I keep wondering what this “Recession” is going to look like in America. People losing their houses, their jobs, potentially their families. Yet in the media, we hear about the huge billions of dollars being written-off or down by the banks, mortgage services, and financial institutions. Billions and what’s worst is that they are screaming for a government bale-out plan that will ultimately cost the American taxpayers billions of dollars.
They, the financial institutions created this mess by creating worthless securities and investing in and encouraging others to invest in them. When someone figured it out and screamed the house of cards fell and now the creators are crying foul.
What’s worst is that they paid out more that $39 billion in bonuses to themselves… Omit Goldman Sachs because they chose not to participate in the monetary shellgame. But look at the money made at the same time the others were calling for help from the government, ultimately, the taxpayers…
Wall Street Bonuses Top $39 Billion on Merrill Payout
Goldman Morgan Merrill Lehman Bear
Sachs Stanley Lynch Brothers Stearns
Net Revenue $45.99 $28.03 $11.25 $19.26 $5.95
Comp/Revenue 43.9% 59% 141% 49.3% 57.6%
Compensation $20.19 $16.55 $15.90 $9.49 $3.43
Bonus* $12.11 $9.93 $9.54 $5.70 $2.06
Employees 30,522 48,256 64,200 28,556 14,153
Comp/Employee $661,490 $343,004 $247,710 $332,470 $241,998
Bonus/Employee $396,894 $205,802 $148,614 $199,482 $145,199
(*Bonuses are estimated to be 60 percent of total compensation. All figures are for fiscal 2007.)
Source: www.bloomberg.com
Sorry that I could not format the blog correctly, but the devil is in the detail. Suffice it to say, all lot of money was paid out in 2007 bonuses to reward very bad behavior... This does not include the termination payouts for the CEO's of certain very prestigious banks.
Something is definitely wrong with the system when your neighbor loses his/her house and the trader gets a bonus... What do you think...
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Many economists actually predict the credit crunch will be good for the American economy, as as reported on the BBC News. Historically crunches have resulted in a resurgence in the manufacturing economy. The crunch will hurt many, who will lose their homes. But it will also bring real estate prices down, which will make housing affordable for many others, and will ultimately increase employment, which is good for everyone. The socialist alternative is that we all live disgusting Russian-style apartment blocks eating bad food from failing co-operatives.
"But it will also bring real estate prices down"
...true, but who is buying right now? Probably the same peiople who are buying up all the gold.
So interest rates are chopped "so people will borrow and spend", and 24 hours later, the market is fine. Except that it is not fine. The physical economy has collapsed, just like in England in 1846+ after the repeal of the corn laws.
History repeats itself.
Where is the gin and tonic?
I heard that some of these bundle mortgages were insured and that the insurance companies do not have capital to cover these losses. They will have to go to the banks to borrow money to cover. These are same banks that are writing down losses now. The prediction is that the only people who will have money to buy houses are the lawyers that are going to go to court to try and establish who the holder of the mortgages are.
The only good that can come from this is a new commitment to open and full disclosure in our financial institutions. Till the next hot shot financial planner comes along with the next big thing.
A down turn that hurts everybody is the only thing that will bring back a world where people can rely on one another. That of course relies on people to have the same vision of what freedom is. Until that is a share vision we will keep building islands of people and anarchy will be the new reality.
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