New Rise of Executive Pay at Banks Exposes the Folly of Bush & Obama Handling of Financial Crisis

Yesterday the New York Times ran a story reporting that executive pay at the nation’s largest banks is again approaching pre-financial crisis levels.  This is simply a signal that management teams in New York, Charlotte and elsewhere in banking headquarters are pursuing a business as usual approach to what many believe is the beginning of the end to the recession.

Krugman’s column today further adds to the case he’s been making all along during this financial crisis – Wall Street’s emperors have no clothes and taxpayers are footing the bill to rebuild their wardrobe.

So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes.

Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks?

Here’s what I think is most disturbing about recent financial history and the Bush and Obama Administrations’ policies:

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Video: Tale of Two TARPs – NewsHour with Jim Lehrer

Video: Geithner Tells Watchdogs He’s No Back-Door Man on Nationalization

… But is he the Lizard King?

Full Text – Document: Special Inspector General on TARP – Bailouts Ripe for Abuse – Barofsky

Full Text: SecTreas Written Testimony, TARP Oversight, April 21

Treasury Secretary Tim Geithner
Written Testimony
Congressional Oversight Panel

Introduction

Good morning. Thank you for the opportunity to appear before you.

The challenges that our financial system faces are complex, interrelated, and the result of developments over many years. Earlier in this decade, a combination of fundamental factors and financial innovations generated unsustainable bubbles in many housing markets across the country. When those bubbles began to burst, starting in early 2006, housing price declines led to a sharp acceleration in mortgage delinquencies and charge-offs. Those unanticipated losses revealed deep-seated problems in our financial and economic systems. A protracted period of rapid innovation, excessive risk taking, and inadequate regulation produced a financial system that was far more fragile than was generally appreciated during the boom times.

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Text-Document: Geithner Letter to Congressional Oversight Panel, April 20, 2009 – Status of TARP Funds

Full Text: April Oversight Report – TARP After Six Months – Congressional Oversight Panel | Includes Dissents

Congressional Oversight Panel, April Oversight Report | Assessing Treasury’s Strategy: Six Months of TARP

Congressional Oversight Panel, April Oversight Report | Section II: Neimanan and Sununu Dissent

Congressional Oversight Panel, April Oversight Report | Section II: Sununu Dissent