Monday, July 27, 2009

Greedy Banks

Greedy Banks

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Pretending that nothing had happened.... As though the global crisis they provoked weren't daily dragging along with it its cort├Ęge of social dramas, human tragedies and economic routs, banks are reviving yesterday's practices. The practices of a pre-crisis world. In the United States, investment bank Goldman Sachs is shamelessly preparing to fund an envelope of some $20 billion to devote to coming bonuses, or the sum the G-8 allocates to combating hunger in the world!

As though in the good old days, when, with complete impunity, they cooked up their little deals sheltered from the real world, the banks are reviving their guaranteed bonuses, intended to compensate bankers for their significant risk-taking, even as their original profits transform themselves into colossal losses. While the crisis is going to deepen the gap between rich and poor even further, these bonuses for greed are profoundly shocking. "Excess and one-upmanship," is the formula Ariane Obolensky, director general for the French Banking Federation, used in the July 22 La Tribune, excess and one-upmanship proscribed in France, thanks to the code on variable compensation adopted in the beginning of the year, but which exist elsewhere in Europe.

Christine Lagarde did not mince her words in the Financial Times of July 22: "I think it is an absolute disgrace that guaranteed bonuses of several years could still be paid, or that some people are thinking of reinstating the old ways of compensating with insufficient relationship between compensation and lasting performance and risk management." The [French] minister of the economy is in step with Barack Obama, who, on July 20, pronounced his own stern judgment: "You don't get the sense," he said, "that folks on Wall Street feel any remorse for taking all these risks; you don't get a sense that there's been a change of culture and behavior as a consequence of what has happened."

Less than four months ago, during the G-20 in London at the beginning of April, all the planet's great and powerful pledged to never allow the financial sphere to get the upper hand over the state ever again. They promised and swore: the crisis would be redemptive. It would supply new tools to regulate a world that had become insane. The post-crisis world would be completely different from the pre-crisis world. "Alas," says Mrs. Lagarde, "the 'old ways' are returning. They increase inequalities; they are dangerous for the economy as a whole; they arouse incomprehension and anger. They must cease."

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