In remarks that will fuel the row around excessive pay, Lord Griffiths, vice-chairman of Goldman Sachs International and a former adviser to Margaret Thatcher, said banks should not be ashamed of rewarding their staff.posted by scalefree at 10:30 AM on October 22, 2009 [1 favorite]
Speaking to an audience at St Paul’s Cathedral in London about morality in the marketplace last night, Griffiths said the British public should “tolerate the inequality as a way to achieve greater prosperity for all” [...]
With public anger mounting at the forecast of bumper bonuses for bankers only a year after the industry was rescued by the taxpayer, he said bankers’ bonuses should be seen as part of a longer-term investment in Britain’s economy. “I believe that we should be thinking about the medium-term common good, not the short-term common good … We should not, therefore, be ashamed of offering compensation in an internationally competitive market which ensures the bank businesses here and employs British people,” he said.
Griffiths said that many banks would relocate abroad if the government cracked down on bonus culture. “If we said we’re not going to have as big bonuses or the same bonuses as last year, I think then you’d find that lots of City firms could easily hive off their operations to Switzerland or the far east,” he said.
Our present situation can give rise to two scenarios - or some combination of the two. The first is that central banks start exiting at some point in 2010, triggering another fall in the prices of risky assets. In the UK, for example, any return to a normal monetary policy will almost inevitably imply another fall in the housing market, which is currently propped up by ultra-cheap mortgages.like could we be witnessing the limits of central banking?
Alternatively, central banks might prioritize financial stability over price stability and keep the monetary floodgates open for as long as possible. This, I believe, would cause the mother of all financial market crises - a bond market crash - to be followed by depression and deflation.
In other words, there is danger no matter how the central banks react. Successful monetary policy could be like walking along a perilous ridge, on either side of which lies a precipice of instability.
For all we know, there may not be a safe way down.
My sole purpose one and a half years ago when I started writing about what I saw happening in this country was to convince enough people that the fiscal and foreign policies of our politician leaders would lead to disaster, so that we could change our path and I could leave my three sons a future brighter than my own. I have come to the conclusion that less than 1% of Americans or 3 million people really care about the path of destruction we are on. Approximately 1% of the population owns 90% of the wealth in the country. The actual number of people in control of the country is quite small. There are maybe a couple thousand people who control the reins of power (100 people in the White House, 535 Congressmen, 50 bankers, 20 people in the Federal Reserve, 9 Supreme Court justices, 100 people in power at governmental agencies, 50 media titans, 100 corporate CEOs, and maybe 200 rich influential people such as Gates, Soros and Buffett).a bit alarmist perhaps, esp after the woo-woo cycles intro (american pie interpretation), and yet and yet while i've read and seen enough [(post-)apocalyptic books and movies] to be kinda cynical about humanity's chances and skeptical of doomsayers' claims, i find it's hard to dismiss kunstler/klaresque long emergency/resource war(nings) -- altho still being wary and weary of them -- given the apparent idiocracy, despite hope, change & awesomeness :P
The majority of Americans are oblivious to the Crisis that has already begun. They are distracted by their latest text message, shopping at the mall, worried about the next credit card bill, engrossed by the adventures of balloon boy, and trusting that their elected officials know what is best for them. What will blind side them is the depth and ferocity of the next stage in the Crisis. They will need to choose sides when the time comes. I will choose the side of truth, freedom, liberty, and adherence to the U.S. Constitution as it was written. This old man will join his three sons at the barricades when the time comes. The fools and fanatics who run this country are certain. I am not certain of the final outcome, but I know which side I’ll choose. Do you?
For our part, the Federal Reserve is participating in a range of joint efforts to ensure that large, systemically critical financial institutions hold more and higher-quality capital, improve their risk-management practices, have more robust liquidity management, employ compensation structures that provide appropriate performance and risk-taking incentives, and deal fairly with consumers. On the supervisory front, we are taking steps to strengthen oversight and enforcement, particularly at the firmwide level, and we are augmenting our traditional microprudential, or firm-specific, methods of oversight with a more macroprudential, or systemwide, approach that should help us better anticipate and mitigate broader threats to financial stability.sounds like the fed up banks' asses, but looking at off-B/S, contingent and derivative exposures, within firm, with others and internationally? like banks may have passed their 'stress tests' relatively easily, but it seems like cavity searches all around: "Building on the success of this initiative, we will conduct more frequent, broader, and more comprehensive horizontal examinations..."
Although regulators can do a great deal on their own to improve financial regulation and oversight, the Congress also must act. We have seen numerous instances when weaknesses and gaps in the regulatory structure itself contributed to the crisis, many of which can only be addressed by statutory change. Notably, to promote financial stability and to address the extremely serious problem posed by firms perceived as "too big to fail," legislative action is needed to create new mechanisms for oversight of the financial system as a whole; to ensure that all systemically important financial firms are subject to effective consolidated supervision; and to establish procedures for winding down a failing, systemically critical institution without seriously damaging the financial system and the economy.
...consolidated supervision, particularly at large, complex organizations, so that supervisors can properly understand risks and exposures that cross legal entities and business lines. Second, we must combine a systemwide, or macroprudential, perspective with firm-specific risk analysis to better anticipate problems that may arise from the interactions of firms and markets. To support these approaches, we are strengthening our supervisory processes to include analyses that draw on multiple disciplines, updated surveillance tools, and more timely information so that supervisors can identify emerging risks sooner... recent experience confirms the value of supervision of financial holding companies--especially the largest, most complex, and systemically critical institutions--on a consolidated basis, supplementing the supervision that takes place at the level of the holding company's subsidiaries. Large financial institutions manage their businesses in an integrated manner with little regard for the corporate or national boundaries that define the jurisdictions of functional supervisors...so apparently bernanke's trying to get tough and wants teeth from congress so that banks respect his authoritay
Because financial, operational, and reputational linkages span large and complex financial firms, the risks borne by such firms cannot be adequately evaluated through supervision focused on individual subsidiaries alone. Instead, effective supervision must involve greater coordination among consolidated and functional supervisors and an integrated assessment of risks across the holding company and its subsidiaries... Strengthened consolidated supervision also supports improved oversight of institutions' compliance with consumer protections. Indeed, building on a pilot project we launched in 2007, we recently announced a consumer compliance examination program for nonbank subsidiaries of bank holding companies, as well as of foreign banking organizations.
Though the Federal Reserve and other supervisors in the United States and abroad are strengthening the existing regulatory and supervisory framework, it remains critical for the Congress to close regulatory gaps and provide supervisors with additional tools for anticipating and managing systemic risks... Any resolution costs incurred by the government should be paid through an assessment on the financial industry and not borne by the taxpayers.finally, while we may not be moving to a (socialist) centrally-planned economy per se, it does appear that bernanke really wants to set up a sort of gosplan for controlling the levers of the financial system; by their oversight of 'systemic' risks, they will not only be setting prices for short-term money, but underlying credit risks as well*
The Federal Reserve supports the creation of a systemic oversight council... The council could be charged, among other things, with monitoring risk exposures that cut across firms and markets; analyzing potential spillovers among financial firms or between firms and markets that could lead to financial contagion; identifying regulatory gaps; coordinating the responses of its member agencies to emerging systemic risks; identifying systemically important firms; and periodically reporting to the Congress and the public about emerging systemic risks and recommended approaches for dealing with those risks. In addition, to further encourage a more comprehensive and holistic approach to financial oversight, all federal financial supervisors and regulators--not just the Federal Reserve--should be directed and empowered to take account of risks to the broader financial system as part of their normal oversight responsibilities.the bank lobby is going to resist -- they already are** -- but i would take bernanke at his word and not underestimate what he wants and intends to get and for congress to oblige; the takeaway for me is what el-erian spelled out: "markets are pricing a return to the previous paradigm for the banking system – call it the 'old normal'. Yet the likelihood is for a 'new normal' in which more dominant utility-like functions translate into an average return on equity (ROE) in the low teens, as opposed to the 20s." we'll see...
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Grape or grain, but never the twain.
Liquor in the front, poker in the rear.
What's this all about now?
In all seriousness, liquor, then beer, for fine tuning.
posted by mrgrimm at 8:08 AM on October 22, 2009