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In Defense of Bankers

MacroAndCheese's picture




 

Bankers have been under siege lately.  I should know, I am one.  Just this week we saw a post on this site tying the suicide of a Greek man in the main Athens square to bankers, urging bankers of all stripes to resign en masse as a means of striking back.  Yesterday we read a guest post by a writer here wondering half seriously if we should execute corrupt bankers.  Commenters were evenly split on whether bankers should be simply executed, or if there was perhaps a better way to inflict even more pain.

I would find these deliberations somewhat amusing, if they weren’t so far afield of reality and so pervasive in our society.  The root of the vitriol seems to come from the perception that bankers are solely responsible for the financial crisis that started in 2007.  This view is compounded by the generalized lumping of all bankers into the same pot, just as if postal workers should also be held responsible for the ills of our government.

It takes just a quick, cursory look at the financial crisis to see what a massive joint effort it truly was, but first let’s clarify just who these guilty bankers are—who were the ones who had a direct hand in the financial crisis, and who did not.  We can presumably blame upper management.  We could point a finger at the guys who packaged and sold those securitized CLOs, CDOs, etc.  We should probably add the people who arranged the mortgages that went into those products.

Those are all bankers, for sure.  But we can’t very well blame bank tellers, can we?  We also can’t really blame stock or bond traders, or traditional loan officers, or credit officers (apart from the ones associated with the bad asset packaging), or the commercial real estate teams, or the bank administrative arms, or the notary people, or the IT departments, or collections, or the bank asset managers who didn’t buy the toxic products.  It would be a stretch to finger the people issuing bankers’ acceptances or letters of credit, or all the folks who service credit cards.

So I’ll go out on a limb here and pencil in a figure of 5% as the number of bankers that were directly involved some way in the financial crisis.  I realize it probably seems high to you too, but let’s be conservative and go with that.  Let’s call these people the “Bad Bankers.”  (For disclosure, I am not a Bad Banker.)

Now let’s take a spin around the financial block and see who else was involved in the crisis.  Let’s start with the investors who bought the products from the Bad Bankers.  Investors who bought these CDOs and CLOs are certainly fully complicit, because banks would hardly waste their time creating investments that no one would buy.  So we really have to include pension funds, endowments, mutual funds, 401k plans, hedge funds, etc.

But these guilty investors are among the most conservative institutions, and they certainly would not have made their purchases if the investments had not been highly rated.  That trail leads to the ratings agencies, most notably Moodys, Standard and Poors, and Fitch.  In fact many institutions can or will only buy AAA-rated investments, that is, only bonds deemed to be of the highest possible credit, virtually certain to return principal and interest.  So the ratings agencies are certainly to blame as well.  How in the world could something with a AAA rating be worth pennies on the dollar just a few months later?

At the same time, regardless of the rating, the products themselves were bad.  Had the mortgages been performing, we would not be in this mess in the first place.  The problem is that the investments that the rating agencies endorsed consisted of mortgages with no down payment, borrowers with poor credit ratings, faulty documentation, etc.  We can’t blame the ratings agencies for the fact that the products were so bad, and we really can’t blame the Bad Bankers, because they would not have agreed to lend money to the borrowers under those conditions.  The Bad Bankers were just representing a huge lender.

The stars of the show, the lenders that made it all possible, are none other than FNMA and FHLMC:  Fannie and Freddie.  These are the government agencies that set the standards and leant the money to the subprime and “Alt A” borrowers, that stretched farther and farther to find potential borrowers so that more and more Americans could own their own homes, no matter how inappropriate that might have been.  No Fannie and Freddie, no financial crisis.  It’s that simple.  Our list of the guilty is growing exponentially.

But Fannie and Freddie are really only there to serve their master, the federal government.  As we all know, our government has been pushing home ownership during multiple administrations, pushing the ratio from an already unsustainable 64% to a mind-boggling 68% over the last few years that preceded the crisis.  Barney Frank, the chairman of the House Financial Services Committee, encouraged Fannie and Freddie to leverage their activities even more, during the height of the fiasco.  For the record, he is still the chairman of the House Financial Services Committee.

But the government, as ill-advised and well-intentioned as it was, could not have forced us to buy the homes that Fannie and Freddie would fund, that the ratings agencies would endorse, that the Bad Bankers would package, that the institutions would buy.  For that, they needed millions of US citizens.  Yes, it may be hard to turn down a house we can’t afford when someone is willing to lend money at low rates (we have Alan Greenspan to thank for the low rates, by the way), but why should we choose to live beyond our means?  Whose fault would that be?  Now our very long list of the guilty just became much, much, much longer.

The simple fact is that our entire country went through a bubble, just like the Japanese before us, and the Europeans now.  Among other things, bubbles require a pervasive herd mentality, and lots and lots of credit.  Our bubble was not perpetuated by the Bad Bankers, who were also living the bubble dream.  The Bad Bankers bought plenty of their own products, entranced by the same AAA ratings that ensnared the rest of us.

Sure, we can blame bankers, good and bad alike.  We can also blame our pen for staining our shirt pocket, and cut off our nose to spite our face.  In that same way, the government has been all too happy to blame the banks for the crisis, to avoid taking responsibility for its own prominent role in the debacle.  But when we blame bankers, we fail to address the issues we still face in a responsible, effective manner.  The Bad Bankers are gone, or neutered.  The rest of the chain that comprised the crisis remains very badly flawed, and we continue to single out the banks at our own peril.

 

macroandcheese.org

 

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Fri, 04/13/2012 - 14:33 | 2342421 TheFourthStooge-ing
TheFourthStooge-ing's picture

Kraft Dinner said:

"We don't have enought trees to hang them all"

...to which Kaymen replied:

Beg ta differ, beg ta differ.

Indeed. Trees, like rope, can be reused as needed. There's nothing wrong with making the fuckers wait in line.

And, yes, Kraft Dinner, tellers get a pass.

Absolutely. Integrity in banking is inversely proportional to your position in the organization. The tellers are the most honest people in the entire "industry".

 

Fri, 04/13/2012 - 08:41 | 2341171 gookempucky
gookempucky's picture

thanks for the post smartknowledge

macaroni and cheese = yellow slime and only .49 a box

Fri, 04/13/2012 - 08:37 | 2341164 disabledvet
disabledvet's picture

All right fine..."we'll just blame the Jewish bankers then." Will that put some Cheese on that Mac?

Fri, 04/13/2012 - 08:37 | 2341163 jay28elle
jay28elle's picture

Yeah, but none have even been shot at.

Fri, 04/13/2012 - 08:37 | 2341162 jayman21
jayman21's picture

You have no grasp of what happened and why it happened.  The fractional reserve system is at the root of this.  The bankers do not want to give up the fractional reserve system.  Bad banker vs. good banker....how about a messed up system and stop scapegoating.

Fri, 04/13/2012 - 21:54 | 2343144 Neo1
Neo1's picture

A Banksters defeatism nightmare, Being forced to Return to Real Money=United States Note=Lawful Money. The real reason you pay an income tax, is for the privilege of using a private currency. Also known As A:  Federal Reserve Note, Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.

http://www.21silver.com/?show=merrill&read=federal_reserve_act_remedy

Tax Exemption: http://stormthunder.com/federal-reserve-act/

Web search these four different phrases: Redeemed in Lawful Money  or  United States Note  or Redeemed in Lawful Money Pursuant to Title 12 USC §411  or deposited for credit on account or exchanged for non-negotiable federal reserve notes of face value  

Fri, 04/13/2012 - 08:33 | 2341159 smartknowledgeu
smartknowledgeu's picture

"macroandcheese", since you (1) obviously never watched my video or (2) watched it and are choosing to lie, I will post the link here to my video here, 

Bankers, Why We Must Choose Beauty & Life Over Greed, Misery & Destruction

so people can watch it and have the proper context for your lies about my message. I have no problem standing by my statement that the banking industry that works on a fractional reserve basis is an inherently wicked and immoral system. I also, however, stated, that I know that there are likely quite a few good people that work in this industry but that they likely continue working for the industry because they do not understand how it operates and the harm the industry and their support of the industry causes billions.  If someone that works for the industry, as it is currently structured, is ignorant of how the system destroys wealth and people's livelihoods and actually falsely believes that they are helping people, then I can excuse them for continuing to work for the industry. However once someone takes the effort to educate them about the reality of how the fractional reserve banking system operates today, then I become less forgiving of their support of an immoral system.

Furthermore, I would have no problem in the future supporting the banking industry if bankers would adopt sound money principles, create prosperity, and conduct business in an honest, truthful manner instead of working for an industry that callously steals peoples' savings and destroys the purchasing power of fiat money every year.  If you support our banking system as it operates today, then I'm afraid you simply do not understand at all how money is created as debt, how inflation is tantamount to theft, and numerous other scams of the global banking system imposed upon citizens all over the world. Or perhaps you are just a fan of theft, immorality and misery, in which case, there is no argument to be made.

Fri, 04/13/2012 - 08:39 | 2341169 MacroAndCheese
MacroAndCheese's picture

I watched the first video, in which you very clearly linked the suicide of the Greek man to bankers, and implored everyone working in banks to quit.  This is patently ridiculous and unbelievably selfish on your part, to think people will give up their livelihoods to fulfill some fantasy statement of yours.

Quit using banks altogether and keep your money under your mattress, then you can ask bankers to quit.

Fri, 04/13/2012 - 10:18 | 2341468 Kayman
Kayman's picture

"keep your money under your mattress"

At a 0% interest on savings, and risking life-long savings by "investing" it with some "banker", perversely, your derision is in fact, a realistic option.

A mattress has become an investment option. Ask MF Global clients.

You're right, Kraft Dinner, a rotten tomato to ya.

Fri, 04/13/2012 - 15:12 | 2341391 Widowmaker
Widowmaker's picture

Macro dillusion could not have proven Kim's point more succinctly with his comment.

Like it or not, fiduciary responsibility was replaced with a banker-appetite for destruction.  The public, even the liars loan recipients, are not tasked with that responsibility no matter how much denial and blame bankers assert to the contrary.

Society has the legal-tools to deal with the liars loans but not the lack of responsibility incorporated on fraud street.

If Macro and Shame was serious about reform he'd turn all his collegues that breeched their fiduciary duty inside out.  Those that broke laws would be held accountable in a court of law.   It's that easy, Macro.

You won't do that, because as we've seen, shirking responsibility and blaming the victims makes you a true-banker.  Your profession deserves every ill coming your way, just like you assert the public should.  For the so-called "good bankers" perhaps that is stygma and unemployment... the bad get the meat grinder or worse.

May justice be served, economic and legal.

 

Fri, 04/13/2012 - 09:35 | 2341315 chunga
chunga's picture

The first rule of fraud club is shift the blame...

"I didn't fuck it up."

Fri, 04/13/2012 - 11:44 | 2341816 williambanzai7
williambanzai7's picture

Fraud club...there's an idea ;-)

Fri, 04/13/2012 - 12:56 | 2342082 Teamtc321
Teamtc321's picture

Fraud club vs. Fight club presented by NWO. 

Fri, 04/13/2012 - 09:09 | 2341245 smartknowledgeu
smartknowledgeu's picture

Stop the propaganda macroandcheese. There are too many intelligent people on ZH to fall for your nonsense. I used to work as a Private Wealth Manager for the industry many, many years ago when I didn't understand how the system worked. When I educated myself and realized how corrupt and immoral the system was, I decided I could not work for such an immoral system a single day longer. I "gave up my livelihood" the very next day and a very good livelihood at that. I didn't know what I was going to do or how I was going to make my living again, because I had no other job lined up at the time and I eventually figured out how to contribute, instead of take away from society. The act that you describe as "unbelievabl[y] selfish" - walking away from an immoral and amoral industry - I equate with integrity, honor and justice. And that sums up the difference between you and I.

Fri, 04/13/2012 - 11:17 | 2341722 hardcleareye
hardcleareye's picture

SKL, a respectful hat tip to you!

Fri, 04/13/2012 - 10:55 | 2341628 SeekingNuNormal
SeekingNuNormal's picture

+1,000,000 SmartKnowledgeU....Keep spreadin' TRUTH!!

Fri, 04/13/2012 - 09:09 | 2341239 GeneMarchbanks
GeneMarchbanks's picture

Wheew! Glad that you're around to answer replies. Very brave, kudos. Anyway, please watch the last minute of this video:

http://www.youtube.com/watch?v=LcBtYsC28dg&feature=relmfu

and tell me if there is something other than the short list Das speaks of that banking can offer. I'm all ears.

Fri, 04/13/2012 - 10:26 | 2341500 Kayman
Kayman's picture

Geez, Gene, after watching the video, I had an epiphany. Banking isn't all about churning and skimming and trickfucking your client. Who'd a thunk it ?

Fri, 04/13/2012 - 08:59 | 2341215 acetinker
acetinker's picture

I find it amazing the lengths that you hurdle in rationalizing the conduct of your industry.  You get to create money from nothing, based on a promise to pay, disburse it to "buy" real, tangible goods, all while charging the borrower interest.... and you fucked it up!  Amazing!  As far as your own personal culpability goes, it's real simple.  You lie down with dogs, you get fleas.

Fri, 04/13/2012 - 08:58 | 2341213 Sancho Ponzi
Sancho Ponzi's picture

My daughter fell victim to this: 

http://rosemary-e-bachelor.suite101.com/banks-use-overdraft-fees-to-fleece-customers-a64467

My son was double-charged for a restaurant tab which led to almost $100 in overdraft charges. BAC NEVER refunded him the money even though they admitted being at fault. Both were college students at the time.

I agree that community banks and credit unions provide valuable services, but the TBTF financial institutions have been out of control for some time now.

 

Fri, 04/13/2012 - 09:05 | 2341236 jayman21
jayman21's picture

Why do people continue to bank at the TBTF?  Credit unions and community banks are all over the place and you just might get to know your banker if you are not careful and like him/her.

 

Suggestion: Move your account out of Chase, BofA, Citi, Wells or any other TBTF and stop complaining.

Fri, 04/13/2012 - 09:43 | 2341338 Sancho Ponzi
Sancho Ponzi's picture

I've banked with a credit union since 1992, and I'm happy to say both kids now deal exclusively with credit unions as well. And since when is it 'complaining' to point out that big banks 'steal' (legally or not) from their customers?

Fri, 04/13/2012 - 09:59 | 2341389 jayman21
jayman21's picture

good point..+1

Fri, 04/13/2012 - 08:24 | 2341150 LongSoupLine
LongSoupLine's picture

 

 

Apologistic and disingenuous at best.

I equate it to the military top brass you see that retire and write a book on how messed up everythng is, yet have no moral courage to do something about it when they were in the seat.

FU bankers!

Fri, 04/13/2012 - 10:07 | 2341421 Widowmaker
Widowmaker's picture

Great analogy.

Cowards thought to be heros.

Bankers thought to be stewards of responsibility.

Fri, 04/13/2012 - 08:21 | 2341143 sansnobel
sansnobel's picture

Tis true that there were a lot of people involved, but the banking system with it's Gov't sanctioned license of fractional reserve lending just compounded the problem.  The problem you silly little pesky bankers don't get is that historicaly you guys always fail.  And why prey tell does that happen?  Is it because your banks are terrible at managing risk?  Well that certainly would be partially true, but I think you idiots take risks with OTHER PEOPLES MONEY because you get bailed out by the government every time you screw up.  So hell why not go wild with your loan portfolio right?  If you can privatize the gains and socialize the losses with your legally sanctioned system of moral hazzard to bail your dumb asses out every time your book of "Assets" doesn't look so good, well why not take risks you probably would not normally take right?  You morons have been stealing from the public for a long time, and eventually your gonna get whats coming to you!!!!  Your little friends and cronies in D.C. too!!!

Fri, 04/13/2012 - 08:16 | 2341130 snowman
snowman's picture

Of course not all bankers are bad. I don't think that is the point.

The public's attitude about banking would be quite different if the "bad bankers", "bad regulators", "bad raters", "bad polticians", "bad investors" and other baddies

were prosecuted for their badness. They haven't been, and they should be. Whether it's 5%, 1%, or 10% of everyone involved.

A business where it's ok to break the law and get away with it, is not a business people trust. Banking is (was) a trust business. 

Fri, 04/13/2012 - 08:30 | 2341154 Bob
Bob's picture

It is heavily incumbent upon the "good bankers" to lead the call for prosecution of the "bad bankers." 

Not to cleverly spread the blame around. 

If you really want to distinguish yourself as a "good banker," take a stand against the offenders of your own ken. 

That's what's holding back enforcement of the rule of law here . . . and rightly feeding the enmity toward bankers as a group. 

Fri, 04/13/2012 - 08:12 | 2341123 TrustWho
TrustWho's picture

Good start to assigning blame, but you missed the crony capitalism. The interplay between the corporate financial organizations and government. Money, through lobbying efforts, was transferred from financial institutions to politicians and politicians made the rules that governed the money making game. People in the private institutions responsible for other people's money must be held accountable. I wish we could hold our politicians responsible, but they apparently get to legally rip off the citizens because we voted for them. I pray we will find the power to apply the philosophy "EQUAL JUSTICE FOR ALL".

Note: How many people did Jamie dimon terminate because a project failed whether the particular fired person was the reason for the failure or not. What is good for the goose is good for the gander!

Fri, 04/13/2012 - 08:12 | 2341122 Benjamin Glutton
Benjamin Glutton's picture

5%???? Hit yourself with a tomato Mr. Goodbanker.

 

hilarious little liar.

 

I will trust Prof. W. Black's figure of 100,000+ that should be in prison or permanently run out on rails.

Fri, 04/13/2012 - 08:07 | 2341109 tigsman
tigsman's picture

You disrespect all ZH readers with this shallow, juvenile argument. It reflects either your ignorance or your arrogance. No wonder you bankers screwed the pooch so badly.

Fri, 04/13/2012 - 10:11 | 2341165 Mercury
Mercury's picture

And yet the government is still very much in the business of setting prices for risk and demanding that the extension of credit match their social and political goals. There really isn't a set of circumstances under which that will end well - good bankers or bad bankers.

The financial behavior of people, corporations and especially bankers is largely determined by incentives and in the case of bankers and banking, most of those incentives are set by the government. U.S. mortgage lending in the 2000's was and still is the most regulated financial business in the world.

Although, a very few bankers, like Andy Beal, we’re smart enough and at liberty enough (as in: not a large, publicly traded bank) to see the train wreck coming and avoid the bubble.

 

How many of you armchair pundits would have listened to someone like Andy Beal in 2005?

Fri, 04/13/2012 - 08:04 | 2341104 GeneMarchbanks
GeneMarchbanks's picture

The root of the vitriol seems to come from the perception that bankers are solely responsible for the financial crisis that started in 2007.

Depends on your knowledge of all things economic/financial/monetary. Easily, aware intelligent individuals can trace the root past 2007, way past even.

Credit money is a problem methinks, bankers are a bloated industry hence more of a symptom.

Fri, 04/13/2012 - 08:00 | 2341099 Azannoth
Azannoth's picture

So if all you say is true, and 95% of your peers are good bankers, where where those good bankers when the Fraud was happening under their noses every day? Where where those good banker Whistle-blowers screaming at the top of their lungs about how corrupt the system is? etc. etc.

All i know is this  A Good Banker is a Dead Banker

Fri, 04/13/2012 - 09:04 | 2341232 EvlTheCat
EvlTheCat's picture

+1000

Fri, 04/13/2012 - 07:53 | 2341093 Hobbleknee
Hobbleknee's picture

"The Bad Bankers bought plenty of their own products..."

And they got bailed out at our expense!

Fri, 04/13/2012 - 10:28 | 2341510 LowProfile
LowProfile's picture

Which if you think about it, actually means that WE ENDED UP BUYING THOSE "PRODUCTS"...

...VIA OUR TAXES, WHICH ARE TAKEN AT THE POINT OF A GUN.

Sat, 04/14/2012 - 06:25 | 2345078 zhandax
zhandax's picture

I hate to tell you skip, but the taxes we pay right now is a bump on a midgets ass.  What you need to worry about is the hit to your paycheck.  GDP may be the benchmark used to calculate the amount needed, but the actual dollars come from your paycheck (cap gains, net income, whatever applies).  You do understand that everyone (including the kiddies) in the US is currently on the hook for about $47,000, in national debt (not counting social security or medicare)?  And until we can get all these A/D addled, cell-phone talking, mindless fucktards on board, there will be no consensus to tell the banksters to pound sand and write the shit off?  And letting it sit there and grow at a trillion and a half a year is a lot worse for your long term well-being than being hit for a $47,000 charge from the IRS for every member of your household on Monday?

You do realize that whenever the dollar looses reserve status, that is exactly what will be proposed by whatever bankster horde will be running the show?

Fri, 04/13/2012 - 07:51 | 2341090 Hobbleknee
Hobbleknee's picture

This was already covered in Clerks (Death Star Politics):

http://www.youtube.com/watch?v=dGOVbXF7Iog&t=1m06s

Fri, 04/13/2012 - 07:26 | 2341047 kraschenbern
kraschenbern's picture

The real culprit(s) is(are) the (set of) person(s) who institutionalized TBTF.  Freedom to fail has to be allowed.

Fri, 04/13/2012 - 09:53 | 2341371 Bindar Dundat
Bindar Dundat's picture

 I could not agree more. Here is a little read blog that says it like it is.

 

http://www.larryobrien.net/tycoon-socialism/

Sat, 04/14/2012 - 00:03 | 2343247 sleepingbeauty
sleepingbeauty's picture

Wise words, less convincing when you consider the source though.

Fri, 04/13/2012 - 07:22 | 2341041 wang (not verified)
wang's picture

fail

Sat, 04/14/2012 - 05:36 | 2344876 zhandax
zhandax's picture

Can't believe you haven't gotten any more green for that.  That (the second link) is an incredible story which everyone on the planet should be started on in 4th grade and expounded on every year thereafter.

Fri, 04/13/2012 - 08:25 | 2341151 TheFourthStooge-ing
TheFourthStooge-ing's picture

Fail indeed. Interesting how the progression goes from "5% of bankers are to blame" to "we're all to blame".

Also interesting is how MERS was sidestepped altogether.

The TBTF banks, the ratings agencies (big three, not Egan Jones), the FASB (Fuck America, Serve Bankers), and the Wall Street/Vichy DC crime machine (including their wholly owned subsidiaries Phony Mae, Fraudie Mac, the courts, and Congress) are to blame. That's whose severed heads should be on pikes.

Not "all of us".

 

Fri, 04/13/2012 - 16:04 | 2342645 waterhorse
waterhorse's picture

Didn't the "we're all to blame" meme circulate around a few years ago?  It wasn't very successful then and met an outraged backlash, why do they think it will be successful now?  The "free house", "TARP paid back" "tanks in the street" and the "deadbeat borrower" memes have also been debunked.  Can't these masters of the universe who trashed our global economy come up with any new material?

Fri, 04/13/2012 - 09:27 | 2341290 been there done that
been there done that's picture

To me "Banking" should just be called "Fucking" and get it over with. The more people you fuck, either through selling crappy stocks that you knew were crap, or crappy mortgages, bonds that don't even beat inflation or even just through basic system of inflation that was designed to fuck people out of 5%/year even when times were good, the more money they "make". The more they "make" skim from the population, the worse off everyone else is. Don't call it Banking, call it FUCKING. How many people did each bank fuck, and how badly.

Fri, 04/13/2012 - 12:50 | 2342062 waterhorse
waterhorse's picture

Please, let's not insult fucking.

Fri, 04/13/2012 - 08:23 | 2341148 bank guy in Brussels
bank guy in Brussels's picture

MacroAndCheese makes the astonishing claim above:

« ... The Bad Bankers are gone, or neutered.  ... »

Ha!

Amazing to try to sell this kind of line on ZeroHedge.

Do NOT follow this link or you will be banned from the site!