Catch-22 Billion

For Bankers, Saying "Sorry" Has Its Perils

As a kid and Air Force brat, I didn't like Catch-22 very much. The novel, while laugh-out-loud funny, speared the military and hit too close to home. As a blogger and novelist, however, I admire Joseph Heller's writing techniques, especially his use of repetition. In Catch-22, different characters keep asking: "Are you crazy?"

The boys -- Lloyd Blankfein, Jamie Dimon, John Mack, and Brian Moynihan -- are back in Washington today. Though the words may differ, politicians are asking the same question on behalf of the American public: "Are you crazy?" Wall Street CEOs, it seems, have tripped over a financial version of Heller's chicken-and-egg classic.

How can you apologize for dropping global capital markets to their knees through leverage, CDOs and other Weapons of Money Destruction? How can you say, "I'm sorry," without pouring lighter fluid on shareholder lawsuits and incurring the wrath of your board, which will no doubt fire you for artless communication?

How can you acknowledge that government intervention, during 2008 and 2009, revived the world economy? How can you admit mistakes in one breath and then defend massive performance bonuses in another?

And here are the toughest questions of all, hat tip to The New York Times. How can you package troubled mortgage assets and pass them off as legitimate investments? How can you market toxic waste and then take the opposite side of the trade?

So much for Wall Street being long-term investors in their own firms. I believe the fury over bonuses, in the wake of the last eighteen months, will trigger a regulatory tsunami. And those regulations could undermine our finance industry's ability to compete abroad for a long, long time.

Norb Vonnegut

 

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Comments

[Corners]

11:18 AM on 02/06/2010

The banks worried of competition abroad is what got us this mess to begin with and was the big excuse for ripping glass-steagal to shreds.

[sposton]

12:46 PM on 01/14/2010

Oh, I forgot. I wasn't implying that we don't have the people to win a WWII. I've meant we don't have the economic productive capacity to win a WWII today. And who is most responsible for that? Our style of capitalism - financial capitalism. Never let financiers decide your economic policies, or you will end up where we are currently finding ourselves.

[Norb Vonnegut]

11:20 PM on 01/14/2010

Financiers must be part of the dialogue because securities have grown so complex. I doubt that 10 people in the Senate can explain credit default swaps and how they trade.

[sposton]

11:55 AM on 01/15/2010

Yes, of course. One thing is to be a part of the dialogue and another being in the driver's seat. Our governmental decisions are essentially made by financial capital interests. Read Friedrich List to find out why this is so detrimental to our commonwealth.

[Twayn]

04:07 PM on 01/16/2010

This begs the question, why have securities grown so complex? The answer seems to be, so that they can be understood only by those who benefit from them, but not by those they harm. But these complex securities, powerful as they are to create such enormous wealth where none existed before, must be fragile things, indeed, if the light of open exchanges is enough to render them impotent as the financial elite would have us believe. Such extraordinary things are not for the common man to contemplate, they say in their most condescending tones. And so we are told to go on our way like good little children, and leave the fate of the world in their much more capable hands, and to pay no attention to the men behind the curtain pulling the levers and turning the screws.

[sposton]

10:41 AM on 01/14/2010

"And those regulations could undermine our finance industry's ability to compete abroad for a long, long time."

I could not care less how well our banks can compete overseas. How exactly does competing overseas help us if these banks are not performing their crucial function in this country?

We seem to have forgotten some simple facts of life. The strength of our financial system is a reflection of our real economy. One cannot for long have a swiss cheese like real economy and world class financial system "that can compete overseas". The same goes for military power - for how long can we remain a military power with our crappy real economy with a constant need to borrow from communist Chinese in order to prop our Empire? Do you think America of today could have won the WWII? I do not believe we could have for one moment.

[Norb Vonnegut]

12:06 PM on 01/14/2010

There's no doubt that WW II vets were the "greatest generation."

In answer to your question: Services, including finance, are critical to economic health in the US. If we aren't competitive, we will lose this industry, too. Personally, I believe that we need a finance equivalent to the UN that creates uniform international standards. Otherwise, companies will shop around for the best deal.

Norb

[sposton]

12:40 PM on 01/14/2010

Have you ever read Friedrich List's "The National System of Political Economy"? I think List offers the best criticism of the free trade dogma from Adam Smith and David Ricardo through today. I hope you get to either read it or reread it. It is quite amazing how true his criticism rings even today (he wrote in the early 19th century) of what is fundamentally wrong with our guiding economic thought.

Our economy can never be fixed by our services and financial sector being more competitive abroad, nor can it be fixed by more exports. Our economy can only be fixed if it produces most of what it consumes, and then exports. The other structural stumbling block in our system is to be found in the way we create our money. In this process you can find most of our economic ills. Instead of Keynes we should have listened to Irving Fisher. Read Fisher's "100% Money" and also his writing on the stamp script (Silvio Gesell's idea, whose book is also worth reading).