NEP’s William Black posted the following comment in response to Krugman’s Twinkie Manifesto post:
This is also playing out in Ecuador. The legislature has given preliminary approval to a bill that would impose an excess profits tax on banks and limit the compensation of bank executives. The four largest banks (with over 80% combined market share) responded with a coordinated email campaign to every depositor implying that the legislation would place their deposits at risk.
Yes, they are actually threatening to induce a run on their own banks if their compensation is limited. They are trying to extort President Correa into withdrawing the bill by holding the finance sector (and through it the general economy) hostage.
Correa was in Spain — trying with other Latin American leaders to convince Spain’s conservative government to reject austerity — when the large Ecuadorian banks launched this effort to panic their depositors. As an economist, he is particularly well-positioned to explain why regulating executive compensation is essential to limit the perverse “agency” incentives that have been a leading cause of bank failures and bank illegality.
If banksters had tried this type of extortion during the S&L debacle we would have immediately issued a temporary cease and desist order prohibiting their action and then removed and prohibited them from office and/or placed the S&L in conservatorship and appointed new controlling officers.
Nov. 19, 2012 at 3:30 a.m.
Yes. Per the MMT gurus, a tax hike on the “rich” or even the “super rich” bankster is not needed … for revenue.
But it IS necessary for social justice, as well as for REAL justice and the “agency” problem that Black describes. This is where banksters can pay themselves outlandish salaries based on no or negative additions to productive wealth, and much looting and fictional asset prices.
Bill Black has it backwards. All of the boys outside GS huddle bought all this paper and rating agencies gave it AAA because for yrs the way they sliced and diced the credit traunches worked see American Securitization Forum. The FASB which oversees and GAAP changed in Jan 2007 to force all of these owners of paper to mark to market. GS who was fined tens of millions more then once IMHO conspired with large hedge funds JP Paulson, G Soros, Kyle Bass, Jim Chanos, Ray Dalio. IF you were out of the huddle you lost — if in you won. THE ABX Index which was adm my Markit in London was est by GS among others. 2009 was not the finest and most profitable yr in GS history for nothing. DOJ did not prosecute because to prove they destroy the confidence of the USA credit system for profit would enhance one of the greatest melt downs in history. Nobody has put two and two together.
Follow the money because the process of pricing credit was not new and did not cause undo risk but the manipulation of the credit markets allowed those in the cabal to make a fortune. ABX Index was a thinly traded collection of 22 thinly traded CDS. Surely one can guess JP Paulson unhappy with his trade or short paid GS $15m to develop an asset (see Abacus deal which GS paid a 500M fine for its part) which they then bought CDS to insure. Like a put the cds pays off big/goes up if the asset defaults). It is like building your neighbors house and then getting insurance on it and burning it to the ground. The domino effect they created allowed those in the huddle to make a real killing. Follow the money and you have the crooks. Just be aware many of these folks own the government as well. GAAP then forced the owners of these investments or MBS paper to use manipulated CDS used in the manipulated ABX Index use for FMV Accounting and mark to market. Then the cabal once starting the domino effect used REG SHO a loop whole at SEC which breached the SEC ACT of 1934 sec 17A to naked short these same institutions into credit down grades. LEH, Bear both referenced Naked SHORT selling allowed under REG SHO as the culpret for their ending. THIS was the real domino effect and why if you were in on the huddle you made a fortune. The cabal gave the answers to the exam to front men like Dr. mike burry and told him to close the fund down afterward. They artfully used public opinion to deflect attention away from the real cabal members. See “Inside Job” which was propaganda by Soros and JP Paulson to deflect and confuse the public. Go no further then reading Fortune Mag article on Hank Paulson meeting at lunch at Eton parks office signal to 30 hedge funds they could keep their short attack on GSE even with a dead cat bouce going. Did Hank Paulson x CEO of GS who walked with $500M have reason to destroy GS competition once and for all. Follow the money but don’t say the process of securtizing the debt was inherently evil. It was and should be a common practice in a healthy credit market. It was the domino effect manipulating GAAP changes to FMV accounting that was aided by the SEC REG SHO loop hole that allowed those in the huddle to make billions. The talking heads at CNBC and DOW JONES will spin and confuse attention away from the real crooks. IF history didn’t continue to repeat itself we would all realize the way they paid shills these journalist to spin public opinion for the cabal was the most amazing part of their plan.
What a perfect opportunity to then nationalize the banks gwho make threats.
It’s worth noting that Ecuador is dollarized, and so does not have the fiscal freedom of a sovereign currency, a policy which President Correa opposes. Hopefully he will face down his banksters, shake some ill-gotten dollars out their pockets and restore currency sovereignty.
But the dollarization shows even more how ludicrous these threats are. It’s like a bank robber entering a vault telling the depositors that their money won’t be safe unless he is allowed to take it for himself!
You couldn’t make this stuff up.