Matt Yglesias says ...

8 Words of Wisdom for Week Ending 4/17/2009 #5

... whatever one thought should be done with large financial institutions as a policy matter, surely we could agree that the executives at these institutions are primarily bad people.

It turns out we couldn’t agree on that. But my argument is pretty simple. These are people primarily motivated in life by greed. Not just by a desire to make some scratch, mind you. These aren’t immigrants who walked through the desert from Mexico in order to earn more money by washing dishes in a San Diego hotel. They’re not 24 year-olds looking for a hefty salary in order to pay off student loans. They’re multi-millionaires who want to earn millions more. It’s possible, of course, that Vikram Pandit really does find being a bank executive to be intrinsically interesting. But a good person, who’s primary passion was the life of a bank executive, would be donating the bulk of his massive compensation package to charity. But that’s not what Pandit’s doing. Rather he, like virtually all executives at major firms, is living a life that’s primarily oriented around an ethic of greed.

Once again we get a look at one of the core values of the conservative movement ... GREED. They say greed is good. They say greed is right. Truth be told, even in this awful economic climate, the greedy haven't been hurt nearly as bad as the rest of us. Greed is only good for the greedy.

Greed interferes with any attempt to act in a manner that benefits the many as opposed to the few. Greed corrupts government. Greed leads to the lowering of the inheritance tax. It leads to cutting taxes on the highest income brackets. It leads to deregulation allowing industries to take more risks and make more money. Greed leads to corporations skirting the law to increase profits. Greed leads to politicians seeing businesses and lobbyists as their constituency.

Ultimately, we are a country who gets to decide what we value. We do that we when go the polls. In November of last year, we went to the polls and we rejected the politicians whose policies of greed sunk this nation into an awful financial crisis. We should take every opportunity to remind our elected officials of that fact. By combating greed, the government can restore economic prosperity for most Americans.

Source - Think Progress

Paul Krugman says ...

8 Words of Wisdom for Week Ending 4/17/2009 #4

Thirty-plus years ago, when I was a graduate student in economics, only the least ambitious of my classmates sought careers in the financial world. Even then, investment banks paid more than teaching or public service — but not that much more, and anyway, everyone knew that banking was, well, boring.

In the years that followed, of course, banking became anything but boring. Wheeling and dealing flourished, and pay scales in finance shot up, drawing in many of the nation’s best and brightest young people (O.K., I’m not so sure about the “best” part). And we were assured that our supersized financial sector was the key to prosperity.

Instead, however, finance turned into the monster that ate the world economy ...

Before 1930, banking was an exciting industry featuring a number of larger-than-life figures, who built giant financial empires (some of which later turned out to have been based on fraud). This highflying finance sector presided over a rapid increase in debt: Household debt as a percentage of G.D.P. almost doubled between World War I and 1929.

During this first era of high finance, bankers were, on average, paid much more than their counterparts in other industries. But finance lost its glamour when the banking system collapsed during the Great Depression.

The banking industry that emerged from that collapse was tightly regulated, far less colorful than it had been before the Depression, and far less lucrative for those who ran it. Banking became boring, partly because bankers were so conservative about lending: Household debt, which had fallen sharply as a percentage of G.D.P. during the Depression and World War II, stayed far below pre-1930s levels.

Strange to say, this era of boring banking was also an era of spectacular economic progress for most Americans.

Wait, unrestrained capitalism doesn't always work? I'm not exactly shocked here. Here's the first indication that an industry should be heavily regulated: its collapse can bring down the entire economy. Seems almost like a no-brainer for me.

Can banking be made boring again? Well, the bankers themselves will fight it tooth and nail. As Krugman points out, "boring banking would mean poorer bankers". Speaking as an American who is not a banker, so? Boring is good. Boring is solid. Boring is better for everybody.

We need a Glass-Steagall Act for the 21st century. It is time to usher in a new era for banking that backs a new period of economic progress. The conservative practice of little to no regulation has been exposed. The time has come to scrap it.

Source - The New York Times

Read This ...

8 Things to Learn for 2/2/2009 #4

Read the list at this link and tell me, what have you learned?

A. Lots of banks are failing.

B. Georgia has a disproportionally large number of banks failing.

C. All of the above.

Needless to say, you should have learned C. One more reason that I'm proud to be a Georgian.