[Peace-discuss] Wayne calls out Krugman

[E. Wayne Johnson]

Carl,
His observations are correct, and he correctly observes that Bernanke 
doesn't seem to have a clue.




C. G. Estabrook wrote:
> [Wayne-- Wouldn't you agree that this (from today's column, "Money for 
> Nothing" [no reference to chicks]) is pretty good? He even exposes the 
> unbelievable Bernanke. --CGE]
>
>
> ...there’s no longer any reason to believe that the wizards of Wall 
> Street actually contribute anything positive to society, let alone 
> enough to justify those humongous paychecks.
>
> Remember that the gilded Wall Street of 2007 was a fairly new 
> phenomenon. From the 1930s until around 1980 banking was a staid, 
> rather boring business that paid no better, on average, than other 
> industries, yet kept the economy’s wheels turning.
>
> So why did some bankers suddenly begin making vast fortunes? It was, 
> we were told, a reward for their creativity — for financial 
> innovation. At this point, however, it’s hard to think of any major 
> recent financial innovations that actually aided society, as opposed 
> to being new, improved ways to blow bubbles, evade regulations and 
> implement de facto Ponzi schemes.
>
> Consider a recent speech by Ben Bernanke, the Federal Reserve 
> chairman, in which he tried to defend financial innovation. His 
> examples of “good” financial innovations were (1) credit cards — not 
> exactly a new idea; (2) overdraft protection; and (3) subprime 
> mortgages. (I am not making this up.) These were the things for which 
> bankers got paid the big bucks?
>
> Still, you might argue that we have a free-market economy, and it’s up 
> to the private sector to decide how much its employees are worth. But 
> this brings me to my second point: Wall Street is no longer, in any 
> real sense, part of the private sector. It’s a ward of the state, 
> every bit as dependent on government aid as recipients of Temporary 
> Assistance for Needy Families, a k a “welfare.”
>
> I’m not just talking about the $600 billion or so already committed 
> under the TARP. There are also the huge credit lines extended by the 
> Federal Reserve; large-scale lending by Federal Home Loan Banks; the 
> taxpayer-financed payoffs of A.I.G. contracts; the vast expansion of 
> F.D.I.C. guarantees; and, more broadly, the implicit backing provided 
> to every financial firm considered too big, or too strategic, to fail.
>
> One can argue that it’s necessary to rescue Wall Street to protect the 
> economy as a whole — and in fact I agree. But given all that taxpayer 
> money on the line, financial firms should be acting like public 
> utilities, not returning to the practices and paychecks of 2007.
>
> Furthermore, paying vast sums to wheeler-dealers isn’t just 
> outrageous; it’s dangerous. Why, after all, did bankers take such huge 
> risks? Because success — or even the temporary appearance of success — 
> offered such gigantic rewards: even executives who blew up their 
> companies could and did walk away with hundreds of millions. Now we’re 
> seeing similar rewards offered to people who can play their risky 
> games with federal backing.
>
> So what’s going on here? Why are paychecks heading for the 
> stratosphere again? Claims that firms have to pay these salaries to 
> retain their best people aren’t plausible: with employment in the 
> financial sector plunging, where are those people going to go?
>
> No, the real reason financial firms are paying big again is simply 
> because they can. They’re making money again (although not as much as 
> they claim), and why not? After all, they can borrow cheaply, thanks 
> to all those federal guarantees, and lend at much higher rates. So 
> it’s eat, drink and be merry, for tomorrow you may be regulated.
>
> Or maybe not. There’s a palpable sense in the financial press that the 
> storm has passed: stocks are up, the economy’s nose-dive may be 
> leveling off, and the Obama administration will probably let the 
> bankers off with nothing more than a few stern speeches. Rightly or 
> wrongly, the bankers seem to believe that a return to business as 
> usual is just around the corner.
>
> We can only hope that our leaders prove them wrong, and carry through 
> with real reform. In 2008, overpaid bankers taking big risks with 
> other people’s money brought the world economy to its knees. The last 
> thing we need is to give them a chance to do it all over again.
>
> http://www.nytimes.com/2009/04/27/opinion/27krugman.html?_r=2&em
>
>
> E. Wayne Johnson wrote:
>> The only possible success I can see is choose option 1,
>> otherwise we will reap corruption and the so-called reverse midas touch.
>>
>> What we are experiencing now is plunder.
>>
>>
>> Bob Illyes wrote:
>>> Krugman is one of the people to the Left who is tearing his hair out 
>>> about the same Bush/Obama response to large bank failure that the 
>>> Right is tearing its hair out over.
>>>
>>> There are only two rational responses to the failure of the large 
>>> banks:
>>>
>>> 1) Let them fail or
>>> 2) Put them through the usual reorganization imposed on smaller 
>>> banks when they become insolvent.
>>>
>>> We are so far doing neither, which is mad.
>>>
>>> Krugman is partial to the latter solution. He's very uneasy about 
>>> the large sums of pretty much no-strings money being injected into 
>>> large banks.
>
>