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Joseph Stiglitz: Wall Street's Lobbying Efforts Have 'Really Paid Off'

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The Nobel Prize-wining economist Joseph Stiglitz said in an interview with CNBC that financial market reform is the single most pressing issue facing the global economy.
The Nobel Prize-wining economist Joseph Stiglitz said in an interview with CNBC that financial market reform is the single most pressing issue facing the global economy.

All that money banks have spent wielding influence in Washington has "really paid off," according to Joseph Stiglitz.

"Not for shareholders and bondholders,” Stiglitiz told CNBC on Friday. "But for the bank managers, who have done very well in the last few years."

The discrepancy between executive salaries and company performance has been a frequent point of complaint for the Nobel Prize-winning economist and Columbia professor. And Stiglitz's harping may have some basis in reality. The CEO pay packages of the 15 largest banks in the United States increased by 12 percent last year despite dismal corporate earnings reports.

In one example, JPMorgan Chase CEO Jamie Dimon saw his pay rise 11 percent to $23.1 million last year -- reportedly the heftiest bank executive salary -- even as JPMorgan's stock price suffered a 20 percent blow. Other CEOs of top firms like John Stumpf of Wells Fargo and Lloyd Blankfein of Goldman Sachs also received increases in their pay packages already worth millions, while failing to increase company profits.

As for their political investments, Stiglitz told CNBC that it was banks that pushed for the 1999 repeal of the Glass-Steagall Act. They have also been lobbying against financial reform, which is the single most pressing issues facing the world's economy, he said.

The Glass-Steagall Act prevented commercial banks from acting like investment banks. The law's nullification not only eliminated competition between these two bodies, but also allowed financial firms to make risky bets using the money of depositors. Most recently, JPMorgan Chase admitted to losing billions via the kind of trading behavior that may have been disallowed by regulations.

Stiglitz also spoke in favor of a stronger version of current financial reform measures, namely the Volker rule. The new mandate bearing the name of ex-Federal Reserve Chairman Paul Volker aims to stop firms from speculating with money from their own accounts. But the rule, expected to be implemented in July, has already been watered down through the lobbying efforts of bank officials.

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