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Hmmm, the financiers seem to be undermining business

It takes the Brits to put the pieces together and spell-it-out for the terminally slow Americans.  This piece on Business Secretary Vince Cable’s revelation is from the Guardian this morning:

Britain’s banks are “throttling” the economic recovery because of an anti-business culture which focuses on short-term profits, the business secretary, Vince Cable, has said.

As Ed Balls warned of widespread outrage if the ousted Barclays chief executive, Bob Diamond, receives a £16m pay-off, Cable accused banks of undermining multibillion-pound measures to help businesses.

Speaking on The Andrew Marr Show on BBC1 on Sunday, the business secretary said: “The real problem at the moment is that the banks – because of their existing culture, which is frankly anti-business, obsession with short-term trading profits, not focusing on the long term – are throttling the recovery of British industry.”

Tell me more:

He said: “There has been a breakdown in the mechanism, in the transmission. It just doesn’t get through to companies. We are going to ensure that the new money that the chancellor and the governor of the Bank of England talked about at the Mansion House does actually directly reach the companies.

“Given that our leading banks are, frankly, throttling recovery by not making business lending available, particularly to small-scale companies, we now have to focus single mindedly on that task. How to make sure that the additional money gets through to business.”

The business secretary indicated impatience with some of his Conservative colleagues, who were wary of state intervention, as he praised the scheme by his predecessor, Lord Mandelson, to revive the car industry.

Aaaand?:

Highlighting the importance of working in collaboration with business, he said: “Laissez-faire just doesn’t work. When you are making big long-term investments you have to have the government and the private sector working together. It has been a great success story in the car industry, similarly in aerospace and life sciences and others.”

Well, it *used* to be a great success in the life sciences business but no longer.  Mr. Cable might want to check in with the people who live and work around Sandwich, if there are any left.  A lot more government intervention will be required if Britain and the US ever expect to be on top in that area again.

In conclusion:

The shadow chancellor had earlier warned Diamond against accepting a £16m pay-off from Barclays. Balls said: “People will look at that and think that is totally outrageous. It is outrageous that somebody should stand aside because the board decides there is a problem and then get a payout which is off the scale for anything normal people will receive in their life times.

“The shareholders are going to think really hard about this. The government will need to look at this and talk to the shareholders. They clearly talked to the shareholders about Mr Diamond.”

Indeed, the shareholders should think long and hard about a lot of things.  For instance, do we need so many people to be trading their defined benefit pensions for 401Ks that will be used by the banks as a constant, monthly replenishing source of money with which they can gamble?  Do the hard working people of America need to also be the same shareholders who cheer at a bump in their portfolios at the same time they fear for their jobs (so other 401K shareholders can get a bump in their portfolios)?  By the financiers’ logic, the 401K will achieve its maximum value as the number of workers approach zero.  How did we get talked into this scam in the first place anyway? It sounds so stupid and self-defeating that we should all have our heads examined.  Oh, sure, there’s nothing wrong with investing if you have the money to do it but to use Wall Street as your primary source of retirement income?  Let’s face it, we are morons.

The politician that proposes a mechanism that allows us to convert our 401Ks to pensions gets my vote.

Anyway, it’s good that someone in government, well, someone else’s government, has finally made the connection between incentives for short term profits and an anti-business atmosphere.  Perhaps the Brits are finally waking up to the idea that all of the deficit reducing austerity measures are meant to do only one thing: increase the wealth of the wealthy at the expense of everyone else, including Main Street businesses.  I don’t expect Republicans will acknowledge that this is what is leading to so many layoffs and dragging the economy down.  For that matter, I don’t expect Democrats to acknowledge it either.  And from what I can see on the frontpage of the NYTimes, this is something that the city elites don’t want to talk about.

By the way, why do I have to go all the way to London to get any new information on the LIBOR scandal?  Why exactly is there so little coverage of the LIBOR scandal in American newspapers? Who are they trying to protect with this “nothing to see here, move along” attitude?  Anyone want to take a guess at this?  And did you know that the CFTC started investigating the LIBOR manipulations back in March of 2011?  That means they must have been aware of it before that time.  THAT means that when Occupy Wall Street was righteously indignant at Zuccotti Park and was getting beaten up by the DHS and smeared by our elected officials, the Obama administration was well aware that there had been fraudulent interest rate manipulation on an enormous scale.  Those same students who can’t pay their huge student loans with their high interest rates are the same people who were potentially harmed by these manipulators.  Why was it so necessary to kick people when they were already down on Wall Street’s behalf?  And knowing this, do we have any reasonable expectation that Barack Obama will hold Wall Street accountable for what it has done to our economy and our futures?

Why so much silence from our elected officials?  And what did Tim Geithner know and when did he know it? Inquiring minds want to know.

Oh, and I ran across this bloke on twitter.  Is he representative of the British public?  Because he is asking a very good question about why the scandal is being handled like an internal governmental investigation instead of a judicial inquiry.  It’s similar to what we are doing here.  That indicates that they are trying to prevent too much public outrage and real reform.  But if the general public gets the gist of the scandal as well as this guy does, then how long will this stay contained?  And what effect will it have on an election year?

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14 Responses

  1. Same as happening here, what else is new?

    When you dismantle manufacturing and send it to the Third World profits will increase … until your customers who just got laid off run out of credit.

    While the Wall Street vultures were tearing the heart out of Industrial America they were placating the critics by telling them the unemployed could go to school and become rocket scientists. How’s that working out since Obama is gutting NASA?

    All those print and broadcast pundits that went along with the lie are either in on it or so stupid they forget to breathe unless reminded.

    Finance, like Global Warming is at the tipping point and both presidential candidates are poised to push. Since Obama has no persona to speak of he can’t transition into public service like Bill Clinton so how is he going to feather his post White House nest?

    My guess is to cater the whims of Wall Street and get a cushy consulting job working from his Rezko financed Hyde Park mansion.

    • Methinks that the unsustainable nature of the whole stupid quarterly business cycle scheme has finally reached its limit.
      Some people are starting to have a Soylent Green moment. We need to encourage this kind of thing.

  2. When did Geithner know? From the start – it was his idea, I’m sure.

    • Not sure it was his idea but I’ll eat my blog if he didn’t know. This is the guy who didn’t do his tax returns for several years. He already has an integrity problem.

      • The whole crew thinks they are the smartest in the room only this time it won’t be just some shyster energy company that goes down.

  3. Central banks and governments are not exactly helpless when it comes to bank lending. They can make it a condition of banks’ charters that they lend whatever proportion is deemed reasonable of their bailouts (or their entire capital, for that matter).

    Simple.

    Will they do it? Nooooo.

    • See, this is why I think the LIBOR scandal is so important. It was bad enough that they manipulate the rate during the meltdown because they didn’t want to provoke a crisis that would send us back to the stone age. But the fact is that the rate masked a very serious problem and because we didn’t know how serious it was, our government response to it was less than adequate.
      I have to wonder if the Republican party would have let such insanity persist in their party or have encouraged the Tea Party if they knew how dire the banking situation really was. We still don’t really know, do we? We have no idea how shaky the banks actually are and we have proceeded to govern on that lack of knowledge, making policy on it and projecting into the future. Paul Krugman and Christina Romer’s estimates of unemployment were way off. They thought the worst of it was going to be around 8% and at one point we were up around 11%. That can all be traced back to not knowing the severity of the problem.
      That’s why I want to know what Geithner knew because if he was aware of how bad the banks were doing and his recommendations to Obama were premised on that knowledge and protecting the banks, then we have been screwed 15 ways to Sunday. It affected Dodd-frank, the consumer financial products agency, Elizabeth Warren’s committee and treatment by the administration, the ability of the FDIC to nationalize the banks, the size of the stimulus package, etc. We had no idea how bad things were but someone in the Obama administration had to have known because the bankers were protected from any serious investigation. The stress tests are a joke. And whose idea was that to keep the truth from getting out?
      An awful lot of geithner’s behavior makes sense when you realize that they all served to keep key players from looking too closely at the bank books.

      • The US media silence on the continuing news about LIBOR is curious. Despite Niall Ferguson’s pomposity, LIBOR isn’t difficult to understand and explain. The potential economic fallout for Main Street is significant and worthy of extensive coverage. And as you point out, the LIBOR fraud provides further evidence that the big banks are far weaker than what we are led to believe.

        Regarding unemployment, wapo posted an article channeling your posts on the plight of research jobs in the US:

        “The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia. Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay area and other hubs. But a decade of slash-and-burn merger; stagnating profit; exporting of jobs to India, China and Europe; and declining investments in research and development have dramatically shrunk the U.S. drug industry, with research positions taking heavy hits.”

        • Big pharma is a prime example of what is wrong with the financiers running businesses and industry. But it’s even worse than that. China doesn’t have the business infrastructure that is ready for R&D. The US used to be a highly desirable place to do business because government regulated commerce here and the environment was trustworthy. With LIBOR, among other things, that’s just not as true any more.
          Yeah, research is only a glimmer of what it used to be. I saw an article at the NYT about a medical researcher who couldn’t get an insurance company to pay for his FLT3 inhibitors for his leukemia. I looked at the inhibitor and thought, I could design that. In fact, I had designed drugs in that pathway already and had to model FLT3 at one point in the project. But now, I’m laid off. It’s not like cancer is going away and you’d think that a person with my experience designing kinase inhibitors would be in high demand. But nope. This is the new research frontier and many of us are sidelined.
          Go figure.

      • Is there any reason to think the Senior Leadership Republicans didn’t know all about it right from the start, just like the Senior Leadership Democrats? Is there any reason to think that this was anything other than part of a long-range deliberate plan to put America into the Greatest Ever Depression so that the Old Money families of dynastic wealth couldn’t buy up all the distressed assets and people at pennies on the benjamin? I have called this bipartisan plan Plan Yeltsin For America, but one could also call it the Andrew Mellon 2.0 Plan.

  4. Could the fact that interest rates are at all-time lows have something to do with the banks’ reluctance to make long-term loans? If the banks aren’t loaning the money out, what are they doing with it?

    Why would the banks be anti-business?

    • Really, myiq, I’m surprised you are even asking this question. The interest rates are only low for savers. For borrowers, the banks will charge whatever they can get. Besides, the government is lending money to banks for practically nothing. They should be making more money than the know what to do with.
      If the banks are not lending money, it’s because they have no faith in the market, other banks, their own balance sheets, their ability to recoup, etc. Low rates of lending means the economy is FUBAR. Also, If they treat all businesses like the pharma industry, they are expecting large rates of return on their investment. They don’t make small bets anymore. It’s like going to a casino where there are no small games. Every player is going to have to come to the table with a guarantee that they can win. That’s what makes it particularly frustrating for research ventures. Research means there is no guarantee. It’s research. It could be fantastic, it could be a bust. But one thing is for sure, it’s going to be expensive and will not be done in three months. That’s not good enough so they don’t get loans. And so it goes. You’d better have som whizz bang gadget that every 14 year old American wants or you don’t get money.

  5. Speaking of life sciences, Roche is closing its Nutley, NJ facility. 1,000 layoffs expected. Closing “by the end of 2013″, but probably much sooner, possibly by the end of this year.

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