Robert Reich has a list of conditions that he thinks should be applied to private sector banks should we wind up creating what he dubs a “Bad Bank” to dispose of all those nasty assets.
Until the taxpayer-financed Bad Bank has recouped the costs of these purchases through selling the toxic assets in the open market, private-sector banks that benefit from this form of taxpayer relief must (1) refrain from issuing dividends, purchasing other companies, or paying off creditors; (2) compensate their executives, traders, or directors no more than 10 percent of what they received in 2007; (3) be reimbursed by their executives, traders, and directors 50 percent of whatever amounts they were compensated in 2005, 2006, 2007, and 2008 — compensation which was, after all, based on false premises and fraudulent assertions, and on balance sheets that hid the true extent of these banks’ risks and liabilities; and (4) commit at least 90 percent of their remaining capital to new bank loans.
In common parlance, force them to behave like banks rather than criminals, while clawing back illegitimate salaries and other earnings.
Or we could just take over all the banks, clean them out and sell them. Things are so bad we might wind up having to do that anyway.
Reich is one of the few sensible voices out there. Let’s hope his advise gets taken to heart.
The complexity and cost of trying to extract the penalties Reich proposes in (3) probably wouldn’t be worth the trouble, and once you got about three or four layers down the corporate food chain you’d be wiping out folks who may or may not deserve such a fate, and whose children definitely wouldn’t.
What might be better, would be a provision that if the government takes over a failing bank, the CEO, senior vice presidents and board members (those who actually determined company policies) would summarily lose their jobs, be required to cash out their company shares (if they were worth anything) and be prohibited from working in the financial industry for ten years.
The point here is that although what many of these people were doing was certainly immoral (and probably fattening) it wasn’t specifically illegal. Going forward, it should be. We want to prevent this crap from happening again. Revenge might feel good for a minute or so, but woudn’t solve the problem.
What Reich is proposing would be illegal and not in line with the current set of laws. But as AF states: “Revenge might feel good” and that is the only premise Reich has. Going forward you can put in certain rules…but going back is a no go. But if he is serious…why not propose to do the same with politicians ? Frank, Dodd who fraudulently asserted that Fannie, Freddie were all sound and solvent….should they go, pay back the senate salary and be banned from politics ?
@3: Sure, and Bush and every republican idiot who said that the economy was fundamentally sound should lose their seats too …..wait, the election already did that.
The problem was not Freddie and Fanny – it was the loans they were required to back. the banks and mortgage companies that could bundle the bad loans and hide them. The system failed because there were no penalties for the banks and mortgage companies to MAKE bad loans.
Who wrote the rules and new laws for this ridiculous situation? Phi Gramm.
I think bankers should be compensated according to how much value they add to the economy, but in any case not less than a statutory minimum wage of $2.18 per hour plus tips.
sure sure, and what about Clinton and Carter who demanded that banks start to loan to people who couldn’t afford it ? You are right, there were no penalties to make bad loans because they were required to make bad loans…and with the assumptions by so many that the housing prices will always go up …it made it easy.
And don’t forget, this is a global issue, not just a US issue. Look what happened in Iceland or the rest of Europe, look what’s happening in China etc. This was a global mistake by many.
I’m going to repost #5 because Goldy’s edit function isn’t working today.
I think bankers should be compensated according to how much value they add to the economy, or $2.18 per hour plus tips, whichever is more.
@3 Since when did Republicans like you ever give a shit whether something is legal?
Someone who just woke up from a coma and read the troll comments on this board would naturally assume we’ve had a Democratic president and a Democratic Congress for the last 8 years.
The Community Reinvestment Act, which was enacted in 1977, worked fine until Republicans got their paws on it.
Dutch @#3
If that’s illegal, how can an employer require someone to get out of bed at an ungodly hour, go down to the office and sit in a stuffy little cubicle all day doing some dreary chore?
If you want someone to give you money, you usually have to do what that person says.
emily: one of the examples would be going back and taking compensation away etc.
But you bring up a point: If you want someone to give you money…you usually have to do what the person says….like donations to politicians…see latest discussions on who is invited to inauguration, etc.
Dutch @ 13:
Reich doesn’t propose “going back and taking the money away.” He says if the banker guys want the free money, they have to voluntarily give the money back. Banks would be free to give their employees whatever compensation they want to, pay the stockholders whatever dividends they wanted to, etc. But if Reich’s proposal is adopted, bankers would have to do certain things they may not want to do in order to get the dough.
That’s just life in the big city.
@13 In American law jurisdictions, a thief doesn’t acquire title to property by the act of stealing it.
I was rereading The Great Gatsby for the umpteenth time yesterday and came across a sentence that Fitzgerald could just as easily written for the Bush administration as for the Buchanans:
They were careless people, Tom and Daisy–
they smashed up things and creatures and
retreated back into their money or their
vast carelessness or whatever it was that
kept them together, and let other people
clean up the mess they made … .
@6
Bit of a stretch blaming what’s happening today on a law that in passed ’77 and worked just fine from ’77 to 2000 don’t ya’ think.
Reading accounts of WAMU and Country Wide’s failures I’ve never come across a person saying they didn’t want to give someone a loan, but they had to anyway.
Any system will fail without proper oversight and regulation (try running a room full of 2nd graders without any oversight or rules!) and that’s exactly what happened under Bush the 2nd.
@16
Perfect.
“Bit of a stretch blaming what’s happening today on a law that in passed ‘77 and worked just fine from ‘77 to 2000 don’t ya’ think.”
Actually, the people to whom you’re directing that statement don’t. Think, that is. At all.
@6: Dutch
try to get your facts straight:
Why would something enacted in 1977 to make it illegal to deny QUALIFIED applicants loans (on the basis of race or whatever) suddenly cause problems now? This was ONLY for QUALIFIED applicants and helped to prevent redlining.
And this was NOT a global issue – most european banks (except some in England) did not make these bad loans – but they bought into the bad loan portfolios or they bought into our banks. And then they were hit by the worldwide global depression – started by US.
you guys are all so fucking stupid. dont you see that this whole thing is orchestrated with obama being created as a super celbrity, so most people will not question him, and this entire nation will be socialized. you can all forget you flatscreens and suv’s. did you see one of his quotes “there can be no idle hands”. didn’t stalin say that too? you guys are in for a big surprise.