(Lately, many notices have appeared urging us to protest the behavior of megabanks by transferring our accounts to local financial institutions. The Geezer was ahead of that game. Following is an abridged version of his Jan. 26, 2010 comments—the original appeared here a full 21 months ago. As predicted, the big bank that lost Sandy’s account has not collapsed, but perhaps now with millions joining the movement the bankers will get the message.)
Take It from the Bank
Of course, the bank president will just laugh at the loss of our business, if by some strange quirk of fate it comes to his attention. But our action will be symbolic. We are going to transfer Sandy’s checking account from a big bank to join mine at a little credit union.
We little guys aren’t moving our business out of greed, although often we can get better rates locally. We’re doing it because we’re mad as hell at greedy big bankers.
We ought to be. In 2008, the median U.S. household income was $50,303. It no doubt will be lower when the numbers are in for 2009 (Ed note: it was). The average professional employee (broker, sales staffer, trader) compensation at JP Morgan Chase was $279,000 in 2008. The bankers gave themselves a raise in 2009, upping average compensation to $379,000. Wow! The average Morgan staffer got an income increase double what the average American family must subsist on.
JP Morgan Chase was given $25 billion dollars of taxpayer money in the fall of 2008 to ensure the firm would be healthy. Wouldn’t it follow that the guys who were making a quarter million or more a year were the same bozos who were making the firm unhealthy? They should have been disciplined, not rewarded with big bonuses.
The medicine worked. Morgan paid back the $25 billion. The taxpayers even earned some profit on the deal. Unfortunately, although the patient survived, it didn’t start doing what the doctors envisioned. The idea was that the propped-up big banks would lend cash to stimulate business, which in turn would save or create jobs.
The bankers quickly engineered a payback to avoid government control of their compensation packages. They made the money to do that in investment banking, and continued a lot of the risky stuff that got us into a financial crisis in the first place. Instead of ramping up typical business lending they tightened things up in that area. They gave the surplus funds to each other, rather than helping their country out of recession.
Was Morgan an isolated case? Goldman Sachs got $10 billion from Uncle Sam to stay in business. It was one of the first to make a full repayment. It should be better managed than some competitors, because at Goldman average professional compensation was a mind-boggling $317,000 in 2008. It increased to $498,000 in 2009. Meanwhile, nationwide unemployment moved above 10 percent.
The big bankers deserve our ire. Some even admit it. At a hearing before the Financial Crisis Inquiry Commission, Brian Moynihan, Bank of America chief executive officer and president, said, “Over the course of the crisis, we as an industry caused a lot of damage.”
That’s right on. Politicians, Republicans and Democrats, over the past twenty years stripped away needed regulations or looked away as questionable activities were taking place. But, just because politicians gave financiers a license to steal doesn’t mean the liberated bankers were forced to plunder. They could have applied their own ethical standards—if they had any-- to daily practices.
We need Congress to clamp down hard on the bad guys who betrayed us. Democrats will lose the support of a lot of voters if they simply continue running around yelling “yes, we can” make financial institutions work for all Americans. They need to do it. And Republicans need to identify some common-sense reforms they can support and get with the program.