2 min read

The Passion of the Banks

The Wall Street journal asks:

Was it surprising to investors that Merrill paid $3.6 billion in bonuses?

This figure leaned toward the low end of estimates that had appeared in the press, and it was significantly less than the $6.7 billion that some news outlets had forecast. Just two days before the shareholder vote last December, the Wall Street Journal’s Deal Journal cited a Bloomberg report estimating a 50% cut in Merrill bonuses compared to 2007 (a year when the firm also lost billions and also paid billions in bonuses). A 50% cut suggested Merrill bonuses in the range of $3 billion — not too far from the actual amount paid.

Via: Cuomo and Towns Attack Bank of America for Bonuses — WSJ.com.

If this was public information, should investors be angry at the companies disclosures? How can the same politicians that cheered this deal now condemn it? (The short answer being that’s politics, but I could not help but naively make that point).

Last week there were about 30 protesters standing outside my office. They were lacking passion (they were literally just standing there, not speaking) and a coherent message (the most popular being “quarantine Bank Of America”). I think the politicians and these protesters are responding to a general sense of frustration with the banks and the bailout bondsmen (by which I mean the treasury department and the financial regulatory community).

People don’t understand what went on, they don’t understand how far it went, and they don’t understand that the vast majority of people at banks were not involved in the big payouts or losses that occurred. They do understand that their friends and family are out of jobs and falling and hard times, and there is the sense that something shady went down. Still, this unspoken, this inexpressible frustration is being vented in ways that are at best inefficient and at worst dangerous.

The public is letting the politicians bait and switch them, offering up corporations for the kill rather than end their own careers or fix their decades of mistaken policy. The politicians are crucifying banks, saying “You can die for our sins”. So what if most of the people hurt hand nothing to do with the crisis. So what if nothing is done to improve us. I am progressively losing my faith in the ability of our congress to govern. In the words of Herb Stein “If something cannot go on forever, it will stop”. This age of inaction cannot continue, the only question is what will eventually stop it and how long it will be.