July 17, 2009

Business as usual

Unseemly? Ungracious? Untimely?

Stunning profits from any financial institution in the US would ordinarily be marvelous, spiffingly wondrous news. In the midst of a US induced GFC, it's mega-excellent news.

Really it is.

Goldman Sachs took billions of US tax dollars, sacked around 6000 employees, paid back the tax dollars only a month ago, and are now set to celebrate their recent sterling performance by making confetti from one hundred dollar notes and dry-showering each other on Mondays and Fridays.

Then they'll get down to the serious business of rewarding themselves with seven figure bonuses, possibly bigger and better than the bonuses they'd been accustomed to during the years of milk and honey.

Only a few days ago the Bank of America Merrill Lynch also declared the recession over.

It's done. Just like that. Easy peazy.

Substance always means a great deal more to my uncreative brain than perception, and in the case of Goldman Sachs making the biggest quarterly profit in its 140 year history - yes, that's right, in the last quarter they made more profit than in any other quarter during the last 140 years - one can't turn one's nose up at the substance of the achievement, but on the perception front, one does turn one's nose up at the moral legitimacy of rewarding the remaining Goldman Sachs employees with gobsmacking bonuses for three months worth of startling performance.

Didn't a few thousand people have to lose their jobs to contribute to that profit?

Didn't the US government have to pony up $10 billion to keep Goldman Sachs chugging along?

Didn't they also receive even more billions from the US government (non refundable) via the bailout of AIG insurance?

Plus a competitive advantage from the Asset Relief Program, which allows them to issue debt cheaply?

Still, Goldman Sachs feel they possess the moral authority, based on three months worth of staggering profits, to have already earmarked $11.4 billion for bonuses, with that figure likely to grow before the end of the US financial reporting year.

Yes, it would seem that some segments of the US financial industry have come roaring back, and nothing has changed. Not a thing. Business as usual, as if the last two years were nothing but an aberration.

Sure, the PR might get a little sticky come bonus time, but that's a storyline the captains of industry are used to running around the block until we're all giddy. No biggie.

With big profit, Goldman sees big payday ahead


So much hand-wringing over the perils of the existence of businesses that are "too big to fail", yet here it is: the fallout from the US financial crisis appears to be leaving a mere two banks gloating and profiteering over all the rest.

Along with Goldman Sachs, JPMorgan has announced salivating profits for the last quarter, this, despite having been pretty useless at excelling during the boom times. More irony.

The banks are now in full throttle vigorous lobbying mode to put the kibosh on tighter derivatives regulations and consumer protections. Big surprise.

The other market distorting trend is that the top 20 US banks, having received $125 billion from the government in prop-up cash in the midst of the GFC, promptly reduced their inclination to give loans by 16% ($120 billion - almost a match for the funding they received).

The next top 20 banks only reduced their lendings by 4%, or $9 billion.

Meanwhile, all the other little banks combined increased lending during the same period, facing the same market conditions, by 5%.

So, the big banks have learnt something: don't lend money! Ka-ching, ka-ching, ka-ching.

Two giants emerge from Wall Street ruins


  1. What did you expect Caz!!?? Really! What did you expect??!!


    It was an inside job
    Like it always is
    Just chalk it up
    To business as usual

    You think that you're so smart
    But you don't have a fucking clue
    What those men up in the towers
    Are doing to me and you
    And they'll keep doing itand doing it
    Doing it and doing it
    Doing it and doing it
    Doing it and doing it
    Until we all wake up
    Wake up, wake up, wake up, wake up

    Perhaps the lyrics to Workin' It are just as apt...

    We've got a whole new class of opiates
    To blunt the stench of discontent
    In these corporation nation-states
    Where the loudest live to trample on the least
    They say it's just the predatory nature of the beast

    But, the barons in the balcony are laughing
    And pointing to the pit
    They say, “Aw look, they've grown accustomed to the smell
    Now, people love that shit
    And we're workin' it.”
    Workin' it

    We got the short-term gain, the long-term mess
    We got the suffocating, quarterly consciousness
    Yes man, run like a thief

    New York to Hollywood, hype and glory
    Special effects, no story
    Yes man, run like a thief

    Workin' it
    Workin' it

  2. Jeeeeeeezzzzzzzzzzz.

    I don't know Father.

    Something, something, something, err, more creative?

  3. Anonymous8:19 PM

    Maybe the greedy bastards are just getting in for what they can before everything goes belly up. Rape and pillage while the sun shines - the nature of the beast.

    The US and most of the rest of the globule is broke and subsequently only two things can be done to alleviate the situation – increase taxes or decrease public services – probably both. Shrinking government and bureaucracy would help but that won’t happen. Of course we could simply print quad zillions of paper cash but we know where leads – pretty dunny paper.

    As the pollies hate to increase taxes it looks like the end of the welfare state, or more sneaky taxes, regressive taxes – let’s have a carbon tax?

    I believe it was Otto von Bismarck who introduced the masses to welfare. And they liked it. He decided to curry favour with the punters (to save his political hide) so introduced an old age pension.

    Yippee the punters said: we no longer have to save for our retirement, the government will look after us; so all the punters happily paid their taxes to pay for their retirement. It was lost on them that only one in ten would get to live to retirement age (60) and to enjoy a humble retirement.

    In the mean time a rather broke Germany became rather prosperous with all that tax and had lots of money to spend on a growing bureaucracy and other good and bad stuff.

    Europe along with Great Britain and the Scandinavian nations followed this really cool way to raise capital and seek favour with the punters. Democracy and the welfare state are symbiotic. Now we have welfare for all – the poor, the middle classes, the rich and corporations.

    Today we can see that the pollies are keen to wind back the welfare state (but not our pregnant governments and bureaucracies). As such in Australia the punters now have super guarantee to look after their retirement.

    Some of this cash the government keeps as tax (which it wastes at its discretion) and the greedy bastards get the rest to play with (think steal) until you reach 65 or more – if there is any left you may get to keep it.

    Sadly Caz, the game is up and now it is just a matter of time, the greedy bastards know it but they will be the ones to walk with what’s left of the loot while the punters pay for their bastardry.

    Sadly it appears our very wise leaders want it all to go away and talk about a recovery in the second half; they gave us cash and told us to spend – der! The reality is many nations and major banks are insolvent; the tax base is shrinking while welfare liabilities are ballooning. Governments are already finding it harder to off load bonds – when they can’t sell bonds to cover interest payments the game is up – crunch.

    On July 8 China couldn’t complete a major bond sale, the first time in around six years. When the Yanks can’t sell their bonds then what next? When China stops buying US bonds – what next? When the US defaults on interest payments – what next? The US financial system is nothing more than a very big Bernard Madoff; selling bonds to meet interest payment while never paying off the principle. Oh dear.

    Sadly the powers (and benefactors) that be are quite happily propping up a sick and twisted financial/political paradigm (with taxpayer cash, er, debt) rather than working out the most painless way to demolish same and reconstruct it in a manner that rewards productivity and genuine wealth creation.

    But that will never happen unless we get rid of the powers that be, for they will fight to the bitter end to protect their privileged, corrupt and pathetic positions.

    Things will get a lot worse before they get better, that’s why the greedy bastards at Goldman Sucks are doing what they have always done and will always do until they are stopped, full stop.

    Cheers J

  4. Jacob9:27 PM

    On the train this morning, after reading the mixed news in the financial section of the morning paper, I went into a daydream whilst going through the chute, and thought I heard our charming feminine automaton announce, “Now fast approaching stagflation.”

    “Just what we need,” I thought with just a hint of irony, “just to round off a truly memorable GFC.”

    Thence realising the She-Bot had actually said, “Now approaching Flagstaff Station,” I gathered myself together to plunge into another working day.

  5. “Now fast approaching stagflation.”

    Hee, hee, hee.

    Come on Jacob, Flagstaff is a bit like that, trains don't even bother to stop their after dark or on weekends. :-D

    Justin - where have you been my dear; how have you been?

    China already owns the US, all but officially. No small irony there. Fortunately, we all know that Americans don't do irony.

    I definitely don't agree that only two things can alleviate the current situation: increase tax or cut spending.


    Simple: government spending is a pittance compared to private sector spending. The money being flushed into the world as stimulus packages is only a fraction of the investment and infrastructure spending that has been withdrawn, or put on hold, by the private sector.

    Government budgets, including welfare, have shrunk over time relative to the private economy. Cutting welfare or increasing taxes in order to repay debt won't make an iota of difference to the local or global economy.

    Friggin' carbon taxes ... grrrr ... don't get me started. If anyone was serious they would cab carbon output and apply fines for breaches, done. No tax. No trading in a false commodity.

    The welfare state, as exercised in Oz, is generous to everyone other than the poor Justin. The unemployed get, what, around $200 a week, and as much as $50 rent assistance. With that they not only have to pay for accommodation and food, but also transport, clothing, grooming, and access to a PC, Internet and phone so as to be able to apply for work. Even pensioners, who get a pittance, but don't need to keep up appearances, nor need to have ready access to daily job ads, get significantly more than the unemployed. It's bloody criminal.

    We were all conned on superannuation Justin.

    Here folks, instead of a pay rise we'll put 9% away in mandatory savings for your old age, we'll force you all into the stock market, and watch your enforced savings be pissed away.

    Yeah, how's that working out for everyone?

    Kinda makes me want to demand to have my 9% back in my pay packet, at least I'd know it had some value, and I could spend it as I see fit.

    It was a mighty fine idea at the time, but sheesh, we have been screwed coming and going.

    BTW - did you know that only 10% of oil production is owned by the private sector? The rest is owned by governments. So much for democratic capitalism and free enterprise. State sponsored capitalism is running the global show after all. I suppose that's more irony.

  6. The Goldman Sachs situation kind of reminds me of the stories of the American car maker CEO's turning up in Washington with cap in hand looking for government cash to bail them out of their predicaments. The problem was that they traveled to Washington each in their separate private jets, and didn't think this was inappropriate.

    I find the corporate world hilarious. But then I've always had a dark sense of humour.