OBAMA AND THE BANKERS… Hello all, and thanks to Steve for the opportunity to fill in. Because he is more machine than man it takes two of us to do so. Anyway, let’s get to it.
President Obama met with the nation’s top bankers yesterday, and I think “jovial” would best describe the atmosphere, at least from press reports. The White House has calmed their rhetoric toward Wall Street of late, and after the meeting the bank CEOs were all smiles. They even might do us all the favor of keeping taxpayer money, which is awful nice of them.
Obama apparently did impress upon them the need to curb their excesses, at least in public.
Sitting at the center of a round table in the state dining room, Mr. Obama spoke firmly about how there had been a “cultural shift” regarding executive bonuses and Wall Street pay. He said that Americans had a right to be angry. “The anger is real,” the president said, according to people who attended the meeting. “The industry needs to show that they get it on the compensation issue.”
“Excess is out of fashion,” Mr. Obama added, noting that pay must be linked to performance.
The bankers nodded, but made no firm commitments.
As to any real change in compensation rules, I’m not from Missouri but they’ll have to show me.
But I agree with Moe Tkacik that JP Morgan CEO Jamie Dimon might have offered a bit too much truth in the post-meeting press scrum:
“One of the main root causes [of the crisis], and this has been going on for a long time, was the huge trade and global financing imbalances which fueled very low rates and excess consumption, and over a long period of time I do not believe you can run those kind of trade deficits…”
Dimon was getting at one of the root structural causes of the current crisis — America takes, the world (China especially) makes, an unsustainable situation sustained above all by an increasingly usurous financial services industry. As the CEO of PNC Financial Services just pointed out, banking is the biggest sector of the American economy — and it’s been to the detriment of everything else.
…it was precisely Wall Street and corporate America that relentlessly lobbied the government over that very long period of time to enable those gaping imbalances to gape ever wider. What both Barack Obama and Jamie Dimon implicitly understand is that publicly traded corporations are not engineered to look out for their long-term interests. By allowing the financial sector to bloat “too big to fail”, the country lost the kind of industries that are too vital to fail — which is to say, manufacturing.
This is the point that my father, he of the 40 years in the textile industry, has made repeatedly to me since he lobbied Congress to save his industry – in 1979, mind you. A society that loses its industrial base at the expense of, in this case, the financial services sector, puts itself in great peril. The size and the increasingly lucrative nature of an overgrown financial sector combined with the desire for perpetual growth creates just the kind of bubble-based economy, and dangerous aftermath, that we see today.
I don’t think Dimon was actually calling for the shrinking of his own industry, but that was the effect, at least on me.