8 ms·

>“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well,” Cuomo’s office said in the 22-page report

by tormeh 12y ago

>“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well,” Cuomo’s office said in the 22-page report. “When the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.” Waaat. I think the government should stop bailing out businesses. Either you let the company go bankrupt or you nationalize. Also I clearly need a job in banking...

jheriko 12y ago
> Either you let the company go bankrupt or you nationalize. I vaguely agree with that sentiment, but the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't and turn things into political footballs. Although thinking about that for a moment, its a big problem on its own...
- cowsandmilk 12y ago
  > government sucks at running things Because a company that needs to be bailed out was doing a great job...
  - davidw 12y ago
    You should have seen how banks were run in Italy when they were essentially the financial wings of various political parties. Anyway, this is pretty clearly about politics, so... article flagged.
    - themartorana 12y ago
      You should either participate in a discussion OR flag it as inappropriate, because the second you agree to engage, you believe the conversation has some merit on this forum. Edit: I can't reply to you for some reason, but I didn't downvote you. However, saying "downvote" instead of just doing it, and then flaunting your karma score and elevating yourself to the position of de-facto moderator seems much like saying "here is MY political opinion, and now I will work to shut down any further discussion on the subject."
      - davidw 12y ago
        If no one mentions that something is inappropriate, the site will gradually migrate towards politics, because the number of people interested in that is vastly superior to the number interested in "HN" topics. Also: I don't really care about your downvotes, because I've accumulated more than enough of this otherwise useless 'karma' that I'm happy to spend in order to make HN better by keeping politics and 'outrage stories' off of it.
- TomGullen 12y ago
  I don't see why governments can't nationalise industries such as oil extraction. Seems like a lot simpler of a business model than banking and very lucrative as well.
  - smcl 12y ago
    They can and have - a nice example of this is Norway vs the UK\Scotland. When oil reserves were found in the North Sea both Norway and the UK had claims which were (iirc) roughly similarly sized. They chose completely different paths, with Norway establishing a state owned oil company (Statoil) to handle exploration, extraction and processing with stipulations on what should be done with the windfall. The UK ended up selling licenses to private companies to handle this themselves. As a result of this Norway now has the largest sovereign wealth fund in the world. It's pretty hard to make direct comparisons given the differences in their populations and economies, but a fairly broad range (i.e. left and right [1][2][3][4]) of people seem to think that this was a wasted opportunity and that if it was managed better they'd have a lot more to show for the last 3 1/2 decades. I'd tend to agree. [1] http://www.theguardian.com/commentisfree/2014/jan/13/north-sea-oil-money-uk-norwegians-fund http://www.theguardian.com/commentisfree/2014/jan/13/north-s... [2] http://www.bbc.com/news/business-19871411 http://www.bbc.com/news/business-19871411 [3] http://www.economist.com/news/special-report/21570842-oil-makes-norway-different-rest-region-only-up-point-rich http://www.economist.com/news/special-report/21570842-oil-ma... [4] http://www.newstatesman.com/politics/2013/04/thatcher-and-north-sea-oil-%E2%80%93-failure-invest-britain%E2%80%99s-future http://www.newstatesman.com/politics/2013/04/thatcher-and-no... edit: A little more digging seems to indicate that I was painting with slightly broad strokes. Norway do indeed operate some sort of licensing scheme according to the "North Sea oil" wiki page (http://en.wikipedia.org/wiki/North_Sea_oil http://en.wikipedia.org/wiki/North_Sea_oil), so it is not entirely operated by Statoil.
    - vidarh 12y ago
      Norway certainly does have private exploration too, but note that we also levy massive extra taxes on oil companies, which adds up to something like 70% total, vs. 28% corporation tax on the profits of most other businesses. I believe the licensing system also takes into account investment and effects on local economy to an extent that creates substantial capital inflow beyond what you'd otherwise see.
- deleted 12y ago
  [deleted]
- JetSetWilly 12y ago
  The UK government nationalised RBS and thus far RBS does not seem to be particularly badly run or more bureaucratic when compared to other banks, so I'm not sure there's any real evidence for this statement. In fact the UK government is expected to make a tidy profit when it privatises RBS again.
  - collyw 12y ago
    Ahhhh, cute, you believe what the government tell you.
    - JetSetWilly 12y ago
      The government hasn't told me anything about RBS. I am very familiar with it as a customer (before and after nationalisation) and know several people who work for it though, so your ideologically-driven snark doesn't really hit its target.
    - dang 12y ago
      > Ahhhh, cute, you believe what the government tell you. Personal attacks are not allowed on Hacker News.
      - collyw 12y ago
        Where can I read up on the rules Dang? They don't seem to be available anywhere, I have asked before.
        dang 12y ago
        These are linked at the bottom of each page: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html This is displayed to new users, but is worth re-reading: https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html
- matthewmacleod 12y ago
  They introduce layers of infrastructure that business doesn't and turn things into political footballs. Have you ever had any interaction with any large business? They are bureaucratically indistinguishable from governments.
  - dougk16 12y ago
    Actually they are distinguishable - many of my interactions with banks and insurance companies make the government look like a well-oiled machine.
    - ashark 12y ago
      I've never had any interaction with the government that was even 1/4 as screwed up as the health insurance/hospital pairing. It's astonishingly bad. I can only conclude that the people saying things like "think healthcare sucks now, wait 'till the government's in charge!" have never actually had to personally deal with the healthcare system. Actually, the only thing that's hit the "1/4 as bad" mark is the health care exchange, and my problems with it are chiefly attributable to 1) no standard Internet-Age-friendly national ID card or similar, so identity/citizenship issues are still ad-hoc "send us a fax and mail us a copy of your drivers license, social security card, and birth certificate" nonsense, which is a problem with far more than just interactions with government, and 2) private health insurance is still a major part of the picture. It's like a machine to generate stress and take your money, with treating illness as a side effect. I'd gladly take single-payer over the dubious and mostly not practically available "freedoms" our current system affords me.
- mattgibson 12y ago
  > the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't Actually, there is no evidence of this. See this report that compares the Govt run industries before and after privatisation: http://www.psiru.org/reports/public-and-private-sector-efficiency http://www.psiru.org/reports/public-and-private-sector-effic... "The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient" Even if it was more efficient, $31 billion of corrupt bonuses on top = no different from an inefficient government.
  - jasonwocky 12y ago
    > "The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient" Exactly this. I've spent years in both sectors. People suck at running things, not governments.
    - ahallock 12y ago
      At least those inefficient companies could be disrupted by startups, and at least they don't get to take my money by force (apart from subsidies and bailouts). No such mechanism exists for government. That people suck at running things is the very reason we need this rise-and-fall structure.
  - vidarh 12y ago
    I think people tend to conflate government run businesses with government departments. Government departments will often be more bureaucratic for the simple reason that they have many additional roles to their primary ones: They are subject to openness and audit criteria that no private business is; they're subject to leadership systems that need to be resilient to far more frequent and drastic changes than in most businesses; they're subject to performance measurement across a far wider set of criteria than most private businesses etc.
- crdoconnor 12y ago
  >I vaguely agree with that sentiment, but the problem in practice is that government sucks at running things. The government could be no worse than a management team that has already proven its dedication to running the company into the ground.
- maxlybbert 12y ago
  It's not the federal government, but my favorite example was a (legal) brothel went bankrupt in Nevada a few years ago. The state of Nevada took it over until they could find a buyer, and lost money on the deal. Seriously, Nevada's state government couldn't turn a profit running a brothel.
quonn 12y ago
This is an excellent point. I would put a system in place that makes it clear that banks have a choice of a) Splitting before they get to big to fail or b) Accepting that if they grow larger, they can always be nationalized if they make a mistake that would cause them to go bankrupt. The problem is, that currently nationalization is only possible in most countries, if you fully pay the owner. Changing this would in some countries require constitutional changes. I think having a special rule for banks and the option to split would be a feasible change.
- josteink 12y ago
  If the company/bank goes bankrupt, the value of the company is by definition zero. What is there to pay the owners?
  - antocv 12y ago
    What the taxpayers have payed to keep the bank profitable. Just, you know, the taxpayers are not the owners, because . Hm, maybe it doesnt really matter if taxpayers would have become the owners, because in any case they would have payed for their losses but the profits would not magically find their way into taxpayers pockets, instead it would be some new term instead of owners like "facilitators" "workers". In the end, money doesnt really matter, what matters is which people take decisions concerning all other people, power.
    - vidarh 12y ago
      The point is that in the situations where nationalisation - or near nationalisation - to prevent bankruptcy is worthwhile, the effective price is going to be low, however you structure it. For starters, the government can go to the banks shareholders and tell their shares are going to be worth $X or they won't put money in and the business will go bankrupt. If the shareholders manage to find another investor, then great. In the UK, this happened with e.g. Royal Bank of Scotland, where the government gradually acquired a larger proportion of the bank as it provided capital until it owned the vast majority (in 2012 it owned about 82% - I don't know what it stands at now). While nationalisation of RBS was certainly not cheap in terms of pounds, it was firesale prices in terms of the size and turnover of the business, because the government took on massive risk as well. But the key part is that by providing the cash infusion in return for shares, the government is also participating in the upside if they manage to turn the bank around, and shareholders took a substantial hit in the form of massive dilution (though they are set to recover quite a bit as the bank recovers).
CmonDev 12y ago
"Also I clearly need a job in banking..." What you need is to be a partner.
tomp 12y ago
I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clearly need a job in banking... If you want to become a good cook, get a cooking job. If you want to earn good money, get a money (banking) job :)
- crdoconnor 12y ago
  >the government actually made money on those loans (AFAIK). Nope. Explanation here: http://www.interfluidity.com/v2/2587.html http://www.interfluidity.com/v2/2587.html Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) lent to financial institutions at or near risk-free interest rates against sketchy collateral (directly or via guarantee); 3) purchased preferred shares at modest dividend rates under TARP; 4) publicly certified the banks with stress tests and stated “no new Lehmans”. By these actions, the state assumed substantially all of the downside risk of the banking system. The market value of this risk-assumption by the government was more than the entire value of the major banks to their “private shareholders”. On commercial terms, the government paid for and ought to have owned several large banks lock, stock, and barrel. Instead, officials carefully engineered deals to avoid ownership and control. ... After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health. The government provided famous and obvious transfers like unwinding AIG swaps at 100¢ on the dollar. It forced short-term yields to zero and created an environment in which medium-term interest rates would be capped for several years, granting banks a near-risk-free arbitrage for a while. It emitted trillions in excess reserves on which it continues to pay interest. It forewent investigations and prosecutions that by law it should actively pursue, and settled what enforcement it could not avoid for token fees. Then there are the things conspiracy theorists and cranks like me suspect but cannot prove: that the government and the Fed have been less than aggressive in minimizing their costs when they or entities they control (AIG, Fannie, Freddie) transact with large banks, that they have left money on the table where doing so could be hidden in arcane accounts or justified as ordinary transaction expenses and trading losses. Large banks have enjoyed some rather extraordinary results for allegedly efficient markets, quarters with large trading profits and no or very few losing days. Government housing policy is pretty overtly subject to a constraint that interventions must not provoke loss realizations for banks carrying bad loans at inflated values, or interfere with servicing revenues. (If you think I am overconspiratorial, I’m still waiting for an innocent explanation of this, from 1991.)
quaffapint 12y ago
I work in banking as just another cog. We suffered wage stagnation and no bonuses. The executives on the other hand still got at least a 10% bonus each year, because they had contracts. So, please keep that in mind when it says 'employees'.
- easytiger 12y ago
  Still happening. Especially people working in IT in banks are getting almost nothing in bonus and no pay increase for many years. The number of jobs is significantly reduced also.
  - DennisP 12y ago
    That may be, but in Charlotte at least, IT jobs at the banks tend to be on the high end of our local salary range.
    - smcquaid 12y ago
      If you dont mind me asking, whats the software dev salary range in charlotte?
      - eatbuckyballs 12y ago
        Depends on Skillsets but it's not horrible. It's actually pretty consistent in Charleston, SC. as well. I know many devs over 100k in each field, It's not SF pay, but the cost of living is also not SF prices.
  - freehunter 12y ago
    Ever since I've started working in IT, the rule has always been if you want a pay raise or a promotion, you go to a different company. Out of the four companies I've worked for in three different Midwest states, I've never worked at a place where the highest raise of anyone on my team has ever exceeded 1.5% per year. 2-3 years then get out and get your raise somewhere else.
gadders 12y ago
>>Waaat. I think the government should stop bailing out businesses. Either you let the company go bankrupt or you nationalize. What, like General Motors?
- lmm 12y ago
  Yep. That worked out pretty well, on the whole; government gets to keep the upside rather than just throwing money at the same management that failed and getting nothing to show for it.
  - justincormack 12y ago
    Indeed there was no reason not to wipe out the equity holders of the banks as part of the deal, and take that as government upside.
    - rayiner 12y ago
      When financial services is a huge part of your GDP, and your country depends on a steady flow of investor dollars to keep the economic engine running, yes, there's a lot of reason not to wipe out equity as part of the deal.

by tormeh 12y ago

jheriko 12y ago

> Either you let the company go bankrupt or you nationalize. I vaguely agree with that sentiment, but the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't and turn things into political footballs. Although thinking about that for a moment, its a big problem on its own...

cowsandmilk 12y ago
> government sucks at running things Because a company that needs to be bailed out was doing a great job...
- davidw 12y ago
  You should have seen how banks were run in Italy when they were essentially the financial wings of various political parties. Anyway, this is pretty clearly about politics, so... article flagged.
  - themartorana 12y ago
    You should either participate in a discussion OR flag it as inappropriate, because the second you agree to engage, you believe the conversation has some merit on this forum. Edit: I can't reply to you for some reason, but I didn't downvote you. However, saying "downvote" instead of just doing it, and then flaunting your karma score and elevating yourself to the position of de-facto moderator seems much like saying "here is MY political opinion, and now I will work to shut down any further discussion on the subject."
    - davidw 12y ago
      If no one mentions that something is inappropriate, the site will gradually migrate towards politics, because the number of people interested in that is vastly superior to the number interested in "HN" topics. Also: I don't really care about your downvotes, because I've accumulated more than enough of this otherwise useless 'karma' that I'm happy to spend in order to make HN better by keeping politics and 'outrage stories' off of it.
TomGullen 12y ago
I don't see why governments can't nationalise industries such as oil extraction. Seems like a lot simpler of a business model than banking and very lucrative as well.
- smcl 12y ago
  They can and have - a nice example of this is Norway vs the UK\Scotland. When oil reserves were found in the North Sea both Norway and the UK had claims which were (iirc) roughly similarly sized. They chose completely different paths, with Norway establishing a state owned oil company (Statoil) to handle exploration, extraction and processing with stipulations on what should be done with the windfall. The UK ended up selling licenses to private companies to handle this themselves. As a result of this Norway now has the largest sovereign wealth fund in the world. It's pretty hard to make direct comparisons given the differences in their populations and economies, but a fairly broad range (i.e. left and right [1][2][3][4]) of people seem to think that this was a wasted opportunity and that if it was managed better they'd have a lot more to show for the last 3 1/2 decades. I'd tend to agree. [1] http://www.theguardian.com/commentisfree/2014/jan/13/north-sea-oil-money-uk-norwegians-fund http://www.theguardian.com/commentisfree/2014/jan/13/north-s... [2] http://www.bbc.com/news/business-19871411 http://www.bbc.com/news/business-19871411 [3] http://www.economist.com/news/special-report/21570842-oil-makes-norway-different-rest-region-only-up-point-rich http://www.economist.com/news/special-report/21570842-oil-ma... [4] http://www.newstatesman.com/politics/2013/04/thatcher-and-north-sea-oil-%E2%80%93-failure-invest-britain%E2%80%99s-future http://www.newstatesman.com/politics/2013/04/thatcher-and-no... edit: A little more digging seems to indicate that I was painting with slightly broad strokes. Norway do indeed operate some sort of licensing scheme according to the "North Sea oil" wiki page (http://en.wikipedia.org/wiki/North_Sea_oil http://en.wikipedia.org/wiki/North_Sea_oil), so it is not entirely operated by Statoil.
  - vidarh 12y ago
    Norway certainly does have private exploration too, but note that we also levy massive extra taxes on oil companies, which adds up to something like 70% total, vs. 28% corporation tax on the profits of most other businesses. I believe the licensing system also takes into account investment and effects on local economy to an extent that creates substantial capital inflow beyond what you'd otherwise see.
deleted 12y ago
[deleted]
JetSetWilly 12y ago
The UK government nationalised RBS and thus far RBS does not seem to be particularly badly run or more bureaucratic when compared to other banks, so I'm not sure there's any real evidence for this statement. In fact the UK government is expected to make a tidy profit when it privatises RBS again.
- collyw 12y ago
  Ahhhh, cute, you believe what the government tell you.
  - JetSetWilly 12y ago
    The government hasn't told me anything about RBS. I am very familiar with it as a customer (before and after nationalisation) and know several people who work for it though, so your ideologically-driven snark doesn't really hit its target.
  - dang 12y ago
    > Ahhhh, cute, you believe what the government tell you. Personal attacks are not allowed on Hacker News.
    - collyw 12y ago
      Where can I read up on the rules Dang? They don't seem to be available anywhere, I have asked before.
      - dang 12y ago
        These are linked at the bottom of each page: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html This is displayed to new users, but is worth re-reading: https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html
matthewmacleod 12y ago
They introduce layers of infrastructure that business doesn't and turn things into political footballs. Have you ever had any interaction with any large business? They are bureaucratically indistinguishable from governments.
- dougk16 12y ago
  Actually they are distinguishable - many of my interactions with banks and insurance companies make the government look like a well-oiled machine.
  - ashark 12y ago
    I've never had any interaction with the government that was even 1/4 as screwed up as the health insurance/hospital pairing. It's astonishingly bad. I can only conclude that the people saying things like "think healthcare sucks now, wait 'till the government's in charge!" have never actually had to personally deal with the healthcare system. Actually, the only thing that's hit the "1/4 as bad" mark is the health care exchange, and my problems with it are chiefly attributable to 1) no standard Internet-Age-friendly national ID card or similar, so identity/citizenship issues are still ad-hoc "send us a fax and mail us a copy of your drivers license, social security card, and birth certificate" nonsense, which is a problem with far more than just interactions with government, and 2) private health insurance is still a major part of the picture. It's like a machine to generate stress and take your money, with treating illness as a side effect. I'd gladly take single-payer over the dubious and mostly not practically available "freedoms" our current system affords me.
mattgibson 12y ago
> the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't Actually, there is no evidence of this. See this report that compares the Govt run industries before and after privatisation: http://www.psiru.org/reports/public-and-private-sector-efficiency http://www.psiru.org/reports/public-and-private-sector-effic... "The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient" Even if it was more efficient, $31 billion of corrupt bonuses on top = no different from an inefficient government.
- jasonwocky 12y ago
  > "The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient" Exactly this. I've spent years in both sectors. People suck at running things, not governments.
  - ahallock 12y ago
    At least those inefficient companies could be disrupted by startups, and at least they don't get to take my money by force (apart from subsidies and bailouts). No such mechanism exists for government. That people suck at running things is the very reason we need this rise-and-fall structure.
- vidarh 12y ago
  I think people tend to conflate government run businesses with government departments. Government departments will often be more bureaucratic for the simple reason that they have many additional roles to their primary ones: They are subject to openness and audit criteria that no private business is; they're subject to leadership systems that need to be resilient to far more frequent and drastic changes than in most businesses; they're subject to performance measurement across a far wider set of criteria than most private businesses etc.
crdoconnor 12y ago
>I vaguely agree with that sentiment, but the problem in practice is that government sucks at running things. The government could be no worse than a management team that has already proven its dedication to running the company into the ground.
maxlybbert 12y ago
It's not the federal government, but my favorite example was a (legal) brothel went bankrupt in Nevada a few years ago. The state of Nevada took it over until they could find a buyer, and lost money on the deal. Seriously, Nevada's state government couldn't turn a profit running a brothel.

quonn 12y ago

This is an excellent point. I would put a system in place that makes it clear that banks have a choice of a) Splitting before they get to big to fail or b) Accepting that if they grow larger, they can always be nationalized if they make a mistake that would cause them to go bankrupt. The problem is, that currently nationalization is only possible in most countries, if you fully pay the owner. Changing this would in some countries require constitutional changes. I think having a special rule for banks and the option to split would be a feasible change.

josteink 12y ago
If the company/bank goes bankrupt, the value of the company is by definition zero. What is there to pay the owners?
- antocv 12y ago
  What the taxpayers have payed to keep the bank profitable. Just, you know, the taxpayers are not the owners, because . Hm, maybe it doesnt really matter if taxpayers would have become the owners, because in any case they would have payed for their losses but the profits would not magically find their way into taxpayers pockets, instead it would be some new term instead of owners like "facilitators" "workers". In the end, money doesnt really matter, what matters is which people take decisions concerning all other people, power.
  - vidarh 12y ago
    The point is that in the situations where nationalisation - or near nationalisation - to prevent bankruptcy is worthwhile, the effective price is going to be low, however you structure it. For starters, the government can go to the banks shareholders and tell their shares are going to be worth $X or they won't put money in and the business will go bankrupt. If the shareholders manage to find another investor, then great. In the UK, this happened with e.g. Royal Bank of Scotland, where the government gradually acquired a larger proportion of the bank as it provided capital until it owned the vast majority (in 2012 it owned about 82% - I don't know what it stands at now). While nationalisation of RBS was certainly not cheap in terms of pounds, it was firesale prices in terms of the size and turnover of the business, because the government took on massive risk as well. But the key part is that by providing the cash infusion in return for shares, the government is also participating in the upside if they manage to turn the bank around, and shareholders took a substantial hit in the form of massive dilution (though they are set to recover quite a bit as the bank recovers).

CmonDev 12y ago

"Also I clearly need a job in banking..." What you need is to be a partner.

tomp 12y ago

I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clearly need a job in banking... If you want to become a good cook, get a cooking job. If you want to earn good money, get a money (banking) job :)

crdoconnor 12y ago
>the government actually made money on those loans (AFAIK). Nope. Explanation here: http://www.interfluidity.com/v2/2587.html http://www.interfluidity.com/v2/2587.html Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) lent to financial institutions at or near risk-free interest rates against sketchy collateral (directly or via guarantee); 3) purchased preferred shares at modest dividend rates under TARP; 4) publicly certified the banks with stress tests and stated “no new Lehmans”. By these actions, the state assumed substantially all of the downside risk of the banking system. The market value of this risk-assumption by the government was more than the entire value of the major banks to their “private shareholders”. On commercial terms, the government paid for and ought to have owned several large banks lock, stock, and barrel. Instead, officials carefully engineered deals to avoid ownership and control. ... After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health. The government provided famous and obvious transfers like unwinding AIG swaps at 100¢ on the dollar. It forced short-term yields to zero and created an environment in which medium-term interest rates would be capped for several years, granting banks a near-risk-free arbitrage for a while. It emitted trillions in excess reserves on which it continues to pay interest. It forewent investigations and prosecutions that by law it should actively pursue, and settled what enforcement it could not avoid for token fees. Then there are the things conspiracy theorists and cranks like me suspect but cannot prove: that the government and the Fed have been less than aggressive in minimizing their costs when they or entities they control (AIG, Fannie, Freddie) transact with large banks, that they have left money on the table where doing so could be hidden in arcane accounts or justified as ordinary transaction expenses and trading losses. Large banks have enjoyed some rather extraordinary results for allegedly efficient markets, quarters with large trading profits and no or very few losing days. Government housing policy is pretty overtly subject to a constraint that interventions must not provoke loss realizations for banks carrying bad loans at inflated values, or interfere with servicing revenues. (If you think I am overconspiratorial, I’m still waiting for an innocent explanation of this, from 1991.)

quaffapint 12y ago

I work in banking as just another cog. We suffered wage stagnation and no bonuses. The executives on the other hand still got at least a 10% bonus each year, because they had contracts. So, please keep that in mind when it says 'employees'.

easytiger 12y ago
Still happening. Especially people working in IT in banks are getting almost nothing in bonus and no pay increase for many years. The number of jobs is significantly reduced also.
- DennisP 12y ago
  That may be, but in Charlotte at least, IT jobs at the banks tend to be on the high end of our local salary range.
  - smcquaid 12y ago
    If you dont mind me asking, whats the software dev salary range in charlotte?
    - eatbuckyballs 12y ago
      Depends on Skillsets but it's not horrible. It's actually pretty consistent in Charleston, SC. as well. I know many devs over 100k in each field, It's not SF pay, but the cost of living is also not SF prices.
- freehunter 12y ago
  Ever since I've started working in IT, the rule has always been if you want a pay raise or a promotion, you go to a different company. Out of the four companies I've worked for in three different Midwest states, I've never worked at a place where the highest raise of anyone on my team has ever exceeded 1.5% per year. 2-3 years then get out and get your raise somewhere else.

gadders 12y ago

>>Waaat. I think the government should stop bailing out businesses. Either you let the company go bankrupt or you nationalize. What, like General Motors?

lmm 12y ago
Yep. That worked out pretty well, on the whole; government gets to keep the upside rather than just throwing money at the same management that failed and getting nothing to show for it.
- justincormack 12y ago
  Indeed there was no reason not to wipe out the equity holders of the banks as part of the deal, and take that as government upside.
  - rayiner 12y ago
    When financial services is a huge part of your GDP, and your country depends on a steady flow of investor dollars to keep the economic engine running, yes, there's a lot of reason not to wipe out equity as part of the deal.