A good friend who works on the Street responded to my last post:
Just came across this email again.. My position doesn’t change. Wall Street was certainly a part of the equation but Barney Frank and his merry band of pranksters coupled with a willing and extraordinary irresponsible material driven populace are also complicit in the meltdown. Its easy to blame the “Banker” but let us not forget the power hungry “Politician” and the short sighted and often time fraudulent “Borrower” for they are equally at fault. Where’s the outrage about the massive pensions and gold plated health care that so many municipal workers have landed over the past 20yrs? Where’s the outrage about the tax payer funded loans the auto industry took and has yet to pay back. The same auto industry that for 20yrs was warned about fiscal discipline to no avail and negotiated with unions “job banks” to protect their workers while loosing money all the while? Where’s the rational discussion about the Feds role in strong arming the banks into funding low income (some might call sub-prime?) loans in order to increase home ownership to the highest levels in this country’s history. Where is the outrage beyond the “Banker”??
By the way, I am not vilifying successful Americans. I am an entrepreneur after all. I actually believe there ARE good bankers out there. And I am certainly not saying we should nationalize the banks or dismantle the free market system. Those aren’t good ideas. And neither is raising taxes. But a famous management guru once wrote: “People do what they are paid to do.” (i.e. “All economic activity boils down to incentives.”) WS folks got rewarded when they did things that weren’t always good for their firms in the long run, weren’t always good for Borrowers & Clients, and strayed over the line in terms of risk. Today they are still rewarded when they take risks with other people’s money (client’s, Main Street’s, government’s). As William Cohan wrote in the NY Times: “…the fact remains that the Dodd-Frank Act does nothing to change the terribly warped incentive system that continues to reward Wall Street bankers and traders for the revenues they produce by taking risks with other people’s money. It does nothing to hold bankers and traders responsible for their actions where it really matters — in their pocketbooks.”
My point is that bankers and traders should be held responsible for what they do. Just as Borrowers should be…and Auto makers…and Unions. We all should be. And of course at the end of the day we absolutely need the financial system, but can’t we ask for the same accountability from it that we expect from other sectors? I was interested in Bernanke’s comment in Congress this week. He said Americans were justifiably angry that bankers “who drove their companies into a ditch walked off with lots of money.” A simplification of the events, but perhaps a simple truth nonetheless.
As for credit being available…I don’t see it. Banks are not freely lending — at least not yet. Neither to small businesses nor consumers.