05/30/2009 05:12 am ET Updated May 25, 2011

Headline from Hell

"After Off Year, Wall Street Pay is Bouncing Back
Banks Set Aside Money
Paycheck and Bonuses Seen as Approaching 2007 Level"
April 26, New York Times, Page A1

Please, pass me the Prozac.

An off year??? That's like calling 1929 an off year. Or maybe they're talking about a baseball player who hit only .250 instead of .300. Actually, it was more like Wall Street's batting average was .000, or more realistically, a negative number. Let's look at their box score. During their "off year" the nine surviving largest financial firms lost over $300 billion, wiping out all of their profits from the three previous years. Collectively, they caused an economic collapse that will unemploy one out of ten workers, and destroy more than $4 billion in equity, (think pensions and 401ks). Their fantasy financial engineering has created trillions of dollars of toxic assets that now rot their balance sheets. And lest we forget, we gave them $700 billion in TARP money and more than a trillion in various loan guarantees. Were it not for our largess, virtually all of Wall Street would have gone under. If that's an "off year", please, please don't have a bad year.

And "bouncing back?" This conjures up an aging ballplayer who makes a remarkable comeback after a year of injuries. We see more spring in his step as he confidently strokes the ball up the gaps. Good old Wall Street hitting the sweet spot again.

In reality, even minor league bankers can make money this year. To prevent total economic chaos the Fed has pushed interest rates to near zero. When the money you lend out costs you nothing, you will make money. Then there are the changes in accounting rules which allow you to avoid booking billions of dollars of losses incurred by your financial toxic waste. And in addition to the TARP funds and the loan guarantees and the accounting rule changes, there are the juicy payments you received via AIG for the insurance on your toxic assets.

That lucrative loophole is like giving steroids to ballplayers. AIG wrote $450 billion of insurance on risky securities held by the largest financial firms in the world. (These are called "credit default swaps" because then they escape insurance regulations) When the housing market tanked, those securities went bust and AIG had to pay up, but couldn't. The feds came to the rescue, because if AIG didn't pay, many, if not most, of those large financial institutions would have gone under, taking the rest of us with them. So the feds bailed out AIG to the tune of about $180 billion and counting. Much of that money went to pay off bets lost to the very financial firms that now are "bouncing back from an off year."

Talk about chutzpah. Whose money are the banks "setting aside?" Because they temporarily are in the black, they have the gall to set aside funds to increase their hefty compensation packages, like they earned it? They haven't earned anything real for years and years. If there is money to set aside, they should be paying off their debts -- to us.

But, what would you do if you were a banker and were getting high from such largess - TARP money, guaranteed loans, accounting rule changes and indirect subsidies via AIG? You'd feel pretty damn good. You too would have spring in your step. And you damn well would be asking for a big, big raise, just like any good ball player making a comeback. You'd want to get paid just like you did before things got bad. As a result, Wall Street compensation is again approaching levels not seen since 2007. Oh yes, what a golden year that was.

Well maybe not so golden since nearly all of Wall Street's 2007 profits were phony! They came from fantasy financial instruments like synthetic collateralized debt obligations and other so-called "opaque and exotic" financial instruments that turned out to have no value at all. Yep, 2007 was the banner year for creating and selling financial toxic waste. It's hardly surprising, or reassuring, that Wall Street wants to go back to the good old days.

This financial insanity must be stopped. One way to start is by writing headlines that are a closer to reality (and more self-serving for the book I've just written). Here's my candidate:

"After Worst Year in Financial History
Wall Street Looting America -Again!"

Feel free to submit your own headlines. It beats Prozac.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity-- and What We Can Do about It, (Chelsea Green Publishing, June 2009)