Barney Frank and John McFall are no match for their 1930s role model, Ferdinand Pecora...
LAST WEEK, writes Bill Bonner of The Daily Reckoning, the New York Times proposed "10 Questions Bank CEO's Should Face."
"The Treasury has proposed a $500,000 cap on executive compensation... Many of you have complained that you will lose your top talent. Are those the same people that helped lose your banks billions?"
Oh, you jokers at the NYT. Touché!
Yes, it's "open season" on bankers. And check the new dictionary. The word 'banker' has become synonymous with "reptile" or "scalawag." Drivers will soon be using it on the street. "F**** banker!" they will yell to the car that cuts them off. "Scumbag Millionaires," The Sun called them.
English and Scottish bankers got slapped around on Monday. Then, on Wednesday, it was the Americans' turn. They were summoned to Washington by Congressman Barney Frank; be prepared for a "public flogging," the New York Times warned them. In Paris, meanwhile, the bankers tried to stay ahead of the lynch mob by proposing to cut their own bonuses.
Everybody wants to kick the bankers when they are on the ground. Heck, we'd do it too...but the crowd around them is so thick; we can't get a boot in edgewise. Besides, there are bigger charlatans still standing. After all, bankers were just doing their jobs – separating fools from their money. What about those who were supposed to be protecting the fools?
But we are in a depression. And everyone has to play his part. The politicians feign moral outrage. The bankers feign contrition. The spectators feign to know what was going on and have a good time. It's a show with a subplot, we think. In the interest of seditious mischief, here we undertake to deconstruct it.
First we begin with a critic's remark: this is a well-rehearsed storyline. When the losers are unhorsed, they are almost always spat upon. Louis 16th's severed head was held up and subjected to "atrocious and indecent gestures"...while Mussolini was hung on a lamp post.
The bankers seem to be getting off easy.
Now for a comparison: the farce of '09 is nothing compared to the great show put on following the '29 crash. The weakness of the present spectacle is the cast. The chief American protagonist – Barney Frank – is no match for his role model, Ferdinand Pecora.
Pecora was "the most brilliant lawyer of Italian extraction in the US," said the TIME magazine report of March 6, 1933. He "finished public schools at 12. At 18, after loping through his brother's law books, he was managing clerk of a law firm. Even on the most complex cases (which he, tireless, likes best) he never needs notes, never forgets a word of testimony once it is on the record...At 47, his black eyes flash, his black hair bristles."
But then, the victims are no match for the 1929 good squad, either. Charles Edwin Mitchell – otherwise known as "Billion Dollar Charlie" – earned more than a million dollars in '29, when a million dollars was still real money. Senator Carter Glass said that he "more than 50 other men is responsible for this stock crash."
As TIME reported however, "Neither the directors nor any other Manhattan banker knew anyone who, they believed, could do an equally good job of carrying the bank safely through storm and strife. That he has done the job, Ferdinand Pecora would be the last to deny. The statement of National City Bank [Mitchell's] was, on Dec. 31, 1932, the envy of nearly every bank in the US."
Still, the depression was on and Mitchell was damned for it. By 1933, he was out of a job.
And now Jamie Dimon, Lord Stevenson, Andy Hornby, John Mack, Vikram Pandit, and Sir Fred Goodwin are in the dock.
"Yes, we have erred and strayed like lost sheep," the bankers chant. "We are profoundly, and I think I would say unreservedly, sorry..." said Lord Stevenson, formerly of HBOS, on Tuesday. But "UK bankers find sorry is not enough," judged a headline on Wednesday morning. "I want groveling," wrote an opinionist to the LA Times.
"I want show-trial sweating and stammering. I want their nine-figure bonus checks endorsed over to the rest of us...I want blood."
Be careful not to over-act, is our advice. Viewers might catch on. In London, The Guardian announced its own 12 questions to put to the bankers, including "why should profits be private, but losses be socialized?" Uh...that is a good question, but it is put to the wrong person. Why the bankers would want to offload their mistakes is a question even a Guardian reader could answer.
Why else would they humiliate themselves publicly? Why would not a one of them dare show any fight? The pols control the money now; the bankers know it.
The question is better put to the inquisitor than to his victim. Why would the government wish to take on the losses? There, the answer is fairly easy too – power. Besides, it's not their money; it belongs to the same mouth-breathing yahoos who are enjoying the show.
In fact, we have other questions we'd like to put to Barney Frank, John McFall and the rest of these sanctimonious meddlers: How many of you jackasses went short the financial sector? And if you're so smart, why didn't you warn the public about the housing bubble and the toxic asset meltdown? If your committees...and your armies of regulators at the SEC, FHA, FDIC, FSA or other agencies...could do nothing to prevent the crisis, what good are they?
And how cometh it to be that the biggest financial fraud of all time took place right under your own employees' noses?
So you see, dear reader, how deliciously the plot turns? In the bubble years, the bankers ripped off the public...pretending to make them rich, of course...while the regulators looked the other way. Now, the politicians create a distraction, pretending to punish the bankers, while together they pick the public's pocket for $3 or $4 trillion more. The bankers are judged guilty; but the audience hangs.