close
Wallstreet banks (華爾街銀行) are rewarding themselves with USD$145 billions of bonues. Yes, billions, not millions. The size of Goldman Sachs (高盛) bonuses is enough to pay each of its 23,000 employees USD$770,000. That's about 兩千四百萬新台幣 for each person.
At the same time, Wallstreet own shareholders got clobbered. Citicorp (花旗銀行) shareholders lost 94% from its peak, Bank of America - over 70%, AIG - 99%, Lehman and Bear Stern - 100% wiped out. Even the shareholders of Goldman Sachs, the best of the breed, suffered more than 30% losses from its peak. If the tax payers did not bail out Wallstreet in 2008, "all of them will fail", said Geithner, Secretary of Treasury.
Economy is in shamble. Mainstreet (意指普通大眾) is still suffering. Unemployment nationwide tops 10% and growing. Many of them worked hard, day in and day out, in factory, farmland, schools, hospitals or military. After paying for their car, food and shelter, most Mainstreet people don't have much left. The little they squeezed so hard to save in 401K (退休儲蓄帳戶) just became 201K (少掉一半的退休儲蓄帳戶). And this is the 2nd times in a decade (1st time was year 2000, the dot com bubble). No wonder they are furious. No wonder they don't trust Wallstreet.
Retirees were hit hard also. They live on their interest income. But their interest just went to nearly zero, forcing them to draw on their principals. What they depend on to live through their golden years will run out much sooner than they have planned. Have you noticed that there are so many age 70+ people working as cashiers these days?
Wallstreet banks are supposed to lend money to the business and homeowners. Instead, they used it for their own high risk investment. Wallstreet banks function almost like hedge funds (對沖基金). If Wallstreet banks make money, they say they deserve those bonuses. But if they lose money and drag down the entire economy, they want the taxpayers and their descendants to bear the burden. They threatened that the entire economy would go down with them if they were not bailed out. They took the whole nation hostage.
Citicorp had a subsidiary trading future oil contracts, a highly speculative gambling. Obviously it required a large amount of capitals to buy up those oil contracts worth billions and billions. Where did the money come from to fund this speculative gambling? Our bank deposits and the trillions of dollars loaned to them by Federal Reserve (I will talk more later). As the result, the crude oil price went from $30 a barrel to $147, now back to $75. The head of the trading got $100 millions US dollars in 2009 bonuses. Meantime, we all are paying higher gas prices. It's like a tax increase for everyone, for the benefit of Wallstreet. Of course, Citicorp wasn't alone. All of the other Wallstreet banks had similar units just like Citicorp's.
In the mean time, business can't get loans. They can't hire or expand. Some can't get enough money flow to sustain existing operations. They had no choice but to lay off people.
Some homebuyers can still get mortgages from banks. But banks don't hold on our mortgages any more. They think making 5% or 6% is too little to them. So they make profits from mortgage transaction fees, then immediately sell those mortgages to the public, as well as Fannie Mae and Freddie Mac, both owned by the U.S. government. Wallstreet also packages the mortgages, good and bad, lured the rating firms (Moody, Standard & Poor, etc.) to give them AAA ratings, and sell these toxic assets to people or foreign countries.
But they are not only profiting from selling toxic assets, they are more creative and greedier than that. Let me explain. Well, we all know auto insurance and homeowner insurance. If something bad happens, the insurance companies will compensate our losses. CDS is like that with a major difference. Not just we can buy CDS against the asset we own, other people can buy CDS against what we own. So if something we own goes bad, not only we get paid by the insurance company, other people who bought insurance against our stuff get paid as well. Sounds weird but that's exactly what it is. So, Wallstreet at one hand sells toxic assets, at the other hand buy CDS against those assets, fully aware that they just sold rotten stuff to their clients. A senator put it this way, "It's like Wallstreet selling you a car with faulty brake then buy insurance against your car. If an accident happens to you, Wallstreet got paid."
You may say this sounds like fraud. How could this be possible? Is it legal? Yes, it's legal. That's because in 1999, a landmark law called Gramm-Leach-Bailey Act removed the separation among banks, brokerage and insurance, making it possible for the banks to take our deposits and gamble on the stock, commodities or other risky markets. Worse yet, later on congress passed another law to allow CDO and CDS. CDO allows the banks to securitize the mortgages and sell them to the general markets. As the result, most banks no longer hold mortgages. After granting the mortgages to homebuyers, banks package the mortgages, get good ratings for them, and sell them at a good price to the general markets (called mortgage backed security), Fannie Mae or Freddie Mac. They make money by processing the mortgage transactions and by servicing the monthly payments. Because they don't hold mortgages any more, they no longer care whether the borrowers have good credits or not. This is the reason why the banks kept on pushing mortgages to those who didn't even have jobs, causing the housing bubbles and resulting in foreclosures, etc. The CDS is even worse. Warren Buffet called it financial WMD (Weapon of Mass Destruction). Indeed, it exploded with massive destructive power, sending the world economy to free fall.
Homeowners are not the only ones who suffered from Wallstreet scams. Cities, townships, schools, hospitals, ..., you name it. They often issue bonds to do certain projects - new buildings, new campus, new facilities, etc. Wallstreet convinced them that they could get lower interest rates if they let Wallstreet package the bonds. Well, they enjoyed the lower rates for the first few years. But later the rates skyrocketed. If the townships or schools wanted to get out of the deals, they would have to pay a hefty penalty to Wallstreet.
You may say only the naive people will be fooled by the Wallstreet. Not so. When Harvard University was trying to expand its campus, it worked with Wallstreet to issue some bonds. Of course, the bond was thoroughly reviewed by Harvard financial experts, including Larry Summers, the current financial adviser to President Obama, Robert Rubin, the former secretary of treasury to President Clinton, and a host of Harvard alumni who are Wallstreet gurus. But Harvard lost billions at the end.
You may say you don't owe any money, never invest in stocks, live in a desert, no credit card, and put all your money in the bank earning near zero interest. Well, you are not exempted either. Why? You are paying higher taxes, higher gas prices, and the price of your house just went down another notch. Your pension fund may have bought those toxic assets. Your township, schools or local hospitals may have entered a deal with Wallstreet in the newly issued bonds. In the not too distant future, you will probably see inflation, making your money worth less.
Wallstreet bankers argue that they have to pay big bonuses to retain their talent. Well, if they are so good, why they almost bankrupted the whole nation? They say if they don't pay high bonuses, many of their people will jump ship to other firms. Well, where? Britain and France have imposed 50% taxes on bonuses. Swiss already paid toxic assets, the one created by their own employees, as bonuses to them. That leaves Germany alone. If US, UK, France and Swiss take action, Germany will have no choice but to conform.
Wallstreet bankers argues that in free economy, they should be allowed to do what they see fit. But free economy should allow companies to fail. When Wallstreet were in trouble in 2008, they lobbied for government help. At that time, why didn't they argue they should be allowed to fail because it's a free economy? Even now, Wallstreet is still being helped by government with low interest, Federal Reserve (相當於台灣的中央銀行) borrowing windows, asset value guarantees, and so on. Some banks said they didn’t want TARP. They could have survived without TARP. But Geithner pointed, “All of Wallstreet banks would have failed if they were not bailed out by government.”
Wallstreet banks also argue that they have paid back TARP. They shouldn't be subjected to outside supervision on their pay practices. But Mainstreets think that as long as Wallstreet continue to gamble their hard earned deposits on risky markets and put their well being at risk (they have plenty of proof for that), of course they should have a say in Wallstreet practices.
I should point out that while Wallstreet paid back the TARP, they are still being given special favor by the government even to this day. How? When the financial market was in crisis, Federal Reserve opened a discount borrowing window to Wallstreet, and flowed more than two trillions U.S. dollars to them at near zero interest rate. This money is still in Wallstreet hand. They use it to balance their rotten assets. They also use it as their trading (gambling) principals. You may ask where did Federal Reserve get two trillion dollars? Well, Federal Reserve has the responsibility and power to modulate the monetary policy. In short, they can print money. Of course they fully realize that if they print too much money, they will devalue the U.S. currency and cause high inflation. But Chairman Bernanke, whom I respect greatly, was concerned that the national and the world economy may fall into depression like the Great Depression in 1929. Being an scholar and an expert of Great Depression, he showed money on Wallstreet, which I believe was the right thing to do. But Wallstreet was supposed to lend this money to the Mainstreet to revive the economy. Rather they keep it to themselves for trading/gambling and for balancing the rotten assets still in their hands. The only thing good about Wallstreet holding this money is that it has kept away inflation. But eventually, the money will find its way to the mainstreet. And the inflation probably will accompany it, as predicted by many economic experts and scholars.
Someone said, "If it looks like a duck, quack like a duck, it's a duck." Goldman Sachs and Morgan Stanley weren't banks because they were not doing traditional banking business - taking deposit, making loans or mortgages, etc. They didn't qualify to borrow money from the Federal Reserve discount window at near zero interest rate. So, Henry Paulson, the Secretary of Treasury of Bush era and a former Goldman CEO, allowed them to obtain bank status. Even though they still don't look like banks today, "officially", they are banks, and they enjoy the tremendous benefits of being a bank. Otherwise they will have to borrow like hedge funds at a much higher interest rates. Goldman also got roughly $13B of cash from government (taxpayers) that was flowed through AIG for its CDS bet that went bust. Now Goldman is paying its empoyees $16.7 billions in bonuses.
A real problem in Wallstreet banks today is that they don't make most of their money in the traditional banking business any more, namely, loans, credit cards, mortgages, merger/acquisitions, wealth management for their clients. Rather, they make most of their money in trading - trading stocks, bonds, commodities (oil, gas, metals, agricultural products...), options, derivatives, CDO's, CDS's, and a slew of other things. They make money by pushing the stock market way over the top. Then on its way down, they short the market, making huge profit again while others suffer the losses. So you see the huge swings up and down each day and each year. You see the oil prices go up several folds and go down even faster. There is no way that the demand for oil going up and down 5 times a year. They also trade with one another, making money in transaction fees, even though the assets they hold (probably owned by their clients) kept on losing value. They take our hard earned deposits and savings as their gambling principals and make risky bets, while paying the depositors 1% interest, and charging credit card holders 20-30% interest. If Wallstreet banks make money, they say that's because they are good, and they deserve to keep all of profits. If they lose money, they will have nothing to lose and the taxpayers will have to burden all the losses. Worse yet, they are still paid big bonuses even when their banks are incurring huge losses.
Paul Volker, a former chairman of Federal Reserve and an advisor to President Obama, has been a lone voice advocating the separation of commercial banks and investment banks. So that the banks can’t take our deposits to gamble on the market any more; so that they have to make loans to the public as they used to; an so that there will be no more “too big to fail.” I think there are a lot of merits to his campaign.
“Capitalism without the possibility of failing is not capitalism”, said a Harvard professor.
**老孫
At the same time, Wallstreet own shareholders got clobbered. Citicorp (花旗銀行) shareholders lost 94% from its peak, Bank of America - over 70%, AIG - 99%, Lehman and Bear Stern - 100% wiped out. Even the shareholders of Goldman Sachs, the best of the breed, suffered more than 30% losses from its peak. If the tax payers did not bail out Wallstreet in 2008, "all of them will fail", said Geithner, Secretary of Treasury.
Economy is in shamble. Mainstreet (意指普通大眾) is still suffering. Unemployment nationwide tops 10% and growing. Many of them worked hard, day in and day out, in factory, farmland, schools, hospitals or military. After paying for their car, food and shelter, most Mainstreet people don't have much left. The little they squeezed so hard to save in 401K (退休儲蓄帳戶) just became 201K (少掉一半的退休儲蓄帳戶). And this is the 2nd times in a decade (1st time was year 2000, the dot com bubble). No wonder they are furious. No wonder they don't trust Wallstreet.
Retirees were hit hard also. They live on their interest income. But their interest just went to nearly zero, forcing them to draw on their principals. What they depend on to live through their golden years will run out much sooner than they have planned. Have you noticed that there are so many age 70+ people working as cashiers these days?
Wallstreet banks are supposed to lend money to the business and homeowners. Instead, they used it for their own high risk investment. Wallstreet banks function almost like hedge funds (對沖基金). If Wallstreet banks make money, they say they deserve those bonuses. But if they lose money and drag down the entire economy, they want the taxpayers and their descendants to bear the burden. They threatened that the entire economy would go down with them if they were not bailed out. They took the whole nation hostage.
Citicorp had a subsidiary trading future oil contracts, a highly speculative gambling. Obviously it required a large amount of capitals to buy up those oil contracts worth billions and billions. Where did the money come from to fund this speculative gambling? Our bank deposits and the trillions of dollars loaned to them by Federal Reserve (I will talk more later). As the result, the crude oil price went from $30 a barrel to $147, now back to $75. The head of the trading got $100 millions US dollars in 2009 bonuses. Meantime, we all are paying higher gas prices. It's like a tax increase for everyone, for the benefit of Wallstreet. Of course, Citicorp wasn't alone. All of the other Wallstreet banks had similar units just like Citicorp's.
In the mean time, business can't get loans. They can't hire or expand. Some can't get enough money flow to sustain existing operations. They had no choice but to lay off people.
Some homebuyers can still get mortgages from banks. But banks don't hold on our mortgages any more. They think making 5% or 6% is too little to them. So they make profits from mortgage transaction fees, then immediately sell those mortgages to the public, as well as Fannie Mae and Freddie Mac, both owned by the U.S. government. Wallstreet also packages the mortgages, good and bad, lured the rating firms (Moody, Standard & Poor, etc.) to give them AAA ratings, and sell these toxic assets to people or foreign countries.
But they are not only profiting from selling toxic assets, they are more creative and greedier than that. Let me explain. Well, we all know auto insurance and homeowner insurance. If something bad happens, the insurance companies will compensate our losses. CDS is like that with a major difference. Not just we can buy CDS against the asset we own, other people can buy CDS against what we own. So if something we own goes bad, not only we get paid by the insurance company, other people who bought insurance against our stuff get paid as well. Sounds weird but that's exactly what it is. So, Wallstreet at one hand sells toxic assets, at the other hand buy CDS against those assets, fully aware that they just sold rotten stuff to their clients. A senator put it this way, "It's like Wallstreet selling you a car with faulty brake then buy insurance against your car. If an accident happens to you, Wallstreet got paid."
You may say this sounds like fraud. How could this be possible? Is it legal? Yes, it's legal. That's because in 1999, a landmark law called Gramm-Leach-Bailey Act removed the separation among banks, brokerage and insurance, making it possible for the banks to take our deposits and gamble on the stock, commodities or other risky markets. Worse yet, later on congress passed another law to allow CDO and CDS. CDO allows the banks to securitize the mortgages and sell them to the general markets. As the result, most banks no longer hold mortgages. After granting the mortgages to homebuyers, banks package the mortgages, get good ratings for them, and sell them at a good price to the general markets (called mortgage backed security), Fannie Mae or Freddie Mac. They make money by processing the mortgage transactions and by servicing the monthly payments. Because they don't hold mortgages any more, they no longer care whether the borrowers have good credits or not. This is the reason why the banks kept on pushing mortgages to those who didn't even have jobs, causing the housing bubbles and resulting in foreclosures, etc. The CDS is even worse. Warren Buffet called it financial WMD (Weapon of Mass Destruction). Indeed, it exploded with massive destructive power, sending the world economy to free fall.
Homeowners are not the only ones who suffered from Wallstreet scams. Cities, townships, schools, hospitals, ..., you name it. They often issue bonds to do certain projects - new buildings, new campus, new facilities, etc. Wallstreet convinced them that they could get lower interest rates if they let Wallstreet package the bonds. Well, they enjoyed the lower rates for the first few years. But later the rates skyrocketed. If the townships or schools wanted to get out of the deals, they would have to pay a hefty penalty to Wallstreet.
You may say only the naive people will be fooled by the Wallstreet. Not so. When Harvard University was trying to expand its campus, it worked with Wallstreet to issue some bonds. Of course, the bond was thoroughly reviewed by Harvard financial experts, including Larry Summers, the current financial adviser to President Obama, Robert Rubin, the former secretary of treasury to President Clinton, and a host of Harvard alumni who are Wallstreet gurus. But Harvard lost billions at the end.
You may say you don't owe any money, never invest in stocks, live in a desert, no credit card, and put all your money in the bank earning near zero interest. Well, you are not exempted either. Why? You are paying higher taxes, higher gas prices, and the price of your house just went down another notch. Your pension fund may have bought those toxic assets. Your township, schools or local hospitals may have entered a deal with Wallstreet in the newly issued bonds. In the not too distant future, you will probably see inflation, making your money worth less.
Wallstreet bankers argue that they have to pay big bonuses to retain their talent. Well, if they are so good, why they almost bankrupted the whole nation? They say if they don't pay high bonuses, many of their people will jump ship to other firms. Well, where? Britain and France have imposed 50% taxes on bonuses. Swiss already paid toxic assets, the one created by their own employees, as bonuses to them. That leaves Germany alone. If US, UK, France and Swiss take action, Germany will have no choice but to conform.
Wallstreet bankers argues that in free economy, they should be allowed to do what they see fit. But free economy should allow companies to fail. When Wallstreet were in trouble in 2008, they lobbied for government help. At that time, why didn't they argue they should be allowed to fail because it's a free economy? Even now, Wallstreet is still being helped by government with low interest, Federal Reserve (相當於台灣的中央銀行) borrowing windows, asset value guarantees, and so on. Some banks said they didn’t want TARP. They could have survived without TARP. But Geithner pointed, “All of Wallstreet banks would have failed if they were not bailed out by government.”
Wallstreet banks also argue that they have paid back TARP. They shouldn't be subjected to outside supervision on their pay practices. But Mainstreets think that as long as Wallstreet continue to gamble their hard earned deposits on risky markets and put their well being at risk (they have plenty of proof for that), of course they should have a say in Wallstreet practices.
I should point out that while Wallstreet paid back the TARP, they are still being given special favor by the government even to this day. How? When the financial market was in crisis, Federal Reserve opened a discount borrowing window to Wallstreet, and flowed more than two trillions U.S. dollars to them at near zero interest rate. This money is still in Wallstreet hand. They use it to balance their rotten assets. They also use it as their trading (gambling) principals. You may ask where did Federal Reserve get two trillion dollars? Well, Federal Reserve has the responsibility and power to modulate the monetary policy. In short, they can print money. Of course they fully realize that if they print too much money, they will devalue the U.S. currency and cause high inflation. But Chairman Bernanke, whom I respect greatly, was concerned that the national and the world economy may fall into depression like the Great Depression in 1929. Being an scholar and an expert of Great Depression, he showed money on Wallstreet, which I believe was the right thing to do. But Wallstreet was supposed to lend this money to the Mainstreet to revive the economy. Rather they keep it to themselves for trading/gambling and for balancing the rotten assets still in their hands. The only thing good about Wallstreet holding this money is that it has kept away inflation. But eventually, the money will find its way to the mainstreet. And the inflation probably will accompany it, as predicted by many economic experts and scholars.
Someone said, "If it looks like a duck, quack like a duck, it's a duck." Goldman Sachs and Morgan Stanley weren't banks because they were not doing traditional banking business - taking deposit, making loans or mortgages, etc. They didn't qualify to borrow money from the Federal Reserve discount window at near zero interest rate. So, Henry Paulson, the Secretary of Treasury of Bush era and a former Goldman CEO, allowed them to obtain bank status. Even though they still don't look like banks today, "officially", they are banks, and they enjoy the tremendous benefits of being a bank. Otherwise they will have to borrow like hedge funds at a much higher interest rates. Goldman also got roughly $13B of cash from government (taxpayers) that was flowed through AIG for its CDS bet that went bust. Now Goldman is paying its empoyees $16.7 billions in bonuses.
A real problem in Wallstreet banks today is that they don't make most of their money in the traditional banking business any more, namely, loans, credit cards, mortgages, merger/acquisitions, wealth management for their clients. Rather, they make most of their money in trading - trading stocks, bonds, commodities (oil, gas, metals, agricultural products...), options, derivatives, CDO's, CDS's, and a slew of other things. They make money by pushing the stock market way over the top. Then on its way down, they short the market, making huge profit again while others suffer the losses. So you see the huge swings up and down each day and each year. You see the oil prices go up several folds and go down even faster. There is no way that the demand for oil going up and down 5 times a year. They also trade with one another, making money in transaction fees, even though the assets they hold (probably owned by their clients) kept on losing value. They take our hard earned deposits and savings as their gambling principals and make risky bets, while paying the depositors 1% interest, and charging credit card holders 20-30% interest. If Wallstreet banks make money, they say that's because they are good, and they deserve to keep all of profits. If they lose money, they will have nothing to lose and the taxpayers will have to burden all the losses. Worse yet, they are still paid big bonuses even when their banks are incurring huge losses.
Paul Volker, a former chairman of Federal Reserve and an advisor to President Obama, has been a lone voice advocating the separation of commercial banks and investment banks. So that the banks can’t take our deposits to gamble on the market any more; so that they have to make loans to the public as they used to; an so that there will be no more “too big to fail.” I think there are a lot of merits to his campaign.
“Capitalism without the possibility of failing is not capitalism”, said a Harvard professor.
**老孫
全站熱搜
留言列表
