The Fourteenth Banker Blog

November 22, 2010

Where Do We Turn?

Filed under: Running Commentary — thefourteenthbanker @ 10:57 AM

This apt question, from commenter Sandi, is a timely one. On viewing the movie, Inside Job, Sandi finds the entire system corrupt because the supposed educators and advisors to Presidents are on the corporate dole. The beauty of an on camera interview is that the real person cannot be so easily hidden.

Our half dead populace, drunk on Dancing with the Stars, probably has no desire to turn anywhere or do anything. But a few posts from last week indicate rising awareness of the screw job we are all getting.

FDR Wasn’t FDR…Until His Hand Was Forces By Civil Disobedience

A Debtcropper Society

There are solutions to this mess. Perhaps our inspiration will come from abroad. Perhaps the civil disobedience or political insurrection in other countries will lead to an awakening in ours. We do not have to degenerate into anarchy to bring change, but we do have to act in some manner. Right now there are too few people acting. I’m thinking of pulling my money on December 7. That will only be symbolic and nobody will notice. But it is one small defiant step. Then I will take another one, and another one, until it is the path I walk.





  1. The Roosevelt piece is – or should be – an inspiration. It just made me realize anew how steep the climb will be today.
    People may say they want change, but they want safety first – as in, “don’t stick your neck out”. Until their ox gets gored or they feel the direct effect of lay-offs, sick kids with no health insurance, etc., it’s hard to get them engaged. One big difference between now and 1934, for instance, is that we don’t see “Hoovervilles”, or lines for soup kitchens. We don’t see the Viet Nam vets storm the Mall, we see them on street corners with “homeless vet” signs or in shelters. Thanks to the safety nets created from the Depression experiences, the soup kitchens and bread lines are now electronic – you get a debit card. There aren’t even physical food stamps anymore.
    Also in the ’30s the union movement had some teeth and some strong support. People still remembered having “the Man’s” boot heel on their necks. Part and parcel with the growth of the financial industry and it’s capture of Washington, DC, as pointed out in “Inside Job”, is the fact that the union movement was decimated steadily in those years. Then there is the dumbing down of the public schools and the rise of fundamentalist religion (don’t look for an earthly reward, this life is supposed to be toil and uncertainty, but you’ll get your REAL reward in Heaven”). So many little jagged pieces of this puzzle – it’s no wonder the average person doesn’t see the patterns.
    Oh, yeah, and then there’s Fox and Rush…………….and Glenn

    Comment by Sandi — November 22, 2010 @ 2:35 PM | Reply

  2. The New Yorker asks, “What Good is Wall St.” ? Other than being a frat house for sociopaths, not much, from where I sit.

    Comment by Sandi — November 22, 2010 @ 3:21 PM | Reply

  3. Forgive my multiple posts, but this just came across my virtual transom and I am so outraged I could scream -Judd Gregg for head of Business Roundtable???? This just REEKS of the stench that Inside Job talks about – the incestuous marriage between K Street and Pennsylvania Ave (each end, it now appears). No wonder Sen. Gregg is retiring – to a much more lucrative assignment –

    “In replacing Castellani at the Roundtable, the CEOs may well turn to a retired Member, downtown sources said. They claimed that outgoing Sen. Judd Gregg (R-N.H.) is considered a top candidate. Based on tax forms that show Castellani’s compensation, the job is expected to pay more than $5 million annually.

    A former House Member and Granite State governor, Gregg sits on the Budget, Banking and Appropriations committees and was Obama’s first choice to be Commerce secretary, a job now held by former Washington Gov. Gary Locke (D). Gregg later declined Obama’s nomination, but the president’s nod may still hold sway with exacting CEOs who may be wary of Gregg’s lack of experience in the private sector.

    “If Sen. Gregg met the bar for the Obama administration to be Commerce secretary, obviously he’s well-liked in the business community,” said Ivan Adler, a recruiter for the McCormick Group. “He would be a natural bridge between the Obama administration and business.”

    Comment by Sandi — November 22, 2010 @ 4:32 PM | Reply

  4. (My sentiments, exactly, 14)

    Since this is a banker blog, I’d like some feedback on something that was bothering me long before I saw “Inside Job” Sunday. And that is the issue of trust. Bankers especially, at least in my archaic view, depend on trust above all. In fact, I think we could agree that business in general depends on it. Why would you do business with someone you assumed was out to screw you blind? So doesn’t it follow that by gaming the system, by systematically, if incrementally, screwing their clients, the business community is slitting its own throat? Do they figure that we have no other options? (they are right in some instances), or do they think that by the time we catch on and opt out, they will have collected a tidy sum and can retire to St. Lucia? I am deadly serious about this. Forget honor among thieves – if everyone decides that they can’t trust their car mechanic, their grocer, their industrial food producer, the pharmaceutical companies, the banks, won’t they eventually just do without as much as they can and sit on their wallets?
    I was just reading Bob Herbert’s op-ed piece today about Kennedy.
    I had recently said to an old friend of my generation, “If we had to put a man on the moon today, we couldn’t do it.” We talked about how Kennedy brought out the best in us in many ways, by challenging us to be our best selves, to rise to heights we could barely conceive of. He was no saint, God knows, but without him would we have gone to the moon, developed the Internet, etc?

    Comment by Sandi — November 23, 2010 @ 8:59 AM | Reply

    • Sandi, I have my own experience and the words I get from bankers at other institutions. As far as the really big banks go, first of all there is hubris. They so dominate their markets in terms of branch distribution, marketing presence, being integrated into all parts of the system that they feel somewhat bullet proof. It seems any regulatory or legal problem can be solved with the application of grease to the squeak. The costs of lawyers and settlements is chump change compared to the earnings that are realized. The funding advantage of being Too Big To Fail is quite significant. Large depositors that cannot depend on FDIC insurance do depend on TBTF for at least three of the big four. So funding cost advantages do provide pricing advantages to some extent on the credit side. Next, these banks are so huge an layered that the incentives are different at the top of the house versus with the regular sales force. At the top of the house, they have huge current incomes, generally are already wealthy and connected and believe they are the best at what they do, which is making money, not providing service. Even when some income is deferred through stock restrictions they still believe they will create a lot of shareholder wealth for themselves down the road. Most analysis of the foreclosure and servicing issues say losses will be in the tens of billions but because they can be stretched out over several years, can be absorbed. Personally I believe that before the banks get past all that and reach their “normalized” earnings that will help them realize major gains in share prices, the market will have begun to change and the advantages that exist currently will no longer. But don’t tell that to Exec Management. They believe they own the field. Finally, the bankers that interface with most customers are generally discouraged about their ability to provide the service they would like, but they get paid so much more now in incentive pay that it does not make sense for them individually to criticize the system. That is seen as not being a team player and it results eventually in a penalty to earnings potential. Even though the banks earnings are down, the amounts going to bankers for incentives are not. The shareholders are getting ripped off but they have little power. So the Execs pay themselves big money and convince themselves of even bigger future profits. They buy the loyalty of the other managers and bankers with a combination of high incentive pay, and both financial and status penalties for not playing along.

      Independent banks too often choose to emulate their big cousins and in some cases create the same culture. In other cases there is a healthier culture but they do not have the scale to be so competitive as to move market share in more than a couple of metropolitan areas.

      Finally, I think the big banks have enormous trading advantages. On many recent quarters big banks do not have a single loss day. I believe this is because of informational advantages, the massive earnings from Fed and Treasury operations that run through these books, and because they are so connected that they can predict what the Fed and others will do. They can also stake positions and then influence the market in ways that are perfectly legal. I’m sure that inside information is used regularly but it is “sterilized” through complexity and legit research that is done. This is another competitive advantage that independents and regional banks do not share. So essentially there are subsidies for the Too Big Too Fail banks.

      The Trust issue is a big one and marketing departments are working on that. Unfortunately most people can be fooled most of the time by half truths, mischaracterization of fact and general repetitiveness of marketing messages. It is kind of like politics in that way.

      One more thing, just like people dislike the politicians but often like their politician, so with bankers. They may not trust the industry or a particular bank, but when they have a banker they know versus one from somewhere else that they don’t know, they often stick with the devil they know. The independent banks are extraordinarily inept at differentiating themselves because they are caught in the same basic world view.

      Comment by thefourteenthbanker — November 24, 2010 @ 3:13 AM | Reply

      • Thank you for the thoughtful response, 14. The fact that everything you said is so true just makes things worse 😦 I suppose, historically, the little guy has always taken it in the neck, but that certainly doesn’t make it any easier to accept.

        Maybe it wouldn’t rankle me so much if we, as a nation, didn’ claim to be a meritocracy. We CLAIM one of America’s defining differences is that through hard work and keeping our nose clean, anyone can reach the top of the heap, but we should see by now just how false that trope is, and how it’s been used against the average person. As long as Joe Six-pack believes that one day he, too, will rise to success and prominence, he won’t begrudge the Charles Price’s of the world their gazillions. So what if Jimmy Cayne started out in the mail room? Those days are rapidly fading in the national rear-view mirror. Now everyone who’s “arrived” sends their kids to the same schools, they belong to the same clubs, it truly has become a closed loop, just like the nobility of Old Europe. I’m surprised there aren’t tighter social conventions about marrying a commoner.
        As some of the “old timers” of Wall St. pointed out in “Inside Job”, it’s only been in the last 30 years that this kind of aristocracy has arisen. As the film also made clear, the hand-in-glove partnership expanded under Ronnie Raygun between Wall St and the Capitol has brought us where we are today.
        Everything you said just proves how we have become a plutocracy. And that is NOT who we say we are. I may not be able to change it, but I damn sure don’t have to like it. 🙂

        Comment by Sandi — November 24, 2010 @ 9:26 AM

  5. Wasn’t sure where to post this, but this is as good as any spots, I guess. WikiLeaks, according to Forbes, is getting ready to leak some damaging stuff on a large US bank. In likening the leak to the Enron emails, he said this-

    You could call it the ecosystem of corruption. But it’s also all the regular decision making that turns a blind eye to and supports unethical practices: the oversight that’s not done, the priorities of executives, how they think they’re fulfilling their own self-interest. The way they talk about it.

    Here’s a link to the interview –

    Comment by Sandi — November 30, 2010 @ 12:02 PM | Reply

    • Yes, I may just dig through some of that myself. The way he characterized the information is telling but not surprising, “ecosystem of corruption”.

      Comment by thefourteenthbanker — November 30, 2010 @ 10:15 PM | Reply

  6. After reading the washingtonblog, I can now see the all the premises that were wrong and misleading to a greater degree. I can eventually fix this given the correct amount of time.

    Comment by owen walter owens — December 12, 2011 @ 9:38 AM | Reply

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