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Monday, February 2, 2009

self-awareness

Please, just shut up.

The bail-outs of Citigroup and Bank of America could distort the market if the US lenders succumb to political pressure when making lending decisions, a senior executive at JPMorgan Chase has warned.

Jes Staley, head of JPMorgan's asset management and private banking operations, said political interference in the management of those lenders that have turned to the US government for large-scale support was the "biggest risk" facing his bank.

[...]

"If the big banks start to be geared for public policy as opposed to economics we may end up competing against institutions that are being run for non-economic purposes,” Mr Staley said. “That is the biggest risk we see out there.”

If the entire financial industry wasn't on life support from the government because of the collective uneconomic stupidity of finance nerds then yes, fine. But unless Jes Staley's biggest fear in 2007 was that the entire financial system will implode on itself without any government assistance at all, well then we have a teensy problem.

Look, dude. I sympathize with the argument that government banks will be prone to misallocate resources to 'non-economic' uses, whatever that means. But could they really do worse? We're talking about a financial system that channeled vast amounts into a mind-bogglingly unproductive, uneconomic real estate bubble, which unlike a tech bubble, doesn't even leave anything useful in the crater it left when it exploded. Teenagers will have lots of foreclosed houses to hang out and snort PopRocks in or whatever they do. That's about it.

The last decade has given the financial industry the closest thing it will ever have to the innovative, regulation-free, libertarian paradise it's always wanted. And quite simply, the magnitude of self-inflicted wounds in finance are such that if the government is even having to seriously consider making these kinds of decisions, like intervening in the most basic, mundane forms of finance, that it reflects badly on your profession, not theirs, whatever their current, and certainly future, policy mistakes will be. So yea, while the argument remains a valid concern, it still matters who its coming from: some douche whose company survived thanks to the government interference he's now whining about.

Free advice: take your bailout billions and just shut up for a few years. You're impossible to defend, even for people who like capitalism and appreciate finance, like me, believe it or not. But seriously. Shut the fuck up. Thanks.

More: My imaginary girlfriend Aline van Duyn has more on the lack of humility in finance, which sheds some light on how something like this can still possibly happen.

For months, I and others have written about the disconnect between the way Wall Street regards itself and the way it is regarded by others. Why should investment bankers get paid more than the president of the United States? It is hard to make the case for such payments when the banks in question have received billions of dollars of taxpayers' money. But few bankers think it is strange that they are so much better off than others, even after the recent traumas.

Wall Street is not used to being accountable to anyone. For years, the financial industry has made more money than nearly any other business in the world.

Banks' shareholders rarely questioned them, even as huge chunks of revenues were spent on compensation. It is hard to pinpoint what being accountable to shareholders actually means.

Even activists such as billionaire Carl Icahn had mixed success. Mr Icahn targeted Time Warner a few years ago, when Dick Parsons was the media group's chairman and chief executive. One point often made by executives was this: investors who did not like Time Warner could take their money elsewhere.

Taxpayers cannot just walk away...

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