Wednesday, May 26, 2010

Unmitigated Rage

James Kwak over at Baseline Scenario defines rage with this rant:

Wall Street CEOs like to think they are the adults, the big men in the room, the ones who know how the world works. Well, you know what? They screwed up their own banks, the financial system, and the economy like a bunch of two-year-olds. Every single major bank would have failed in late 2008 without massive government intervention — because of wounds that were entirely self-inflicted. (Citigroup: holding onto hundreds of billions of dollars of its own toxic waste. Bank of America: paying $50 billion for an investment bank that would have failed within three days. Morgan Stanley and Goldman Sachs: levering up without a stable source of funding. Etc.) The financial crisis should have put to rest for a generation the idea that the big boys on Wall Street know what they’re doing and the politicians in Washington are a bunch of amateurs. Yet somehow the bankers came out of it with the same unshakable belief in their own perfection that they had in 2005. The only plausible explanation is some kind of powerful personality disorder.

The bankers also have this bizarre belief that the administration has somehow betrayed them — that this year’s supposed shift to the left constituted reneging on some kind of deal. But there have to be two parties to a deal — and what did the banks do for Obama? They didn’t put in place any kind of self-regulation — not when it comes to compensation, capital, risk management, securitization, derivatives, or anything. They didn’t cut back bonuses to merely outrageous levels, although Goldman did decide not to pay itself record bonuses when it could have. They fought the stress tests all the way to the end, too blind to realize that the stress tests, and the government guarantee they implied, were the key to their salvation.

Read the whole thing, it is ragetastic and I couldn't agree more. (h/t Kevin Drum)

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