global agenda 88.
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The evidence continues to roll in. Scanning the headlines will produce at least an item a week, but if you dig deeper you can find relevant items on a daily basis, too. The most recent big item is the one told of the senior executive in Citibank who is demanding a bonus of $100 million this year, due to him under contract - so he says. Not long before that was the item about Goldman Sachs intending to pay out billions of dollars in bonuses to its employees. And before that, of course, was the story about AIG wanting to make large bonus payments.
For those who are unaware, AIG has been the recipient, to date, of at least $85 billion of government aid that taxpayers money. Citibank has received tens of billions of dollars of direct support from the US government, as well as hundreds of billions worth of guarantees. Goldman was hurriedly converted to a bankholding company last year, to prevent it suffering the fate of its erstwhile competitors, Lehman Brothers and Bear Stearns, while it too has benefited mightily from the slew of government intervention schemes introduced for exactly that purpose, namely to prevent the Goldmans, the Citicorps and the AIGs, from collapsing under the weight of their own failed bets and bringing down the entire financial system and the economy.
Among those who are aware - fully and painfully aware - of the foregoing are all the senior people in these institutions who will either authorise, or receive, or both, the bonus bonanza. It is therefore obvious that these kinds of news items a) reflect an extraordinary level of chutzpa on the part of the specific people, the specific institutions and, more generally, among the financial services sector generally; b) are triggering growing outrage among the general public. It is fed back into the political system and surfaces in talk of a clash between 'Wall Street' - i.e. the financial services sector and its ancillary sectors (lawyers, accountants, software and media firms) - and 'Main Street', meaning everyone else. Less obvious, but nevertheless true, is that the only explanation for the behaviour of the people and companies that make up the financial services sector, given what happened to them, their companies and the world as whole last year, and in the face of the fury building up among the general public, is that they are still cocooned in a state of total disconnect between them and the rest of the world. Essentially, they continue to exist in a dream world, as if the events and developments in their businesses during July 2007 - March 2009 didn't happen, or don't matter, because they have left no legacy.
How can this fantasy-world survive? One possibility is that Wall Street does indeed 'own' Washington. This idea used to be the province of conspiracy theorists, but it can no longer be so easily dismissed - if only because this is the explanation that best fits the incredible facts of the period under discussion. An alternative possibility is that these people genuinely believe that they are worth the obscene salaries and bonuses they draw, because of their supposed contributions to their employers' profits. Unfortunately for them, this nonsense has been exploded by the crash, so that even the average Joe, who has not read Nassim Taleb or Michael Lewis, now knows that banks' trading desks employ smart, arrogant kids to play with 'Other People's Money' and make outrageous bets in various financial markets. In the sick, fundamentally immoral world these traders inhabit, when their bets prove good, they are due a large chunk of the profits as a reward for applying their special talents. When the bets fail and the traders and their desks "blow up", they get fired and take themselves and their intact bonuses to another employer, while the losses are absorbed by the banks' shareholders (or, in the case of hedge funds, the investors) and, if the institution involved is sufficiently large (as in "systemically important") the taxpayer is obliged to cough up to cover the losses.
Meanwhile, the rage building up on Main Street against Wall Street is real and growing. When the current speculative boom fades and the slump returns, the financial sector will be forced to face the fact that the world in which they were the top dogs has gone for ever. As a result, the way people regard them has switched from being a source of envy to being the focal point of simmering hatred. If they do run to Washington, there will be a revolution; if they don't, their political allies will ditch them. Either way, their days are numbered. From an economic point of view, that's absolutely fine, because the number they generate is, over the long term, large and growing, with a minus sign in front.