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And to once again state the bleedin’ obvious…

I was responding to a comment under this article… when it struck me: why do so many people find this screamingly obvious fact so bloody hard to figure out?

“The banks stole our money. If you are not banker, that includes you. The banks stole from everyone – businesses, countries, citizens.”

No, the politicians who bailed them out with taxpayer money stole ‘our’ money after they created the moral hazard that led to the banks doing the things that they were given the incentives to do.

In a sane world, said bankers should have simply been allowed to go bust… so the problem is not ‘bankers’, it is the people who refused to let the bastards go broke by giving them third party… taxpayer… money.

29 comments to And to once again state the bleedin’ obvious…

  • Dom

    You’re right, of course. But I was taken short by this:

    “In a sane world, said bankers should have simply been allowed to go bust…”

    If there was a “moral hazard”, and if the banks were given an incentive to do the things they did, were they in fact wrong?

    A bail-out was absolutely wrong, but think of it from the point of view of the bankers — they were forced to make sub-prime loans, home-buyers were given tax credits to buy over-priced homes.

    No, the problem begins and ends with the politicians, were are (still) making rules to govern our economy without understanding what is going on.

  • I’d point out that the spirit of this article goes to the current anti-corporate hysteria evidenced by the various “Occupiers” as well. I frequently find myself in hostile territory, and taking an uncomfortable position, when I explain that “corporations”, on their face, aren’t evil. I grant that many are probably evil, but the fault for this has to be laid at the feet of the state who has created a symbiotic environment for them to practise their evils. Without the state, corporations would either serve the public or go broke.

  • Indeed it is obvious see [mid-page] The Financial Crisis: What Happened and Why (Link) which is just one of many videos on the internet explaining the real causes.

    The problem is – people only seek explanations for things if they have some grasp of the benefits of understanding the causes of things – and these protesters are like overgrown toddlers – they simply have not got a clue.

  • RRS

    Corporatism is the extension of governments into civil entities (Corporations and other businesses) not, as so widely pundicised, the “take over of government” by Corporations.

    That method was used extensively in both Italian and German socialism, as part of the mechanism of the administrative state. That use persists in France through its politico-mangerial class, in Italy and in the non-Mittelstand of Germany.

    Naturally, given the benefits available, the managerial class (with some notable exceptions) does not point out this miscomprehension, but instead works at attempts to “manage” the nature and certain effects of the governmental extensions.

  • Isn’t this an example of how the left-right distinction is meaningless? I mean, any Marxist would agree with you – the state is the agent of the capitalist* class – as would loads of “left” anarchists.
    * that’s capitalist in the Marxist sense – you lot would call it corporate class

  • bloke in spain

    Is it worth considering there’s actually two failures of democracy going on here.
    One is the elected politicians have been empowered to create this moral hazard for the banks.
    But let’s not forget that the banking corporations, the investment companies etc all have shareholders who are supposed to be holding the management to account. After all, it’s not the bank’s CEO’s money that’s at stake here, it’s their money.
    Going back to the heady days before the crash, I worked out at one point; through credit cards, agreed bank overdraft limits & loan offers I had access to over £3000,000 of unsecured credit. And I do mean unsecured. According information available to the lenders my total assets at the time were precisely zero. No house, life assurance policies, investments. Zilch. Nada.
    If I’d have had the stupidity to hold bank shares at the time, I’d have been asking the bank whether they’d taken leave of their senses offering that sort of money to someone like me. I was watching people buying houses that they couldn’t afford on the expectation that property price rises alone would move the deal from extravagant overspending to sound investment simply on the expectation the everyone else would continue to share the same hallucinations.If I’d been a pension fund contributor or holder of a life assurance policy I’d have been asking those who invest on my behalf how a market could be expected to hold itself up by its own bootlaces.
    But there’s no real way of doing that, is there? Boards regard shareholders as a necessary inconvenience best ignored. In another life, another career, I used to see the proxy forms attached to enormous blocks of shares come in to the office. Default response? No action or whatever the board recommends.
    If these people want to change the relationship between the corporations, the state & the individual start by owning some shares. Make a corporation AGM something to feared by the board. A time of examination & reckoning not mutual back patting. Ditto pension funds, insurance companies, the lot.

    That they’ve gotten themselves into this situation is as much our fault for letting them.

  • T.Ruth

    It’s not the bankers. It’s not the politicians.
    While the politicians allowed the banks to overlend, even encouraged them and failed to use the Bank of England or the FSA to regulate the supply of credit, it was the greedy feckless voting public who put these useless politicians in power, and it was the truly aweful democracy that allowed the stupid voters to ruin themselves.

  • frak

    T.Ruth,

    it was the greedy feckless voting public who put these useless politicians in power, and it was the truly aweful democracy that allowed the stupid voters to ruin themselves.

    Bingo.

    The politicians are just trying to get elected and acquire power. Don’t blame the players, blame the game. The Left, of course, loves the game. Because they’re good at winning it.

    The Right is pathetic at this game. These pathetic Tea Partiers don’t even know to be embarassed for protesting the passage of a federal law on the grounds that it’s unconstitutional. The Constitution died before their grandparents were born.

    These pathetic Tea Partiers cheer George W Bush, the President who enlarged the Dept of Education, created Medicaid Part D, and expanded the debt dramatically.

    These pathetic Tea Partiers will cheer Mitt Romney as their nominee when Mittens vows to repeal Obamacare on Day One. If Mittens is elected he will continue the proud GOP tradition of selling out the Right.

    The OWS may be ignorant, but they win.

  • john

    The bankers were certainly allowed to get away with murder, and the politicians obviously deserve most blame for letting them get away with it. However, activities like securitisation of dubious, insufficiently documented loans and selling them on as triple A to third parties is surely a criminal act.

    For the above reason, and also because there is no way we are ever likely to see the corrupt and incompetent politicians before the courts, I’m happy that bankers are feeling some heat today.

    If the current troubles lead the cowardly politicians start scapegoating some bankers, then that’s fine by me.

  • AndyJ

    In the US up to the FDR regime, bankers had a double liability to their depositors. This meant that they lost not only the amount of share capital they had contributed but another equal amount. For this reason, plus the lack any bank insurance, most banks did no real estate loans. They held gold, govt securities or short term call-notes from businesses.

    I would like to see a simple rule that imposed a double liability on all those who hold a fiduciary to investors, shareholders, and depositors. For corporate officers and directors I would make it a triple indemnity. Should there be a criminal act involved, jail time would apply.

    This would apply to staff and management who were eligible for any bonus. Their double liability equal to the possible bonus would bring forth more eyes on every problem.

    There is nothing like having a multiple personal loss to make one cautious and careful with the funds of others.

    What the useful idiots cannot fathom is that a society that limits success also guarantees no failure. Both remove responsibility for whatever happens next. When there is the opportunity for great wealth, one must be extremely prudent when investing the capital of others and deploying their money.

    In the US where a doctor can see the very wealthy with private and unlimited insurance and next see the indigent with govt insurance, most doctors I have visited say they wish to see -neither-. Both arrive with a sense of entitlement and demand lots of tests, bring complaints and come for the social occasion of it all. They also look for The Mistake which can turn the diagnosis and prescriptions or procedures a lottery win, Most doctors I see , prefer working people who need to get back and only come because there is a problem… This probably applies to other areas of socialized business… I just haven’t found as many who will speak about it.

  • Mike Lorrey

    I really wish you guys would put buttons on this blog so readers can share articles on facebook, twitter, etc.

    That said, your comment is extremely important, but as George Will noted, the OWS protestors paradoxically believe that a) Government is corrupted and b) is insufficiently powerful…. no good can come of this sort of view.

  • Tom Perkins

    “These pathetic Tea Partiers cheer George W Bush”

    No, they don’t, you ignorant fool.

    “These pathetic Tea Partiers will cheer Mitt Romney”

    Funny, they’re actually fighting him tooth and nail.

    Are you even educable?

  • RRS

    Let me say a word about Medicare Part D, the “Prescription Drug Benefit” (erroneously labeled “unfunded.”) – to which I do not subscribe, although I am a compulsory Medicare “beneficiary” (baloney, I have paid in and continue to pay in as tax more than I get reimbursed.).

    Actually, by study reported in NEJM, every $1 of drug benefits paid out reduces $1.38 of Medicare expense that would otherwise be incurred. So, if $100 million is expended in drug benefits $38 million is saved in other expenses that would have been incurred.

    Now, that study was done as soon as stats were available, a reasonable guess would be given the rise in standard treatment costs vis a vis drug costs those savings are now wider, possibly in the $1.50 range.
    The big drug buyers are in the age ranges (like mine) that require the most , and most repetitive, standard treatments absent a drugs routine.

  • frak

    My comment delivering some edumacation to Tom Perkins was smitten! I hope it gets through!

  • Pevinsghost

    Maybe someone else has pointed this out & I didn’t see it, but isn’t the reason the politicians set up the incentives fueling the moral hazard, i.e. private profit and public risk, & the reason they bailed out the bankers when the house of cards did fall, have something to do with all the money and cushy high paying positions with little to no responsibilities that manages to slosh back from the banking industry to various politicians? It’s a bit like asking which came first, the chicken or the egg, isn’t it?

  • Tom Perkins

    Since my personal knowledge speaks tot he profound dissatisfaction of the TEA party types with both Romney and GW Bush, I suspect of have nothing of relevance to add.

    You do know Romney hasn’t budged above around 33% approval among GOP likely voters in what, 5 years? I think he may even have fallen since 2008.

  • Rob H

    The bankers have lobbied hard to protect thier profit model from the competition a free market provides.

    They have all but closed off the market from anyone wanting to enter the cartel. Just look at the trouble Branson had just trying to get his hands on a banking license and he still only has his foot on the first rung.

    This in itself creates the moral hazard you talk about because it is very difficult for new banks to be formed in the event that another bank fails. Do you really think interest rates would be so low with genuine competition in the market?

    You talk of corporate banks as if they are capitalists. They are anything but and so do not deserve our defence. As if they complained about lending all that money to the state. As if they didn’t lobby and deal in the convenient keynesian policies that led to this mess.

    Every family in the UK now owes over £100,000 to the banks using the state as a middle man. Our grandchildren kept in tax slavery at our doing.

    It is my strongly held opinion that the reason the libertarian message continues to stall in the public concsiousness is a reluctance to criticise corporatism on the corporate side. So often the state takes the blame (correctly) but we fail to do what Ayn Rand did so well. To hold the corporate toadies that enjoy the benefits of greater state interference in the same contempt as the state aparachiks. They are one and the same. Interchangeable faces that pass through the revolving door to crony corporatism, from state “regulatory bodies” and vice versa.

    Praise the Hank Reardons to the hills but do not defend the James Taggarts and by extention the Wesley Mouches of this world.

  • Tom Perkins

    “tot he” != “to the”

    “suspect of have” != “suspect you have”

    Sorry, it’s 4:00am or so here and I hadn’t had coffee yet.

  • I really wish you guys would put buttons on this blog so readers can share articles on facebook, twitter, etc.

    I find that the widgets from the so called “social networking” sites tend to be highly anti-social in that they make the browser run extremely slowly. The situation has gotten worse since Google “Plus” has come along.

  • Woo-hoo! I got smited for an anodyne comment about the memory-hogging tendency of “social networking” widgets.

  • Andrew Duffin

    @bloke in Spain: I believe people were buying houses they couldn’t afford in the expectation that the State would debauch the currency and they’d be able to pay back their loans in much-depreciated paper.

    And they were right, the State did exactly that.

    And guess what, the State is still doing that, and indeed planning more of it.

    It’s interesting (no pun intended) to note that the Bank of Englands own pension fund was switched largely into inflation-proof bonds just before those were withdrawn from sale to the public.

  • PeterT

    Not sure this thread requires another post, but..

    In a way the banks did steal the money.

    If you create cash that is not backed by valuable loans inflation will result. So the real value of the money has been stolen.

    Another way of backing up the money ex-post is to bailout the banks of course. While this is not technically speaking theft, if the banks had not been bailed out the depositors would have seen their savings destroyed, if not stolen.

  • Dom

    Tom Perkins: “tot he” != “to the”

    The “!=” sign means “does not equal”.

  • Tom perkins

    I know that.
    Tot he
    &
    to the
    are not equal.

  • Paul Marks

    The left have an “answer”.

    The economic crises was caused by greedy bankers who created the mortgage mess (created by their own efforts – not in line with government and Federal Reserve policy) and more REGULATION would have prevented the crises.

    In dealing with people who do not know much economics (such as Bill O’Reilly of Fox News) this line of “argument” is quite effective.

    O’Reilly does not know that America (under Bush) had the most (not the least) regulated financial markets in the Western world.

    Nor does he know that about the effects of the vast wave of credit money backed by the Federal Reserve.

    So the left (in part) can get away with the “argument” that “the greedy bankers caused the crises – more regulations will prevent such a thing happening again”.

  • bobby b

    No, the politicians who bailed them out with taxpayer money stole ‘our’ money after they created the moral hazard that led to the banks doing the things that they were given the incentives to do.

    Your use of the word “incentives” indicates a disconnect, at least from how I remember it. When I was younger, before corporal punishment got its bad name, we had . . . um . . . corporal punishment. Yeouch. It was dispensed according to relatively clear and constant guidelines – you were never surprised when circumstances led to it – and its purpose was to cause you to alter how you made choices at times.

    In a carrot ‘n stick world, corporal punishment is a stick. What the banks got – what you’re calling “incentives” – was a stick.

    IIRC, ACORN ran its first big (and successful) show on this, in the early 90’s, massing in front of and inside lots of banks with their rent-a-mobs, with the news crews they had arranged with the local stations setting up right inside. After the obligatory call-and-response chants, someone would do a speech about fairness and banks and in particular the provisions of the CRA that now appeared to be more extensive than had been the norm before, and it appeared that the various regulatory bodies that were interested in banks (and there are lots!) were henceforth required to consider a bank’s enthusiastic compliance with certain provisions of the CRA whenever those bodies had to give permission or approval or just acknowledgment to a bank, at least one of which was required for just about anything a bank might ever want to do. Meaning the banks suddenly faced a very serious and costly threat if they didn’t comply with ACORN’s demands.

    What the CRA mandated, and what ACORN demanded the banks do, was that the banks stop treating poor risks like . . . you know . . . poor risks. They could run credit scores, but needed to keep in mind that discriminating against home buyers based on any financial factors whatsoever was no longer allowed.

    At the same time, Barney Frank and his crew were running the two quasi-federal outfits Tammy Fay and Bernie Mack like they were the Democrat Party’s USA debit cards, running hundreds of millions through them and out and into the hands of supporters and voters and people who might be voters if you gave them a house, and all their friends, and backing up ACORN’s threats to the banks about how all of their applications for permissions for mergers and moves and expansions and painting branches and lobby hour changes could easily be misplaced for months or years . . .

    And Tammy Faye and Bernie Mack were also reassuring the banks that, even though they couldn’t find it in the rules, they were quasi-governmental enough so that the banks could be assured that Uncle Sugar had their backs on all of this new deadbeat exposure (wink wink).

    But then, defying all computer modeling conclusions, the deadbeats stopped paying, and the banks started to realize that their huge cascading pile of bad mortgages in the basement that they told the government was worth {$lots} was actually only worth {$lots/2}, and since one of the government’s biggest sore points was banks that didn’t always have {$lots} of cash on hand, suddenly {lots} of banks were in hot water, and looking to Tammy Faye and Bernie Mac to do what they promised and back them up. Like, you know, bail them out.

    Which they eventually mostly did, because they had promised they would, and because they realized that NOT bailing them out would likely result in every person in the world suddenly losing their bank debit card and then every fifth person losing their job and then every thirtieth person losing their house . . .

    Anyway, “incentive” makes it sound like the banks got party favors and drink coupons whenever they made bad loans – the carrots – but what they really got was sticks – “do this or else” – and it doesn’t strike me as unreasonable that the banks did what they could so as to not get stuck financing society’s new “everyone gets a house” program completely out of their own pockets.

  • bobby b… maybe where you come from ‘incentives’ just implies The Carrot. Not where I come from. It is just as likely to imply The Stick.