us cannot "see" or have the courage to voice our conscious to its origin.

    The non-market price of oil commencing a month before Bush took office and peaking earlier this year was manipulation. This manipulation has created some profound distortions in our market (mis-information).

    Understand this about finance: it quantifies it does not create. The finance market has been operationally cut off due to the rise of oil. The IPO market shut down basically 7 years ago. There was a void that was hard to see. Wall street possesses the greatest consentration of capitalists in the world. This was created through natural forces. Without real IPO and M&A activity on a typically robust scale the expectational power of investors forced American finance firms foolishly into real estate. Do not discount to much the quality of Lehman. They were created around the Civil war and survived the Depression.

    The amount of stealing oil has schemed is profound. Add to it the Fed consumption of tax dollars due to military activities (there is a correlation there as well, simply put the value of Iraq's oil reserves). This to me has been a plan that the finance industry has been a victim of. The frauds of Madoff and such must be criminally prosecuted and are a positive outcome of this heist. "When the tide goes down we will see who has there boxers on"

    Ralph Waldo Emerson penned an essay called "Compensation". This is must read for our very confused society. His words are clear and are true utterances of a genius.

    Roughly stated he said "When a country behaves like a prison there currency will reflect that reality." Our currency has been sending signals to the American citizen since the onset to this heist.

    Remove the lowering of the interest rate over the past three years and all things being equal research the relationship between the increase in oil prices and the fall of the dollar. And any intellectual who thinks that oil follows the dollar is naive or worse. The dollar represents it does not create or scheme.

    We have serious felonious behavior far above our finance industry and is being coveted by our most esteemed institution, the White House. This should not be to surprising but must be proesecuted. The lesson for us all in the historic eight years is the profound value vested in a free market by justice.

    May we all lean more towards our character (moral strenght) and find the courage to stop these madmen from allowing this to be hidden away for another generation to endure.

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