Thursday, October 14, 2010

Wall Street's snake oil salesmen are at it again

Thanks Sue, my darling wife for the contribution. Manipulation of markets that is why that are making the profits. Watch it all unfold in my book coming soon. "This time it is different not!"

Aivars Lode

Wall Street's snake oil salesmen are at it again
Charles Purcell
October 13, 2010

Comments 42

The fat cats on Wall Street have not learned anything from the global financial crisis.

Sometimes you read the news and you have to wonder if this is really happening. It was reported yesterday that Wall Street's banks, hedge funds and financiers are preparing to pay a record $US144 billion ($147 billion) in compensation and benefits to executives and employees.

What the? This group of snake oil salesmen and flim flam artists who brought the world to what people are calling the Great Recession — and very nearly a world depression — are receiving record bonuses a mere two years after the disaster, after their speculation helped drive Greece to the wall causing riots in the streets, and the financial meltdown of Iceland, former home to the financial vikings of Europe?

But it gets worse. "The payout, according to a study published in The Wall Street Journal, covering bonuses, premiums and stock options for the firm's executives and employees, is a 4 per cent increase over the previous record $US139 billion that was paid last year."
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So a mere one year after property bubbles and the excessive speculation of financial instruments so complex that barely anyone on Wall Street understood how they worked, let alone the laymen, one year after the US Government was flinging billions of relief money to institutions crying out for saving, one year after some of the major car companies of America almost went bust, Wall Street's fat cats were already pocketing record bonuses. In the space of 12 months they went from desperate supplicant to serial complainers about how government was stifling free enterprise.

In Japan, chairmen or chief executives of disgraced companies have the decency to resign (or worse) when hit by scandal. In the West, we hire PR companies to spin the disaster, wait for the world to forget, and continue on as normal with seemingly no shame at all.

In his book Collapse, American scientist and author Jared Diamond shows how societies destroy themselves from within long before external invaders hasten their collapse. The US is certainly making enough crazy decisions to hasten its own economy decline — and by extension, the rest of the world who are victims of the predations of Wall Street. And as the case with Greece, the world's pain is merely delayed, bailouts postponing the carnage for the length of a bond or a loan until we suffer another mini-global financial crisis a few years down the track when the loans and interest are due. What will the minions of Wall Street do then? Beg for more money?

If I had to pick two reasons for the decline of Western civilisation, I would choose financial irresonsibility (whose damage creates spiralling debt, allowing non-Western countries such as China to purchase our prime assets and industrial knowhow at bargain basement prices) and global warming as the two prime candidates. So why are the people who brought us the global economic crisis being excessively rewarded? And being penalised less than a footballer who broke a salary cap?

When someone robs your house, they go to jail. When someone threatens you, you can slap an apprehended violence order on them. Where is Wall Street's equivalent of an apprehended violence order? Where is the punishment meted out to those who have caused long-term harm to the wealth and competitiveness of Western society? Where is Obama's promised crackdown on Wall Street?

Surely one year is hardly enough time for Wall Street to pay penance for its role in the biggest financial disaster since the Great Depression, a global collapse that reached our very shores, Australia weathering it partly due to our robust mining industry and a much more prudential and secure banking sector.

I don't really know what the solution is. Certainly applying "stress tests" to US (and Australian) financial instutions to test their ability to endure future economic turmoil is a good idea. Eliminating or banning trading in a whole lot of financial instruments that create nothing but are little better than high faluting crap shoots is another. A small tax on share trading might reduce the millions of unneccesary trades made each day and make the market less of a giant casino. The thing they all fear, of course, is government ownership. The Gordon Gekkos of America couldn't wait to pay back Obama's loans so they could get out from under the "oppressive" hand of government.

Some might say it's best to let the market work things out. But the market brought us to the brink of financial doom. And if these overpaid captains of industry are intent on driving us towards another iceberg, it's time they were replaced at the wheel.

Charles Purcell is a Fairfax writer.

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