Why the business world is fucked up

By Carl 

A full 25% of businessmen and women surveyed believe that it is not only acceptable but necessary to break laws and ethical codes in order to succeed in business.

One inference we may draw from this rather remarkable set of data is that the more successful any random group of executives is, the more likely there are skeletons in the closet.

Which brings me to the LIBOR scandal:

"A cesspit." That's how the usually measured Paul Tucker, deputy governor of the Bank of England, described banks' attempts to manipulate the London interbank offered rate, or Libor.

Faced by a throng of sound-bite-hungry British Parlamentarians, on Monday Mr. Tucker did a convincing job of rebuffing allegations that the authorities had put pressure on Barclays PLC to manipulate Libor, the world's most important interest rate. 

There's a hint in that last paragraph as to why you should be paying more attention to this story. LIBOR is the rate that is the basis of the interest rate you pay on everything, from your mortgage and credit cards to student and auto loans.

Not the Fed rate, LIBOR.

LIBOR (London InterBank Offered Rate) is set by a panel of lenders each night, and therefore is removed from the political pressures of the Federal funds rate (the rate at which banks lend money overnight to other banks in America.) Ostensibly, it should be a fairer and truer benchmark of, to put it in layman's terms, the cost of borrowing money.

Which is fine. Free markets, no social structural rate, no incentive for a government to raise or lower, yadayadayada. It makes sense for the markets to use this rate to set all other rates.

Until...

The investigation found that Barclays's traders communicated with colleagues at some of the 16 banks involved in Libor setting. As one Barclays trader explained to another one at a rival lender, "the trick is you must not do this alone." This kind of evidence should help regulators prove that others were in on the fix.

Given [Barclay's CEO Robert] Diamond's resignation, the question is whether CEOs of other firms will follow suit once their companies settle. While some will argue they weren't there at the time, those with long tenure and an investment-banking past will come under pressure.

"CEOs of other banks should be worried, especially those who rose through the ranks of the fixed-income and rate businesses" says Michael Karp, managing partner of Options Group, an executive search and consulting firm. 

Aye, there's the rub. And also the rationale behind strict government oversight of the financial markets.

This crisis will make the subprime bubble look like a bump in the road. See, this means that not only were a handful of bankers in England making out like bandits, pumping up their bottom lines at the expense of, well, the entire fucking population of the planet, but likely it means that the US banks who issued those cards and mortgages and loans had foreknowledge of the rip-off.

And so now we get back to the original point of this post: the tendency towards rule- and law-breaking the higher up the financial food chain one gets.

Evidence suggests that this crisis was covered up furiously when the story began to break, back in April 2008.

After all, would TARP have ever happened if the American public had focused on the fact that the underlying structure of bank lending was rubble and sand? Is it any wonder now why banks, after receiving their injections of steroids, went about not lending to anyone? If it got out that they were scamming people, even as they were being scammed themselves, there might have been full-scale class warfare.

And as George W. Bush was still president at the time, that would not have boded well for the long-term electability of Republicans. Or for that matter, a certain wealthy presidential candidate who banks most of his money overseas and reaps the benefits of investments that likely took advantage of these same scams.

Too, the entire sordid affair puts paid to yet another Republican talking point: that markets will fix themselves.

They might, but it takes time and in the interim, billions -- if not trillions -- of dollars will be illegally skimmed off an already struggling global economy.

Make no mistake about this: this incident could be the crack in the dam where the entire reservoir pours out onto the valley below. This one might actually put capitalism as we know it out of business.

(Cross-posted to Simply Left Behind.)

Bring it on, Darrell Issa, you dangerous idiot

By Michael J.W. Stickings

Buckle up. The Republicans are back, and gavel-wielding Darrell Issa, dangerous idiot extraordinaire, is about to lead the House down into the valley of the damned:

Rep. Darrell Issa is aiming to launch investigations on everything from WikiLeaks to Fannie Mae to corruption in Afghanistan in the first few months of what promises to be a high-profile chairmanship of the top oversight committee in Congress.

According to an outline of hearing topics obtained by POLITICO, the House Oversight and Government Reform Committee is also planning to investigate how regulation affects job creation, the roles of Fannie Mae and Freddie Mac in the foreclosure crisis, recalls at the Food and Drug Administration and the failure of the Financial Crisis Inquiry Commission to agree on the causes of the market meltdown. 

Yes, that's right, Issa is threatening to investigate pretty much everything. Full of partisan hyperbole and what appears to be a complete disregard of history (and reality), he has called Obama "one of the most corrupt presidents in modern times," later clarifying himself by broadening that attack to the Obama Administration generally. (Because, as you know, Obama covered up a third-rate break-in at a D.C. office building, sold arms to Iran and redirected the funds to Latin American fascists, and lied his way into a disaster of a war in the heart of the Middle East.)

In response to that comment, the Post's Ruth Marcus wrote that "[i]f Issa believes this, he is deranged. If he doesn't and is saying it anyway, he is dangerous." (Via Benen.) I would suggest that he is both deranged and dangerous, all wrapped up in right-wing ideology, very much the quintessential House Republican. Benen has more:

To justify his allegations of corruption, Issa told CNN yesterday, "In saying that this is one of the most corrupt administrations, which is what I meant to say there, when you hand out $1 trillion in TARP just before this president came in, most of it unspent, $1 trillion nearly in stimulus that this president asked for, plus this huge expansion in health care and government, it has a corrupting effect."

As is too often the case, Issa is deeply confused. First, the TARP bailout was a Bush administration proposal supported by the Republican leadership in both chambers. The Obama administration made sure American taxpayers were paid back, and lowered TARP's price tag to almost zero. If Issa sees this as evidence of "corruption," someone should have bought him a dictionary for Christmas.

Second, the stimulus wasn't $1 trillion -- I wish it had been -- and there was nothing corrupt about it. Similarly, arguing that health care reform has a "corrupting effect" doesn't make any sense if the effect of the law features no corruption.

Of course, Issa doesn't understand the meaning of corruption. To him, apparently, anything with which he disagrees is "corrupt." And he's not just "deeply confused," he's completely stupid, getting even the simple facts wrong.

But this is what the Republicans are about -- and what they will prove to be about in the House. Instead of governing, or helping to govern, they will be investigating and obstructing, doing everything in their power to prevent the president and Congressional Democrats, who of course still have a majority in the Senate, from governing. I realize that the concept of the "loyal opposition" is more parliamentary than presidential, but this sort of Republican partisanism is disloyalty to the extreme -- disloyalty to the American people.

So why do I say, Bring it on?

Because I'm more than happy to let the Republicans expose themselves for what they are, a party of extreme right-wing politics, extreme partisanism, and absolute obstructionism, a party that is completely out of control, a party that, spurred on by Issa's gavel, wants to drag the country down into the gutter.

And because the American people, and particularly all those much-ballyhooed independents, are supposedly against this sort of thing. Because they want Washington to get to work, and to work for them. Because they don't much care for such partisanism, for such bickering, for such paralysis.

Because the American people need to know what the Republicans are all about.

You've heard that the GOP is the Party of No, or even the Party of Hell No. But it's more than that. It's a party that, having lost in 2006 and 2008, simply cannot accept the will of the American people, the outcomes of American democracy. It's a sore-loser party, a party of bitterness and resentment, a party of anger and vengeance, a party of cynicism and hypocrisy, a party completely divorced from reality, a party out for itself at the expense of all else, including the needs of the American people at this time of ongoing economic difficulty.

So, yes, Darrell Issa, bring it on! Show us just how deranged you and your party really are.

Obama to cap executive pay

By Creature

"If the taxpayers are helping you, then you’ve got certain responsibilities to not be living high on the hog." -- President Obama

Hog-less [Bloomberg]:

President Barack Obama will announce today that he’s imposing a cap of $500,000 on the compensation of top executives at companies that receive significant federal assistance in the future, responding to a public outcry over Wall Street excess.

Good. Now, if someone could school these executives on how not to bankrupt their companies we'd all be better off.

Suck it up or go under

By Creature

The Washington Post on Obama's plan for the rest of the TARP money [anonymous source/grain-of-salt warning]:

In finalizing the plan, officials have made a policy decision that could dismay lawmakers. The administration is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid but instead retain looser requirements initially included in the Treasury's $700 billion rescue program, a source familiar with the deliberations said. Officials are concerned that harsh limits could discourage some firms from asking for aid.

If limiting executive pay is what discourages some from taking TARP money, then they don't really need the money. No? These too-big-to-fail banks have already failed. Only smoke, mirrors, a timid media, and the government are keeping them afloat. If they want another turn at the trough then they must submit to rules. Suck it up or go under. There is no choice here.