Jan 212010

By Friend Jessee
January 21, 2019

Morgan Stanley ignores calls for restraint and doles out £8.8bn to bankers

Wall Street giant Morgan Stanley has defied the growing calls for restraint after doling out huge rewards to its staff

New York-based Morgan Stanley was rescued from the edge of oblivion with a £6.1bn taxpayer handout in late 2008. Although it has since re-paid the loan, it still operates with an effective guarantee of the taxpayer.

One has to wonder how much of that ‘revenue’ is merely the result of artificial mark to market accounting and prop desk speculation, and not real cash flow from commercial banking operations.

That is not the pay method for a bank. That’s a hedge fund. And that would be all very well and good if they were a hedge fund and responsible for their own failures and successes, but they are obtaining the discount window and federal guarantees and subsidies from the taxpayers as though they were a commercial bank.

This highlights the problem with this ‘trickle down’ approach that characterizes neo-liberal stimulus versus the approach of, let’s say, the Roosevelt administration, that of putting people to work and keeping their savings safe as the first priority.

The US and UK are packing the banks with public money to ‘save the system.’ Their hope seems to be that as the banks recover, they will start lending to the private sector again, and eventually this money will trickle down to the public as real wages generated by organic economic activity.

Another approach would have been to guarantee the people’s savings in banks and Credit Unions, the cash value of insurance policies, and money market funds, up to let’s say $2,000,000 per individual and $5,000,000 per couple.

Keeping the people whole, the government would have then been able to effectively place the banks in receivership as required, and work them through the resolution of their problems, handing out some stiff losses to shareholders and speculators and the debt-holders.

No mechanism to do this? They could have nationalized the banks temporarily with a single executive order, as readily as it took Hank Paulson and Tim Geitner to type up a ten page document to give away $700 billion. The guarantees on all savings and private investments would have prevented a panic from the public, but quite a few more bankers and hedge funds might have taken the hard results of their recklessness.

This would have placed all the bailout money in the hands of the people, who could have chosen where they wished to place it after the nationalization process as the banks were either shuttered or restored. We would have ended up with fewer big banks, but more regional banks with real depository bases.

As it is now, the money being given to the banks is being ‘taxed’ at a fairly stiff rate by the unreformed bonus system, and the problems are not being resolved, since the bankers have every incentive to keep the money and not write down their losses, which is the great lie in this ‘profit’ picture being spun for the bailouts.

This is not over, not by a long shot. And if the bankers keep taking 50+% of all the cash that touches their hands from the public subsidy, then what trickles down to the people won’t accomplish anything. Years of zombie-like stagflation look to be the prognosis.

As Bank of England Governor Mervyn King said, “Families face years of pain…The patience of households is likely to be sorely tried over the next couple of years” as inflation cuts into their meager wages in order to pay for this. Families Face Years of Pain – Don’t expect such honesty from the US Federal Reserve or the government. The realization of how bad stagflation is going to be will sift slowly down through the smug layers of the stuporati.

The economic hitmen and the corrupt politicians are taking their pay, and the people and their children and most likely grandchildren will be stuck with unpayable debts. Just like a third world nation, which is what the US will look like when they get done cutting health, infrastructure, education, and basic services to pay for this.

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