Are we supposed to take this posturing seriously? The media is now peddling more and more banker-favoring narratives with a straight face.
The Columbia Journalism Review described one last week, how a little Goldman Kabuki theater to appease the peasants was incorrectly depicted as a serious move:
…the press way overplays what is essentially a PR move.
The Wall Street Journal and The New York Times both slap the news on A1, with the WSJ headlining that “Goldman Blinks on Bonuses,” implying it’s backing down on pay, when it’s doing no such thing. The Times’s hed is not much better: “Goldman’s Curbs on Bonuses Aim to Quell Uproar.” That implies that Goldman is curbing or cutting pay.
It’s doing no such thing. In fact, the move in all likelihood will increase the already-astronomical amount Goldman executives—and I do mean executives: these supposedly A1-worthy changes affect only the top thirty employees—will get this year. That’s because the big move, such that it is, is that Goldman is going to pay its top 30 people not in cash and stock, but in only stock—shares that they can’t cash in for five years.
This is a nice, positive move toward tying Goldman employees’ interests—like those of its partners of yore—to the long-term health of the firm. That theoretically means they wouldn’t be as tempted to blow up the world economy again in search of a quick buck (well, bucks. Many bucks. It’s always many bucks with Goldman) by, say, selling time-bomb securities they’re shorting at the same time.
Wellie, even this interpretation is a tad optimistic. Given that Goldman was a part of this last “blow up the global economy” exercise and now knows for certain it will be backstopped, there is no reason for it not to load up on risk again.
Today, the Wall Street Journal is promoting the curious fiction that a few harsh words from Obama to the banksters has any significance aside from its hopeful PR value.
Recall that Timothy Geithner once ventured early on to actually use “currency manipulator” and “China” in the same sentence. China threw its usual temper tantrum and the US backed down pronto. Here, Obama’s popularity ratings are falling, so the president has stepped up the rhetoric.
But who does he think he is fooling? The UK is imposing a 50% bonus supertax to encourage banks to retain earnings rather than pay them out. Financial services is a larger percentage of GDP in the UK than the US, so it is even more important for them not to mess up banking than it is for us, and they clearly believe that curbing banker pay is a positive and necessary move, and in lieu of having a worked out policy, a stopgap measure is a good place to start. Do we see anything approaching the same resolve here? Of course not, “resolve” is an empty word as far as Obama is concerned.
But look at how this tough talk drama is played up in the Wall Street Journal:
President Barack Obama lashed out at Wall Street, calling bankers “fat cats” who don’t get it, in an escalation of tensions with the industry.
Mr. Obama, speaking on the eve of Monday’s meeting with the heads of major banks at the White House, said he would try to persuade bankers to free up more credit to businesses, with the aim of boosting job growth. But the president also expressed frustration with banks that the government has assisted.
“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street,” Mr. Obama said in an interview on CBS’s “60 Minutes” program on Sunday.
Yves here. That is a curious and revealing statement. No, you may not have run for office on a “cream to the bankers, crumbs to everyone else” platform, but it is certainly what you have done at every available opportunity. Start looking in the mirror and owning your policies, instead of pretending you are somehow not responsible for them. Back to the Journal:
Relations between the banking industry and the White House were frosty from the start and have deteriorated in recent weeks, with large banks lobbying against portions of legislation that would toughen financial-market regulations and administration officials angered by some banks’ continued payment of high bonuses and their reluctance to lend.
Yves here. Huh? Team Obama is acting surprised that the banksters are lobbying heavily against reform. They have been doing this all the way through, even ones who were still on the TARP drip feed. Were they not awake when the banking industry gutted the most meaningful part of the new consumer protection agency for banking products, that banks be required to offer plain vanilla products? Team Obama telegraphed a bank friendly posture from the get-go, from Geither’s very first statement in office, through the stress test charade, to letting the banks pay back the TARP so they could resume the critical-to-the-economy function of paying top executives big bonuses. We are supposed to take this “surprise” as genuine? They aided and abetted this behavior. No, what they are really surprised at is the chump public noticed and is pissed.
And now we have this:
Mr. Obama is scheduled on Monday morning to meet with bankers to exchange ideas on ways to increase lending; to review the financial-industry regulatory bill moving through Congress; and to discuss bankers’ compensation
The industry signaled its complete disrespect for Obama when not a single Wall Street chief executive attended Obama’s anniversary of Lehman speech. They know they are in the driver’s seat because Obama already ceded too much and is now in no position to claw his way back. Had he acted boldly starting January 20, things could be very different, but he now lacks the strategic position to have any impact, and he never had the nerve to begin with.