Bankers’ Pay On The Line Again

By Simon Johnson

The people who run big banks in the US have had a good year.  They pushed back hard on financial reform legislation during the spring and were able to defeat the most serious efforts to constrain their power.  They and their non-US colleagues scored an even bigger win at Basel this fall, where the international committee that sets financial safety standards decided to keep the required levels of equity in banks at dangerously low levels.  And the counter narrative for the 2008 financial crisis, “Fannie Mae made me do it,” gained some high profile Republican adherents closely aligned with the men who will control the House Financial Services Committee in 2011-12.

But there is also a potential lump of coal in Santa’s sack for the biggest banks, in the form of restrictions of pay – both its structure and perhaps even the amounts (although officially the latter is not currently on the table).

The impetus here comes not from American “populists” of any kind – although reformers of left and right have been pushing for progress on this issue since massive bonuses were paid out by firms that were saved by the taxpayer in fall 2008 (and again in 2009 in some cases).  According to the Wall Street Journal, for 2008 there were nearly 5,000 bonus payments in excess of $1 million at “the largest US banks that accepted Treasury aid.”

Rather the push to constrain bank executive pay comes from officials and the political elite in continental Europe – supported by an increasingly effective pro-reform group around the Bank of England (led by Mervyn King, the governor).  There is also supportive language in the Dodd-Frank financial reform bill, although this by itself rather vague and completely open to interpretation by the regulators.

Still, the overall proposal is entirely reasonable and well thought through at a general level: “lock-up” a considerable fraction of bank bonuses until we see, after several years, exactly how the banks do.

The issue, of course, is that banks (with their ludicrously low levels of equity; if this point is not clear to you, see this primer) can juice their returns considerably by taking on more risk.  These risks may not be apparent for quite a few years – depending on how long it takes the credit cycle to run its course.  Eventually, if those risks threaten to bring down one or more big banks, there may be a rescue by the taxpayer – and there is nothing fair or politically palatable about that.

Bank executives hate the idea that their pay will be constrained in any way.  In Europe, where bankers are less powerful than in the US, they have already lost this battle – although there is still a lot of a fighting about details and implementation to be done.

In the US, as we head into 2011, expect to see three types of pushback from the banks’ very sophisticated PR machines.

a) “We already ended Too Big To Fail”.  But we didn’t, at least for the global megabucks that would be subject to these compensation restrictions.  There is no way to handle the failure of a cross-border systemic bank, although than through Lehman-like collapse.  The case for stronger preemptive action to reduce system risk is overwhelming.

b) “This would weaken us relative to our global competitors”. Not really – given that it is the regulators of our main competitors who are initiating this move.  To be sure, Chinese banks are not likely to follow suit, but that is hardly relevant – and since when do we let China dictate our regulations or supervisory practices?

c) “This represents an inappropriate extension of government into private business decisions”. But there is little new here – at least since the 1930s, the relevant authorities have had the power to limit dangerous-risk taking by systemically important banks; the intent of the Dodd-Frank financial reform act was definitely to update and strengthen those powers.  Banks are different from other businesses; their failure can jeopardize the entire economy – as we saw in 2008-09. 

The banks will also worry that such pay restrictions will encourage their top talent to leave and join the relatively unregulated hedge fund and private equity sector.  This is a legitimate point – and suggests that the pay reforms may actually be implemented.  When powerful people (the hedge funds) want a change because it will disadvantage their competitors (the big banks), such changes are much more likely to happen in the American financial system.

Pushing risk-taking into hedge funds or other relatively unregulated entities does not of course solve the deeper problems that brought us to the brink of disaster in fall 2008.  But attempts to develop a more comprehensive approach for the system – limiting size and leverage (debt relative to equity) for the biggest players – were defeated at the behest of the big banks. 

Pay restrictions are not the ideal solution and they are not the end of the reform story.  But we should take what we can get at this stage.  Or, as seems more likely, we should encourage this debate to move into a more public arena – perhaps the regulators will push for restrictions and House Financial Services will raise objections.

The fight to make our financial system safer has barely begun.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire column, please contact the New York Times.

63 responses to “Bankers’ Pay On The Line Again

  1. You missed a fourth pushback, one that is already getting a lot of traction in the conservative/libertarian “believe anything our corporate masters tell us” blogosphere:

    d) Regulations of this or any other sort will increase the cost of doing business, and those costs will automatically be passed on to customers. Don’t think that could really apply to executive pay regulations? Give it a little time and someone will make the argument.

  2. Why do you believe that “Pushing risk-taking into hedge funds or other relatively unregulated entities does not of course solve the deeper problems that brought us to the brink of disaster in fall 2008?”

    To me, the failure of a hedge fund would wipe out the already wealthy investors in the fund and would not prompt any bailout money.

    To me, “excessive” risk is not necessarily a bad thing, especially when it is done by sophisticated investors who are presumed to know the risks and who will get no assistance if they are wiped out.

    Any clarification would be appreciated. Thanks.

  3. markets.aurelius

    Just a couple of things to expand on the points you made here, Simon:

    1) http://www.propublica.org/article/the-subsidy-how-merrill-lynch-traders-helped-blow-up-their-own-firm

    2) http://www.theregister.co.uk/2009/12/08/china_execution/

    Re point a) above, the TBTF has only been put to rest at the banks and at the federal agencies responsible for ensuring the efficient, legal functioning of markets. The fact that it still is the news media turning up the evidence of massive fraud in the institutions at the very center of the financial markets is staggering. The Congress, the White House, the SEC, the Treasury, the Fed, the CFTC, …, the whole lot of them are totally captured and doing absolutely nothing to either expose or prosecute the world-historical levels of fraud and deceit that collapsed the global financial markets.

    To your point b) above, the second link tells you why these guys will never re-locate to China — they execute those guilty of fraud. Here and in the UK, they just get larger bonuses.

    To your point c) above, the only “inappropriate extension of government into private business decisions” has come from the legislative and regulatory capture of the entire law-writing and regulation-enforcement apparatus of the federal government. Only in the US could the people who destroyed the markets, vaporized so much capital, and ruined so many lives take over the government to the extent that they’ve made the certainty of their survival and immunity from prosecution so complete. That, and the absolute certainty they will continue to pay themselves at levels that defy belief. The break between value added and compensation is so wide as to be in another dimension.

    The capture, take-over and dominance of the law-writing, regulatory and enforcement functions of the US federal government is so complete as to become a world-historical event itself — something historians 1000s of years from now will still write about and marvel at.

  4. The problem is that many hedge funds are highly levered. They’re gambling with enormous sums of borrowed money on top of (relatively small) equity bases from their investors. Also, some hedge funds are actually net lenders (see Asset Based Lending Hedge Fund). Too many people view hedge funds as simply a sort of mutual funds for wealthy people that invest in alternative asset classes. In reality, modern hedge funds are involved in all sorts of financial intermediation activities that make them a significant part of the shadow banking system.

  5. LTCM was a hedge fund.

  6. Thanks for taking the time to write this, “Markets Aurelius.” Soothed my soul to hear eloquence FOR JUSTICE from another voice and another angle…

    The lesson is this – only CIVILIZED people are willing to live by “rule of law” that protects the INDIVIDUAL against force and fraud.

    You can look at this mess from every possible angle, and nothing “civilized” can work with the uncivilized…just have to start containing them with the same force…just like putting out an oil well fire – fire with fire….

    But the Constitutional Convention needs to happen first so that “we the stupid” write it in the history pages that the “middle class” was the evolutionary height of “civilized”…”organically” civilized, I might add…

    oh, and BURN the Patriot Act :-)

  7. @Markets Aurelius”: And as the film “Inside Job” pointed out, academia is utterly captured, too.

    Futhermore, has anyone paid attention to the NPR program “Marketplace”? It has deteriorated over a period of years, and most sharply since 2008, into an apologist for all the major corporate actors, some of whom (GE, etc.) of course fund it.

    Public radio, neatly captured as well.

  8. Not relevant to this thread, but noticed your article on fiscal issues and the tax bill.

    http://www.bloomberg.com/news/2010-12-23/tax-cutters-set-up-tomorrow-s-fiscal-crisis-commentary-by-simon-johnson.html

    Although I agree with most of it, there’s one glaring statement that I cannot reconcile.

    “This is where Greece and Ireland were found wanting in 2010; we’ll see how Portugal, Spain, Italy, Belgium and perhaps even France do in 2011. Then it will be the U.S.’s turn.”

    Actually, Krugman has (rightly) taken this assertion to task. GREECE was found wanting. IRELAND was the poster child for fiscal austerity.

    Krugman has repeatedly compared Iceland and Ireland.

    http://krugman.blogs.nytimes.com/2010/11/24/lands-of-ice-and-ire/

    Let’s say that Ireland took the classic IMF approach, and Iceland took the “Joe Gagnon” approach.

    I think there’s a major thread that gets missed here. Fiscal austerity works in the sense that it convinces financial markets that FUTURE debt will be repaid, and one of the best ways of doing this is to get rid of existing debt. Of course, this creates a credibility problem – if country X devalues current debt, why won’t they devalue future debt?

    Likewise, existing financial players would like to tell countries “pay up or else we’ll punish you in the future by not buying your debt!”, BUT the truth is that they ALSO face a commitment problem. (It’s comparable to the optimal punishment literature in oligopolist game theory models.)

    So the determination of which way is best – orthodoxy or heterodoxy – really is empirical, but the empirical examples you used seem to not favor your arguments.

    In other words, for the US to regain sound fiscal standing, ANY cutting of current spending should be balanced by cutting of current debt load (either through formal default, or higher inflation). Moreover, it’s better to get the cutting of past debt obligations out of the way all at once, as expectations of monetization or default deter investment and raise interest rates.

    I think we’ve truly passed the point of no return, now. I don’t see how it all gets paid back at real value.

  9. Why focus on bonuses? They will be had, one way or another. Besides, they’re only are only a drop in the bucket compared to what the banks are getting from the Fed. Their control over the president and congress is the real outrage, as Simon has chronicled. The real importance of this issue is to whip up public outrage about the massive theft that has happened, which seems impossible at this point. Or maybe the film “Inside Job” could be made required viewing? To paraphrase H.L. Mencken, “Nobody ever went broke underestimating the intelligence of the American public.”

  10. “The background to development of Basel Capital Accord (BCA) via Basel I, II & III [yet to be implimented]“___The first BCA came into existence in 1988 – there was a need to set consistent capital standards for Int’l Banks so that one country’s banking sector would not have regulatory advantages over others {G-10 + Switzerland}. In conjunction with the BCA there is the Basel Committee on Banking Supervision {BCBS} responsible (ironic isn’t it?) for the BCA which host the Bank of Inernational Settlements {BIS} meeting behind closed doors.

    “Overview of BCA Standards” {three pillars of banking supervision}
    Pillar I: Risk_Based Capital Requirements
    Pillar II: Supervisory Review Process
    Pillar III: Market Disipline=Reporting and Disclosure Requirements

    Problems with the new BCA from Public Interest Perspective
    Key Notes: This then leads to problems with banks investing predominantly in the most risky of this class where the returns are higher, but capital requirements the same, as for low risk asset.
    Were talking about a reality that played a major role in laying the foundation for the Asian financial crises whereby so many loans made by large creditors were related to overpriced real-estate that didn’t carry a capital charge over safer loans. There is no question this was also a primary cause of the Latin American Debt crises, the aftermath of which helped create the first round of Basel Accords. There is also little doubt that this facilitated the Long Term Capital Management Crises, heavily funded by large U.S. banks.

    Trends in Banking Supervision
    Summary: While the US Gov’t body known as the Office of the Comptroller of the Currency still retains some powers as supervisor of national banks, today the Federal Reserve {FR} is the “king of regulators”. It seems that the FR will have the ultimate responsibility for supervision of all big financial operations based in the United States. It is the FR in the US who will ultimately oversee the standards set by the BCA, because BCA applies to the international players that will be supervised by the (all behind closed doors?) Fed.

    Global Financial Consolidation and “Too-Big-to-Fail” Risks
    Qick overview: “One can conclude from this that the FR, now the financial regulation king, does not consider itself at all subject to the discipline of a democratic accountability”. Nice!

    “Credit Creation for the Poor and Preditory Lending”
    Quick Summary: The fact that under the old and new BCA, there are no additional capital charges for sub-prime loans seems to have crated a situation whereby banks are originating a significant amount of sub-prime loans to prime risks. This tends to happen with mortgages in the lower income markets and, in fact, in 2000 the Chairman of Fannie Mae reported that about one third of sub-prime home loans in the U.S. actually could have recieved a prime credit if assessment had been done properly.

    “Addressing Causes of Financial Crises”
    Summary: Hedge Funds – The past few years have seen a rise in what are known as hedge funds which are generally high risk, highly leveraged investment(George Soros/Greenspan?) funds for the extremely wealthy. They are also completely unregulated on the premise that they involve ‘sophisticated investors”. As we saw in the Long Term Capital Management fund, banks have been making significant loans to these hedge funds without any corresponding capital charge commensurate with the banks involved. (The next shoe to drop because the public is going to be on the hook/ line & sinker).

    “Non-Bank Financial Institutions”
    Summary: BCA does not cover non-bank financial institutions. However we are seeing various countries’ umbrella supervisors feeling the pressure to streamline regulation (Spain?) regulation in the wake of financial services convergence. {[M3/ IMF/ FDIC/][Bretton Woods & Tobin Tax]}

    “Need for Public Input”
    Summary: The majority of comments coming from the larger banks (e.g. comments from Citigroup and the American Bankers Association) are generally asking for more leeway in setting their own capital requirements, and basically requesting lower cpital standards. PS. The big banks are very upset about disclosure requirements. (now isn’t that special)
    End
    Sorry for the lenghty comment Professor Johnson, but it covers all the bases. Plaese note that this is dated material from July/2001. (amazing…you’d think it was today?)
    Ref: “Unraveling the Basel Capital Accord” by Smithy (last section of document)
    http://www.bilderberg.org/bis.htm

  11. “I don’t see how it all gets paid back at real value.”

    It won’t. For now it’s a game of musical chairs, with every (extraordinarily rich) participant sure they won’t be the loser without a seat when the music stops. Until then, everything is just a stall to facilitate the upper class’ theft from each other to the bitter end.

  12. Bayard Waterbury

    Needless to say, Simon, I agree with the post. How does it not occur to anyone capable of rational thought that in an economy which is obviously still struggling along mired with essential inactivity (there’s still very low levels of essential activity from the “essential” bottom up perspective) the banks are only capable of paying such bonuses by massive rent extraction (ala GS and others churing FED funds plunked into US Treasury bills, and high speed trading, commodies arbitrage, and international banking arbitrage). The bottom line is that their ratios related to equity are absurdly low, and the assets which are presently counted by a massive revaluing (FASB rules weren’t changed by the financial reregulation) are of incredibly questionable quality, and, I suspect much of their assets are now comprised of even more CDO’s and other items of absurd esoteric financial (farcical) character.

    With US debt skyrocketing, and the reigning in unlikely to be possible politically (this is one way in which the Eurozone actually has an advantage in its diversity of politics). Let’s face it, the “tough decisions can” is likely to continue to be kicked past the point of no return, and when our bonds get realigned to their true value, all hell will break loose everywhere (if our bond quality slides, that will generate somekind of global financial tsunami, won’t it?). The US banks are like time bombs, and so, unless Wall Street decides to get smart, their millions will be worthless soonor or later in a global meltdown. Isn’t that coming? Can it be prevented?

  13. I can think of several names for economic/financial systems that impose austerity and deprivation while rewarding the architects lavishly, none are laudable.

  14. @Markets.aurelius
    Well stated.

    One can be overwhelmed when considering the precipice on which we all now stand when including the potential pension fund disasters about to explode, the potential muni bond explosions, the FDIC guaranteeing X # of assests for purchasers of closed banks, the states on the edge of bankcruptcy, the next wave of ARM coming due, in addition to the outrageously high risk and questionably manipulative behaviors of financial institutions, the revolving mega compensation employment door between public “service” and these same institutions & lobbying groups, the reality of zilch effective regulation of the OTC derivatives markets, mark-to-fantasy assets, dangerous HFT and on and on.

    Despite very well-documented investigative articles over quite some time by news groups such as ProPublica, McClatchy, and by certain individuals like Mr. Butler in commodities, all of which outline specific grounds for fraud/manipulation; precious little is done at the official level. (Carla, agree- MarketPlace = puff pastry)

    I appreciate Prof. Johnson’s optimism for effective change, but I frankly wonder if it is at all possible. I genuinely look for any positive sign.

    Annie supports a constitutional convention. I believe the general public simply does not search for indepth information instead focusing on the 30 second sound bite offered by talking heads. So, how realistic is it that we “outsiders” will actually become organized?

    While I stay informed and push for greater open discussion of all these issues, I prepare for the worst.

  15. @cedar: here’s a positive approach from Ellen Brown:

    “Governments everywhere are artificially constrained by having to borrow at market interest rates, which means whatever interest banks can extract. Governments can throw off the shackles of this scheme, in which private banks create the national money supply and lend it at interest, by forming publicly owned banks. These banks can then advance the credit of the nation to the nation, interest-free. And if this credit is advanced against future productivity, prices will not inflate. Supply (goods and services) will rise along with demand (money), keeping prices stable.” That’s the last paragraph of her article, which you can find in its entirety at
    http://tinyurl.com/25g8uwq

    Another note: Brenda, who comments on this blog, is trying to get something going. Email her at lets.start.a.grassroots.party@gmail.com.

    Like all of us, she’s crazy-busy with the holidays but I think she will respond to Baseline Scenario readers as soon as she can.

    In the meantime, Merry Christmas or whatever you may celebrate.

  16. Re: @ engineer27___Ref: “Too Big to Fail? Long Term Capital Management and the Federal Reserve” (Alan Greenspan)
    http://www.scribd.com/doc/13672420/-Too-Big-to-Fail-LongTerm-Capital-Management-and-the Federal-Reserve-Cato-Briefing-Paper-No-52-
    (takes awhile)

    This should also be of interest connecting the dots? The “Opaque and unapologetic esoteric Federal Reserve”
    Ref: “What happened to M3/ Greenspan”
    http://www.gold-eagle.com/editorials_05/chapmand112205.html

    Merry Christmas “ALL” :-)

  17. Carla is correct about Marketplace. I’ll never forget listening to Neal go on about the “paperwork sanfus” and “sloppiness” when many blogs had already exposed case after case of absolute fraud and perjury in the “robo-signing” scandal. A real reported would have actually investigated the allegations of fraud and perjury and then given the banksters the opportunity to allege that it was all just sloppiness and paperwork snafus. Not Neal. Day after day he either ignored the story or reported only the banks’ characterizations. Shameful.

  18. The article covers a lot of ground, as usual, and also as usual adopts a moralist perspective.

    1.There are very good reasons why the owners of banks would want the managers to hire individuals who can generate high returns within the risk constraints that the firm’s management has chosen. Some of these returns rely on superior knowledge (understanding customers’ corporate strategy and strategic opportunity and well as having the right contacts) at the heart of the relationship management function. The individuals involved operate in a labor market that includes other highly paid professionals and boutique corporate finance firms.

    2.If banks were required to pay much less than the market wage for this type of individuals, they would not be able to compete in the market for their services.

    1+2: If regulation limits “executive pay” and applies that only to general management individuals (who should not earn more than, say the equivalent in other regulation-dependent industries like pharma, hospitals, network broadcasting, etc) I guess that would not have to hurt the pay of the productive individuals with scarce talents, skills and knowledge that cause high returns (although the public might still feel unfairness, since the politicians have never educated the public to see the difference between managers and performers). The right comparison is with, say the performing arts: the concert hall manager may make less in a year than a performing virtuoso in an evening, and nobody thinks that is harmful to the public interest or to the consumers of these performances.

    So, maybe the political problem has a lot to do with the term “executive pay”. Managing a commercial bank is very much like managing a regulated utility, with the exception that traditionally top bank executives do high level relationship management work (and in the past a bank CEO’s “share of mind” with even his best customers would often be smaller that that of a junior partner at Goldman, then not a “bank” but and “investment bank”, operating under a different regulatory regime) which is premium work. However, they did not do this very well in general, as far as I have been able to see.

    However, as banks and investment banks started to overlap each other’s functions (with investment banks exploiting their more favorable regulatory regime), commercial banks hired more and more of those (mythically gifted) individuals, often whole teams, under a leader who would work out a profit/revenue-sharing deal with an originally commercial bank. Usually the banks were not very successful in this, often involving corporate finance, high level derivatives development and proprietary trading. JP Morgan is a well documented case of how even the most well positioned commercial banks found it hard to compete in the market for talent with non-bank firms, until the end of Glass-Steagall.

    So what regulators should consider when limiting pay for certain people (real managing executives excluded), is that these people would not work for banks then and unless banks were barred from certain activities as well, banks would probably underperform their non-bank competitors in those businesses because of inferior staff. Would you like the opera house director taking the place of Pavarotti?

    As someone who does not believe that commercial banks and investment banks should share managements and shareholders, limiting activities and foregoing profit opportunities might well be in the public interest, if those banks’ financial structure relies on regulation and informal gvt support, as is the case now and will continue to be under the new Basle accord. Investment banking should then be in separate firms and very publicly uninsured (with the exception of stockbroking accounts up to a low maximum). In addition, commercial banks should not be allowed to lend to investment banks or entities managed by them without adequate collateralization.

    The problem with the current regulation is that it maintains the combined model, which also (via the prime brokerage function) links “combined banks” to hedge funds (they provide a range of services and have often rather murky relationships with bank trading desks, especially where funds are managed by “alumni” from the same bank trading desks).

    Leverage controlled by a relatively small group of people and clearly out of range for shareholder- or regulatory supervision, often linked by long friendships and shared apprenticeships is a public concern. Especially when those individuals operate under perverse incentives and high levels of information asymmetry. Partial intervention to please the ignorant public (like the pay issue) is likely to produce unintended consequences that may be worse than doing nothing.

    Two years ago, in the last days of the previous administration, we let the opportunity pass to change the system (with probably support from the Europeans (ex UK) and the Japanese), so wingeing about it now does not make a lot of sense. And the industry owns congress again, apparently. It may even support this president for reelection, rather than someone beholden to the conservative underclass.

  19. How about we let them keep their bonuses but simply take their lives should the economy tank again? Your money or your life? sounds fair to me.

  20. Carla,

    Ellen Brown is close, and well-meaning, but she does not quite understand how the system works. Saying that “Governments everywhere are artificially constrained by having to borrow at market interest rates”, is simply wrong. The US for example borrows via T-bill/dollar re-cycling at real interest-rates that average-out to about one percent, this could be categorized as “artificial”, but E. Brown is suggesting that the costs are artificially high when in truth it is often times the other way around. Nations joining the EU, as another example, did so in part because they gained access to cheaper loans, and so it is more accurate to see artificially low interest-rates as part of what causes bubbles.

    Cheaper loans and the resulting increase in the money supply does not solve the current problem, and that is because the problem is ‘excess liquidity’ in relation to incomes/wages/upward mobility.

    A better way to understand the problem is to start with the realization that the demand for cross-border capital is “artificial”. Any nation can simply create ‘keyboard capital’ and so… there is no genuine reason for nations with genuine demand to share their gains with outsiders in a fiat currency system. There are of course other reasons for nations to allow cross-border capital, technology, jobs, and etc., but the recent craze for capital controls is yet another example of how nations with too much dependence on financial services are at the center of the problem.

    But… nations that depend too heavily on usury could, in theory, be just as dependent on these rents with a socialized banking system. That is not as likely perhaps, but, it is a good way to show that the systemic problem is neocolonialism via usury. And of course all other forms of exploitation through usury have a common denominator in that this all comes down to a question of who has has the right to create capital and benefit thereof in terms of wealth distribution. But socialist solutions to this problem of how to allocate keyboard capital still have the propensity to degrade into crony-based systems.

    So… the central issue here isn’t about isms, it is about wealth distribution and efficiency. And history shows that capitalism is clearly more efficient than socialism, but, history also shows that we have not yet freed ourselves from feudalism. The problem then, put simply, is that our democracy has failed to distribute power evenly across the population of the ‘advanced nations’, and this feudal arrangement depends on existing wealth being of an artificial value in relation to keyboard capital. Ironically though, the system itself is trying to balance these opposing values through interest-rates. Deficit spending is prolonging the inevitable, but due to excess liquidity, in relation to incomes/wages/upward mobility/consumption levels/etc., the system is forcing out the inefficiencies caused by usury via the natural demand pricing for capital.

    Put another way, developing nations are increasingly more able to provide endogenous capital as developed nations are increasingly more dependent on gains from usury and other forms of foreign investment. The demand for capital in general is therefore on a downward trend and this will eventually put so much downward pressure on interest-rates that capital allocations will be redirected naturally toward productive investment.

    Essentially, the owning-class is usurping the rope that the system is using to make a noose, this is complicated, but in the end, capitalism is that which will bring an end to feudalism. And it is happening now as excess liquidity drives down the demand for investment in general.

  21. Rayllove,
    Thanks for your explanation, and yes, it certainly IS complicated.

    I remain unconvinced that public banking and private enterprise cannot co-exist, actually ultimately to the benefit of both. After all, is anyone suggesting that North Dakota is a socialist state?

    You say, “The demand for capital in general is therefore on a downward trend and this will eventually put so much downward pressure on interest-rates that capital allocations will be redirected naturally toward productive investment.” But it seems to me that interest rates have been very low for quite a long time, and this hasn’t happened.

    Admittedly, my understanding is limited, but my gut says: don’t trust the guys who got us into this to get us out.

  22. Herbert Wetherby

    And I completely agree, in addition, the statement of “the system is forcing out the inefficiencies caused by usury via the natural demand pricing for capital” and that the system is trying to balance the opposing values, can be reinterpretated as the system is feeding off its self, and I don’t see any benifit to that.

  23. Carla, Herbert,

    As for interest-rates being low for a long time, as I said, deficit spending has held the laws of supply and demand in suspension. There are so many distortions right now. But, going back decades, excess liquidity has been the common denominator in a series of near collapses. The ‘Lost Decade[s]‘, the Dot Com bubble, the current GFC, all have imbalances between investment capital (too much), and purchasing-power (too little). But it is necessary to look past the stimulus efforts.

    I don’t have any respect for those “guys’ either.

    And yes, the system is feeding on itself, but… I didn’t intend to suggest that the elimination of feudalism would be painless. The nations that have become too reliant on usury and exploitation have some tough adjustments to make. Karma?

  24. Well, as BP told them down on the Gulf, “We gave you some money, now we’re taking your life.”

  25. That may be so, but most of those reliant nations you are refering to don’t have any intention of making adjustments until they have met their reward, where by they tranfer these so called adjustments to other younger parties. Who carry on in the exact same fasion as their older, but now deceased counter parts, until the karma is lost in their minds and no longer a consideration. I don’t see any IRS agents sweating yet?

  26. Herbert Wetherby

    No Anonymous

  27. There really are too few bona-fide USA born and bred citizens on this blog, it seems…not unexpected, all that global hoo-ha…

    But that’s what is preventing the “organization” – I have no trouble “convincing” anyone I have known my whole life with the same background “class” experiences as myself

    that what has gone terribly wrong can – and BY LAW – must be fixed by a Constitutional Convention.

    The largest “political party” in the USA are the “Independents”.

    That Patriot Act needs to be burned. We’ll start the Convention that way…

    Yup, there really IS a “culture” that is uniquely USA – go figure :-)

    I’m NOT giving science over to be “managed” by the INSANELY incompetant who are so retarded that all they know is:

    More misery for others = More money for ME ME ME

    Science SERVES the greatest good for the greatest number – and as the song goes – “…if you’re not part of the future then get out of the way…”

    And I really mean that – get out of the way…

    Not bending my knee to the “power” of War Lords and Drug Lords – ever.

    It’s just that simple. And what is the problem with a “culture” that KNOWS it can eventually get it right enough to turn Spaceship Earth into a Paradise getting a piece of FIAT $$$ to keep it all going in the right direction?

    Eugenics has supported the psychotic “mind” over the normal for way too long – way past time to push back – even do a few pre-emptives – like against the “banksters” who display no capacity whatsoever for NORMAL human functioning and who have done way too much damage to core areas of CIVILIZATION for anyone to “tolerate”…

    There is a PROPER way to go to war – heck there is even a “doctrine” going back a thousand years – “Just War”…wiki it…

    At this point, it’s not pre-emptive – it’s defensive…grab the right to stop the theft of CIVILIZATION…

    Constitutional Convention – FOR REAL, not the astroturf bs of tea bags – and BURN THE PATRIOT ACT.

    Happy New Year – take back free will destiny.

  28. And, don’t forget, the likes of Goldman and JPM execs are doing, “GOD’s work”, as they have ever so kindly instructed us.

  29. James Kwak has suggested the middle class and professionals will lead this revolution. For some reason I’ve been thinking about this recently. Certainly, we need to protect all that we cherish. And what is truly important exceeds material gain.

  30. As I’ve repeatedly argued:

    The most successful terrorists to ever strike this country did not wear towels and live in the middle east. They wear Armani and live in The Hamptons.

  31. markets.aurelius

    @ Rien Huizer

    That is a brilliant insight vis-a-vis the political economy of leverage concentrated among a few institutions run by like-minded men (for the most part):

    “Leverage controlled by a relatively small group of people and clearly out of range for shareholder- or regulatory supervision, often linked by long friendships and shared apprenticeships is a public concern. Especially when those individuals operate under perverse incentives and high levels of information asymmetry. Partial intervention to please the ignorant public (like the pay issue) is likely to produce unintended consequences that may be worse than doing nothing.”

    It would truly be an enormously fruitful line of investigation into how control of capital markets is effected via the concentration of massive leverage among a few institutions sharing a similar set of goals, assumptions and modi operandi, all essentially educated by the same (compromised) set of profs at Harvard, Columbia, Yale, Princeton, and, dare I say it, MIT and Stanford. It’s not that the models and theory have become bankrupt, it’s that the logic — the Apologetics, more precisely — have taken on a near-religious indoctrination that these folks are the best and brightest, and, de facto, what they want and desire must be the best and highest aspiration of their respective societies. They can do no wrong, because they truly are the choosen.

    Think about a firm with $2 trillion of assets built on leverage of 30:1 (cf GS during the mid 2000s, or DB, or JPM, …, you get the idea), acting in concert with 5 other such firms. Together — via their direct signalling and indirect communications — these firms direct or control assets that are multiples of their host countries’ GDPs.

    Is it any wonder the presidents, CEOs and COOs of these firms get more cell-phone time with the US Secretary of the Treasury than do actual lawmakers who, in theory at any rate, control their budgets and write the laws that direct the Treasury’s actions on a day-to-day and long-term basis? The Treasury secretary knows who will be directing the drafting of laws governing his and his successors’ actions. As do the head of the Fed, members of Congress, the current and future occupants of the White House, the regulatory agencies, … .

    Does it come as a surprise to anyone that when the head of any of these firms tells the head of a government, say, Greece, or a suitably high-level functionary, that they can use derivative technology to disguise the true state of their state budgets (cf the sales pitch to Greece showing how to game the EU funding mechanism using swaps) to secure oceans of funding, that these heads of government think this is a sanctioned transaction with zero political risk? Or that they are happy to “reward” their “banker” for his work in bringing this transaction to them?

    Who’s really writing the laws re how the multi-trillion derivatives market will be regulated going forward? Will it surprise anyone 10 years from now when it is the same 5 banks controlling 98% of those markets? Or that former executives of these firms are doing their civic duty and serving in the White House, the Fed or Treasury implementing laws now being written (cf the arc of Hank Paulson’s career)?

    Once again, we ask Cui bono? Indeed.

  32. Here’s the biggest pushback of all, IMO. Which the media are not discussing much.

    These financial masters of the universe have wrecked
    the financial systems of the US and Europe. They only
    survive because taxpayers bailed them out to the tune of mega trillions.

    The pushback is: We can’t afford to pay to clean up another train wreck like this. These guys have to be cut down small enough so we can afford to let them fail. Jamie Dimon, a Mega Master of the Universe, told
    Congress we should expect systemic financial failures about every 7 to 10 years…..which fits nicely with history during periods of deregulation.

    That we accept this, don’t chop these guys down to size and argue about how much their pay should be is
    sheer idiocy.

    Dr Johnson, keep pushing to break these guys up and regulate them so they can’t cause another unaffordable train wreck.

  33. What does one do to prepare for the worst?

  34. “It’s not that the models and theory have become bankrupt, it’s that the logic — the Apologetics, more precisely — have taken on a near-religious indoctrination that these folks are the best and brightest, and, de facto, what they want and desire must be the best and highest aspiration of their respective societies. They can do no wrong, because they truly are the chosen.”

    It’s not “near-religious”, it is a CULT – a Jim Jones story – have someone else build your Jonestown, they kill the labor and take over.

    Monkey thinking…

    No one, and I do mean no one – so if you apply any stat formula for extrapolating the “real” number –

    it really does mean

    NO ONE

    believes the “chosen people” story – it’s pure FICTION.

    This is over already – no trust, no credibility, and less than NORMAL morals – c’mon, how many MILLIONS of people did the health insurance companies pull that “you are short 21 pennies” schtick on with the last COBRA payment…?

    Man, did they make a MISTAKE quoting from the Bible to accuse me – that I am the one trying to cheat them – no?

    And if that is the kind of “intelligence” they have been accumulating about how to “jim jones” the “not fittest” – those who will NOT do anything for their FIAT $$$ –

    We the Stupid have a MORAL OBLIGATION to hurt their precious “mommy told me I was a god” feelings and round them up and lock them up in the kind of “institution” where “elite” always end up when they start to believe their own made up crap.

    Constitutional Convention and BURN THE PATRIOT ACT.

    They passed the Patriot Act for one reason and one reason only – that was to figure out how to rip EVERYBODY off – everybody.

    Brought down the infrastructure of the USA – one HOME at a time – and no amount of $$$ coming in will matter – like the Vikings and other sports teams could not have made sure the roof of the statium in MINNESOTA could take a lot of snow…?

    MONKEY-THINKING…

    the “derivatives” are HOW THEY STEAL – none of it is REAL…I have a plan for how to flush all of them out from behind the computer screen…

    who’s in for that plan?

    Yup, nobody with the brown nose…

  35. Citigroup can’t claim to be “too big to fail” since Citi Chairman Richard Parsons said, “It’s not a question of too big to fail, it’s a question of too interwoven in the fabric of the global financial life to fail.”

    They admit they’ve got us by the shorthairs and don’t plan on letting go.

  36. “Poverty consists, not in the decrease of one’s possessions, but in the increase of one’s greed.” – Plato

  37. CBS from the West

    @ Rien Huizer

    “Investment banking should then be in separate firms and very publicly uninsured (with the exception of stockbroking accounts up to a low maximum).”

    Why should stockbroking accounts be insured at all? What is the social value achieved through that?

    ” Would you like the opera house director taking the place of Pavarotti?”

    No, but are there really any Pavarotti’s in the finance industry? It seems to me they are mainly tone deaf and the opera house director could probably do their jobs just as well as they do. They just have bamboozled the appropriate people into thinking they are doing something special. In fact, knowing nothing at all about finance, I bet that I could take a quick one-semester crash course in the subject and to this kind of work as well or better. What is it they do that really requires special skill or talent? And, if they do require those things, where is the evidence that they have it? (Don’t tell me because they come from Harvard, Yale, Princeton, Columbia and MIT. I’ve been to some of those schools myself–lots of bright kids, but also lots of mediocre minds in the mix.)

    Finally, even if you are right that their work requires special talent and the banks may become unable to hire the best talent, why is that a bad thing? It seems to me that any economy that is as dependent on the finance industry as ours is doomed. We can only survive if we drastically shrink finance back to a reasonable part of GDP and divert its talented people (however many there are) back into something productive.

  38. Claiming to do “God’s work” is the common thread behind the actions of many tragic events in human history. Whether it is an invading army, terrorist group, megachurch charlatan or banker, believing you have infallibility on your side is a dangerous state of mind.

  39. I was wondering if anyone could come up with a radically new financial system.
    Most people here seem quite disgruntled with the current one.
    The the important question is how could it be implemented and how could people be conivinced to accept it, especially those who are winning from the current system.
    Using a wide lens, most of the people in the richest countires in the world are winning from the current financial sytem.

  40. @ Geoff Ryan___”with so many possessions the very want for more leaves oneself but a beggard
    where poverty becomes a backpack of greed
    a proudly weighted virtue from hades
    adorned with hubris and narcissism
    yet it is by this foolish plunder that seals one’s fate”

  41. I think we can use our techology and ever increasingly educated human resources to make a really good system.

  42. The 14th Banker: Year-End Perspective on Corruption

    December 27, 2010 – excerpt

    “While I have been enjoying the presence of friends and family and relaxing in the spirit and ambiance of the season, the media and blogosphere have continued to do heavy lifting…

    First off, on the theme of corruption, it would be silly to assume that the corruption we see in the financial system is anything other than a reflection of the corruption of power more generally. Here are two examples. In this first, it is reported that the revolving door between government and industry is as active in the realm of the military as in the financial realm. The Boston Globe highlights that the normal path for retiring senior military officers, whose pensions are already generous, is to go to work in influential and non-transparent ways for defense contractors.

    The Globe analyzed the career paths of 750 of the highest ranking generals and admirals who retired during the last two decades and found that, for most, moving into what many in Washington call the “rent-a-general” business is all but irresistible. From 2004 through 2008, 80 percent of retiring three- and four-star officers went to work as consultants or defense executives, according to the Globe analysis…The article goes on to illustrate how these retiring officers have inside tracks into the Pentagon and wield influence without disclosure of their financial conflicts of interests. This does remind me of one aspect of the banking business, which is that “Don’t Ask, Don’t Tell” is much more than a policy regarding gays in the military. It is the practice of people who know that there are ethical issues or conflicts of interest and consciously choose to do nothing about them because of mutual benefit.

    A second example of corruption generally is in relation to academia and industry. This is a video interview so I can’t quote it here, but the gist is that economists that opine on regulatory matters, have undisclosed financial conflicts of interest with the companies that would be affected by regulation…. how business works these days. Executives create the environment in which unethical business practices can flourish, but want to keep a level of plausible deniability. That is a pretense….since there has been a singular lack of appetite to do adequate forensics into what caused the crisis, since it might prove to be embarrassing to people still in powerful positions, regulators can follow the inertial course of listening to the palaver that the financial services industry puts forward to allow it to continue looting.

    So back to my original premise, all this bad news is reason for hope, in that it shines light in dark, hidden places. This light will shape the common understanding, and the common understanding will shape future choices. However, it will be up to us to make those choices.”

    http://www.huffingtonpost.com/the-fourteenth-banker/year-end-perspective-on-c_b_801562.html

  43. Steve says “Dr Johnson, keep pushing to break these guys up and regulate them so they can’t cause another unaffordable train wreck.”

    If only this were possible. “These guys” are running the economy and the country, not those puppets citizens vote for. Is it not crystal-clear by now that “these guys” will not allow any meaningful regulation whatsoever?

    The pushback is: We need a paradigm shift. And it will have to come from the bottom up, because there is just no one else to do it.

  44. “Using a wide lens, most of the people in the richest countires in the world are winning from the current financial sytem.”

    It’s kind of strange that someone would consider 1 percent to be “most.” Okay, include some politicians, professionals and minor media personalities and maybe you get up to 10 percent. Still not “most” in my book.

    To find the framework for a radically new financial system, Chris, you might read the position statement and supporting materials of the Center for the Advancement of a Steady State Economy (CASSE) at http://www.steadystate.org.

  45. Carla, I agree with you totally. We need a paradigm shift from the bottoms up. We need to publicly fund a massive rebuilding of our manufacturing base by allowing local communities and workers to buy up the factories the big corporations are out-sourcing and create a solid job base in America. Let me be clear,
    I mean Federal loans to capitalize private companies owned by workers and communities to make stuff here in America.

    Unless we restore our economy, we’ll continue in a death spiral of higher unemployment, lower government revenues, increasing trade deficits and finally, the World Bank and the IMF will restructure our economy for us. And we won’t like the way they do it. So why not try to force our politicos to make this possible by forming a voting bloc of about 5 million folks that votes them out (via swing votes) unless they let us re-create our economy on a local level and stop the big banks and corporations from strip-mining what’s left of our economy.

    We need a grass roots bloc of voters — about 5 million– who will vote out any incumbent from either party who unless they:

    1. Support a constitutional amendment to explicitly declare corporations non-persons and overturn Citizen’s United v FEC. We’ve got to get money out of politics.

    2. Support a campaign finance reform — not a penny can be spent by any Federal candidate except the fixed sum provided by taxpayers.

    3. Support a program to a) stop subsidizing off shoring our jobs and b) invest public capital into our manufacturing sector, so we can create decent jobs and wind down our trade deficits.

    4. Support and protect our fledgling manufacturing base as we rebuild it.

    If we make it our goal to create an economy that can give all Americans decent, productive jobs that revive our economy, using bottoms-up, market-driven
    private companies, we can get support from the left, the center and the right.

    Most of us are totally fed up with the politics the big money says is possible. It is time to form a non-ideological pragmatic voting bloc that demands we recreate our job base at the local level and protects it from the predation of the multi-nationals.

    Other countries nurture and protect their local economies. Why can’t we?

  46. Carla, a great site. Thank you.

    I think a way to win this is to create a big group of voters who will act like the NRA….make a few demands and knee cap any political in the primaries or general elections that doesn’t go along.

    Our demands should be simple and pragmatic:

    1. We want our economy and our jobs back. That
    means public funds to capitalize worker and
    community owning private companies that make
    our “steady state” essentials right here in
    the USA. Goal: A decent job with a decent living
    standard for all Americans that’s economically
    sustainable and can be passed down to our kids.

    2. We want money out of politics.Public financing
    for Federal campaigns and Constitutional amendnments to support this, including an amendment
    to specifically remove the “right” of free political speech and public advocacy from non-humans — corporations, their PACs, special interest groups, the whole spectrum.

  47. Herbert Wetherby

    This about sums up the article and there is only one problem, And that is the inefficency of the democraic process its self is what bankrupted the country or possibly the free world. To do a 180 now is just not comprehenseable by todays politicians. In addition, literatlly taking trust can lead to some shoving.
    Efficient Allocation
    The conventional economic thought focuses almost exclusively on efficient allocation of scarce resources. The dominant thinking is that free and competitive markets, along with prices driven by supply and demand, result in efficient allocation of goods and services (in the absence of pesky, omnipresent externalities and market imperfections). Efficient allocation is also important in a steady state economy – ecological economists support many market strategies to accomplish efficient allocation of resources – but only after achieving sustainable scale and fair distribution. Efficient allocation, although a valid criterion for managing and using resources, means very little in an unsustainable or unjust economic system.

  48. CBS from the West

    “We need to publicly fund a massive rebuilding of our manufacturing base by allowing local communities and workers to buy up the factories the big corporations are out-sourcing and create a solid job base in America. Let me be clear,
    I mean Federal loans to capitalize private companies owned by workers and communities to make stuff here in America.”

    Nice idea, but is it workable?

    People of ordinary means are already living under a crushing debt burden. How will they take on still more?

    Worse, it’s not as if the current practice is to literally ship factories overseas. They simply outsource the work to existing facilitieselsewhere (or, less often, build new ones of their own). The discarded domestic facilities are either sold off to others, or mothballed.

    Either way, the profits to be earned by outsourcing to cheap labor are enormous.

    If we publicly subsidize the purchase of these discarded factories, we will drive up the price that the current owners can get for them. That will only increase their incentive to outsource their labor–and also provided them with additional capital to cover the costs of doing so!

  49. Ask the immigrants herded into the ghettos and fed only booze and drugs – that way the slave wage floats right back to the “masters”…must be a grandparent or two who told the classic USA story of lifting yourself up by your bootstraps…the glory days before Worker’s Unions…

    Survival of the fittest, Ann, right?

  50. And William K. Black is cautiously hopeful that eventually, the truth will “out” and some banksters will be criminally prosecuted: http://www.huffingtonpost.com/william-k-black/the-role-of-the-criminal_b_802115.html

  51. from the article, “But convincing a jury that executives intended to make fraudulent loans, and thus should be held criminally responsible, may be too difficult of a hurdle for prosecutors. ‘It doesn’t make any sense to me that they would be deliberately defrauding themselves,’ Wagner said.””

    Since when do crazy people “make sense”?

    And since when does a CIVILIZATION have a moral responsibility to keep crazy people in “jobs” that ruin civilization?

    And now their “feelings” are hurt? Feelings? What feelings do psychotics, sociopaths and narcissists have? Feelings are acknowledged as something other people have that can be used against the people with feelings – that’s the foundation of “market research”.

    The prosecutors need to read up on Nihilism and proceed from there.

  52. Google just moved into a building in NYC that would not exist if it had been left to “private” investors to build.

    Theft went on unabated for decades. Still is theft and still needs to be “cured” – other than sadists, who is getting off on watching the misery stack up…?

    More misery for others = more money for ME ME ME

    Already one can see the “end times” because without Labor Unions, there is no next generation to keep the infrastructure standing…a “consumer” generation sucking it all up at nanosecond speed means there is no “steady state” after the consumption – there isn’t even the possibility to live a more austere lifestyle – since there are no trees left to swing from as monkeys going back to a steady state.

    Spaceship Earth is trashed.

    And there are 7 billion people who will have to live off trash.

    Indeed, “god’s work”?

  53. Did I say that all these people are telented to the extent that they deserve very high levels of compensation? My point is that “banks” do not need these people (in fact, “banks” would be safer without their activities), but that without the right people, certain activities are probably overly risky (“bank”s would be “stuffees” again as they used to be) as long as the “banks” do not have these activities!

    And of course, Goldman is not a “bank”, or rather until recently is was not. A bank is something with a banking charter. Why on earth Goldman got such a charter in the dying days of Bush II is srill a mystery. Probably because it was not restrictive enough..

  54. @ Carla___”some banksters will be criminally prosecuted”
    Let’s hope?
    Excerpt: “One Nation, Under Too Many Laws”, by Plillip K. Howard
    “There is one common technique that has been used in successful legal overhauls, from the Justinian’s recodification in ancient times to the Napoleonic code that is the basis of modern European civil law to the uniform commercial code adopted in the United States in the 50′s. The technique is this: radical simplification.
    Simplification of law has many virtuies. It allows legislatures to pass measures of a general nature, setting goals and operating principles without trying to anticipate every regulatory situation. Think of the Constitution or the straightfoward recommendations of the deficit commission.” Ref:
    http://www.ajc.com/opinion/one-nation-under-too-788933.html

    PS. Mr. Black makes an excellent argument, period! Wachovia Bank is a prime example of malfeasance/nefarious dealings – making CountryWide Financial a walk in the park regarding sticky fingers. Check out Wells Fargo Bank…and where Wachovia’s top brass landed? Can somebody spell collusion?

  55. Amen Brother Earle :-)

    When anyone who was rolled by Wells Fargo after Watch-over-you-to-rob-you brought their Patriot Act files with them to Wells

    sees their logo stagecoach – we just pull the bandana up over our faces and kick the horse into high gear to rode at and stop that stagecoach

    The drug lords who “launder” for the war lords…everyone manning the Wells phones has such a thick accent (both foreign AND domestic) that you can’t even understand them – Carla’s we-need-’em “immigrant” wave?

    But only 144,000 will make it to the Mansion Worlds – another self-proclaimed “chosen” CULT…talk about EVIL…

  56. CBS — Here’s my point. Given the huge disparities in wages between the US/Europe and the emerging nations in Asia, THERE IS ABSOLUTELY NO REASON FOR MULTINATIONALS TO DEVOTE CAPITAL AND BUILD JOBS IN THE US OR EUROPE.

    Add to this the poor opportunities for consumer goods growth in the aging US/European populations vs the great and growing opportunities in the BRICs and other developing markets.

    Profits, the engine driving pure capitalism, dictates our day in the sun is over. We can happy talk about our entrepenerial spirits, innovation, more education, but in fact none of these are sufficient (barring a true miracle) to restore our economic vitality and allow us to end our downward spiral of trade deficits, government debt and personal debt.

    In short, we need to take control of what’s left of our capital and invest it to make America as self-sufficient, sustainable and well paying as possible.

    To do this, we must invest public capital to rebuild a market-based, employee/community owned and operated economy. And we must protect it with tariffs and nurture it with planning and technology and best practices sharing.

    To do this, we’ll have to give up the ultra cheap prices at WalMart. We’ll have to live with less stuff.

    The tradeoff is we can create an economy that provides a decent standard of living for all citizens.
    Many fewer will have money for frills, bling, Mercedes and Gulfstreams and 4 houses.

    To me it is obvious we have the knowlege to construct our own economy recovery, without the help of (and in face of the aggressive foot dragging and attacks) of both political parties and the big money interests that feed them.

    But only if we join together and have the guts and good will to rely on each other to contribute to make this new American economic and political paradigm happen. And the grit and determination to force Constitutional Amendments to get us a government and an economy that are truly “of, by and for the people”.

    Its time IMO to stop saying “its too much, its a fairy tale, its will never happen”. Its time to join together, create a movement and a plan to restore our nation and protect our sovereignty from NAFTA, our political parties, the World Bank/IMF and those who will eventually call our burgeoning debt.

    Because if they call our debt, history amples shows us we will lose our practical sovereignty. And our economy will be an empty shell.

    The politicos will try to hold things together by selling off our infrastructure (as they are doing now)
    and tell us things are ok.

    We need to use the Constitutional processes our Founders gave us to take back our nation from the Masters of the Universe.

    Try to convince that progressives and progressive groups that if we don’t take back our economy and our politics, the chance of achieving any political, economic or environmental goals is only slight above zero.

    No economic and political revolution via the Constitution and there will be no America as we know it.

  57. Herbert Wetherby

    Actually there is a plan to clense congress of its demons. I can’t get into it now, but trust me as soon as that day arrives, a different form of govt shall be established. Using the same constitutional tools that helped create the demons in the first place, and disabling them in the end. And we have no intention of waiting a second longer than needed, so until then, its congressional demons run amok with a fire under their feet to keep them happy and warm. I shall provide the fire.

  58. 1. Everyone needs to LIE on the internet, facebook, twits or wherever else people are blathering…make it all up…it’s VIRTUAL reality, so who cares – all FICTION – the official “news” media is way ahead of we the stupid – they lie all the time

    2. Get off the grid – stop the auto withdrawals for all “rents” – make it harder for the thieves to herd everyone into a corral and then shoot us all by doing it to one “archetype” – psychos HATE the GOOD people with a passion and they went after those who played by the rules with a venom that is truly clear to SEE.

    3. Start LAUGHING at their puerile foot-stomping schticks of “hurt feelings” and “chosen ones” – all’s fair in love and war and terrorizing their minds is definitely on the table.

    4. Don’t sign another contract for as long as you live – how did they HONOR their “contract with America”?

    5. Never ever forget, they really are insane.

    Let’s see what happens when VIRTUAL reality is all blather and lies….oh wait…it already IS…and the “complex” laws that were concocted to make it RULE reality – gee, how’s that working out for everyone?

    Humans had nothing to do with building Spaceship Earth, where among other bits of “perfection” – the atmosphere was CONSTRUCTED so that the PERFECT amount of sunlight to sustain life reaches us. “They’ve” spent years and billions of FIAT $$$ pretending it ain’t so…how INSANE is that? And what MORAL obligation does anyone have to let such monkey brains claim themselves as “the fittest”…?

  59. I guess I feel we need to get a grip and start figuring out how to get money out of politics so the politicians work for the 98 percent of us who are getting screwed and how to get our jobs back in America.

    Think about this:

    1. Start buying what you can that’s made in America.
    Hard to do, but its a start.

    2. When progressive non-profits ask for contributions, tell them no more money unless they donate 25 percent of your contribution to “Move to Amend” to get rid of Citizen’s United and to a organization that’s pushing to get our jobs back.

    Tell that to MoveOn and ActBlue.

    3. Call your local and federal politicians and tell them you’re voting them out unless the get money out of politics and support a full bore program to reconstruct and protect American factories.

    And get start asking your friends to do the same.

  60. Hard to know where to start with this. The current level of discourse about what constitutes “business” ranges from non-existent to childish. That’s about the full range. The idea that every single entity, from operations with a handful of people all the way to to Citibank are the same, which is what you propose when you use the word business to describe all of them, is absurd. If you want to change the discourse, then don’t use the word. It’s meaningless.

    Banks are no more mom-and-pop operations than the NFL is a backyard sporting event. Banks are utilities, like the electric or gas companies, or they should be. The goal of any discussion revolving around these entities, no matter the size, should be the same: how do we effectively make them transparent in their investment and lending operations so as to render the process largely automated through the use of information, thereby eliminating as much risk as possible? No more multi-million dollar salaries to badly educated fools who have no idea what they’re screwing with as they allow their portfolios to inflate with junk.

    Regulating banks and bankers has nothing to do with this meaningless thing called business. It has to do with insuring that the banking utility functions with as few interruptions as possible.

  61. mountainaires

    I don’t care what bonuses banksters get; I don’t care about their homes in the Hamptons. Why on earth would anyone think that more government diktats regarding bankster bonuses will solve anything is sheer folly, not to mention just more class warfare. No, Simon, I’m sorry to say that the only resolution to the problem of bankster bonuses is for the government to GET OUT of the business of propping them up in the first place. No bonuses go to banksters when their banks fail; in time, the policy of letting them fail sends the message that they get the bonuses they earn through sound fiscal practices. The moral hazard we have embraced can’t be soothed by limiting bankster bonuses; it can only be healed by letting banksters FAIL.

  62. Its good to see some alternative idea like this. I justified by comment above by using the phrase with a wide lens, all Americans can benefit indirectly by the successes of their financial industry on the global stage and lose indeirectly by their failures. My argument for not bailing them out would be based on social justice.