Brits Whack Bankers As Study Proves They're Parasites

WHAT COULD BE MORE FUN THAN SMACKING A GREEDY BANKER with a mallet and not only getting away with it but having the chance to win a teddy bear for your kids? It seems that the idea is very popular in Britain where an arcade owner who has put in a game of "Whack A Banker" has had to replace the mallets several times over.
It's no wonder that the game is popular. There has been a simmering dispute, for instance, between the board of directors of the Royal Bank of Scotland and the government over bonuses. The board is demanding the "right" to pay out £1.5 billion in bonuses at the bank, even though there business sense is so utterly crap that the government has had to pump billions upon billions of pounds into the bank to keep it afloat. The government is set to own up 84% by the time all the pieces fall. And while millionaire bankers want to use public funds to pay themselves bonuses - for what great feat, I'm not sure - the average salary in the UK is £20,000. The board of directors is threatening to resign if they don't get their loot.
And, just to confirm the public's belief that bankers are greedy parasites, a study by the New Economic Foundation in Britain has found that for every £1 they are paid, bankers destroy £7 worth of value. This contrasts with childcare workers, for instance who create £7 worth of value for every £1 they are paid. So much for the rich being rich because of their contribution to society. As I suspected all along, it is the poorest who contribute the most with socially useful work, while the rich are a big drag. As the study notes:

It said the report challenged the notion that high pay did not matter as long as poverty was eradicated. It argues that high pay is often generated by businesses that destroy other parts of the economy or fail to pay the full costs of their activities.
The report said tax accountants were the most destructive, laying waste to £47 of value for every £1 they created. Elite City bankers (earning £1m plus bonuses) destroy £7 of value for every £1 they create and advertising executives wreck £11 of value for every £1 they are paid.
On the other hand, the report judged that waste-recycling workers generated £12 for every £1 spent on their wages. Childcare workers create between £7 and £9.50 of value for every £1 of pay and hospital cleaners create more than £10 in value for every £1 they receive in pay.

So, go on and give those rich a whack, I say. You're providing a social service to the rest of us.

Death Of The American Dream

THAT IS THE TITLE OF THIS MULTIMEDIA PROJECT BY LAUREN GREENFIELD, with beautiful & haunting photos of the wreckage of the US housing sector and the lives ruined by its collapse. These are the voices you don't hear on the news when they're talking about bank bailouts (followed by record bank profits). When you see and hear these stories, you won't be able to think about the massive bonuses at the big banks and not feel angry.

Lauren Greenfield's "Foreclosure: Death of the American Dream" from Frank Evers on Vimeo.

JPMorgan Profits Soar On Wall Street, Housing Defaults Soar On Main Street

I SUPPOSE IT SHOULDN'T COME AS A SURPRISE that the biggest of the big banks in America that sucked up tens of billions in government aid are now rolling in profits. That’s how this game works. So, it was announced today that JPMorgan reported a 580% profit increase over last year to a whopping $3.6 billion third-quarter profit.
The reasons is pure and simple – the money that the US government pumped into the banking and financial sector has created a new Wall St. bubble – with stock prices rising by nearly 50% to top the psychological benchmark of 10,000.
The actual meaning of that number is a mystery to most of us not initiated into the occult world of the stock market. But the basic gist is that there’s a lot of cash floating around and people are doing to the stock market what they did to the housing market – bidding it up, out of relation to the value of the assets that they represent.
The trouble is, in the real world, the shithouse is still burning. Community banks in the US, which make their profit by loaning money to people to buy houses, finance small businesses, other consumer loans, etc. are tanking badly. The 7,000 banks have collectively lost about $2.7 billion. And many are outright failing:
“Ninety-eight banks, mostly small, have failed so far this year, and regulators predict the harvest from the current recession is less than halfway complete.”
The reasons why are straightforward, with loan delinquencies sitting at a record 4.35 percent and climbing – and real estate development loans have rocketed to 16 percent. Amongst homeowners, 7.35 percent were delinquent – another record. In previously frothy markets like south Florida the freefall is continuing. According to one real estate agent foreclosures have risen by 25 percent compared to last year and the trend is higher.
It is certainly possible that the present round of profit reporting – including a positive report from Intel Corp. boosting share earnings and projecting an extra $1 billion in revenue for the fourth quarter could in fact herald a recovery. But it’s also the case that, like previous recessions – going back to the Reagan arms boom – this one will have been ended by laying the basis for the next one.
In particular, what we have seen in recent decades is a game of debt ping pong, with debts being shunted back and forth between governments, private individuals and the corporate sector (including banks). Until that debt can be dealt with it will act as a drag upon the economy and create other problems that will increasingly limit the ability of governments (in particular the US government) to act.
My own view is that in the short to medium term, once the present round of “irrational exuberance” wears off – and I don’t think it will last long once stockbrokers remember that there’s a real world – will see us return to an extended period of stagnation. Some of the weaker centres of the system – droopy old Britain, for instance – may experience Icelandic types of crashes. As Nouriel Roubini might say, this ride ain’t half over yet.

Big Bucks At Big Banks

Whew, that's a relief. The figures are in and Canada's big banks are making big bucks again. The Royal Bank saw its profits surge a whopping 24 percent to $1.6 billion. The saw its profits go up by almost 7 percent. National Bank also had a profit boost of 6 percent. TD-Canada Trust had a whopping 48 percent profit explosion compared to its previous quarter.
I'm sure everyone feels warm and fuzzy that the banks - the ones who caused the present crisis by creating dubious and opaque "derivatives", "asset-backed debt obligations", sub-prime mortgages, "credit default swaps" et al - will feel warm and fuzzy that they are the first to recover from the crisis that's wiping out jobs, and personal disposable incomes.

It does show, however, that when the government puts its mind to it, in this case by buying up $125 billion worth of bank held mortgages to inject liquidity into the system, it actually has an impact on that sector. It does raise questions, the first being why are we rewarding the sector responsible for the crisis? But more importantly, why is the government pumping money into a sector that will not directly stimulate job creation or retooling the economy?

The banks sat on the newfound liquidity and only now are increasing loan activity, but had the government invested that money directly in infrastructure it would have created, perhaps, 1,375,000 jobs, since it's reckoned that every $1 billion invested in infrastructure creates about 11,000 jobs. Instead, we're getting a commitment to $12 billion over two years - if municipalities, many of which are totally strapped - meet any federal investment. In other words of total money invested in the economy, if we include the entire $30 billion "stimulus package" from the January budget, 19% went to what I will call direct investment (infrastructure, tax breaks to individuals, housing, etc), the remaining 81% went to the banks. This doesn't include the $10.5 billion bailout to GM and Chrysler, which will go towards paying off old debts, rather than new production capacity. I will only note that Time Magazine listed it as one of the "worst business deals of 2008":

"The Canadian rescue package works out to more than $340,420 for every employee at Chrysler Canada, which has 9,400 hourly and salaried workers on payroll. That's 15% more than the $295,000 per employee that Washington is shelling out to save about 40,000 Chrysler jobs in the U.S. "This money will never be paid back to the Canadian government," says Toronto auto analyst Dennis DesRosiers, with DesRosiers Automotive Consultants. 'The deal has been spun in a positive way, but if taxpayers understood what's really going on, they would revolt.'"

But back to banks and the rest of us. The money that has gone to restore the banks' profitability comes from government coffers. Those coffers are filled via tax revenue. The government receives 46.6% of its revenue from personal income tax, while only 16.8% comes from corporate income tax. Another 12.3% comes from GST (which business don't pay) and 6.8% comes from EI premiums.

In other words the government gets 66% of its revenues straight out of our pockets. Yet the money it has shelled out has been directed by priority in almost exactly the opposite proportions. The Tory government "recession strategy" has been nothing more than another transfer from our pocketbook to the pocketbooks of corporations and the wealthy.