

Another Inside Job - bakbak
http://www.nytimes.com/2011/03/14/opinion/14krugman.html?_r=1&src=me&ref=homepage

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jcromartie
What I hate about all of this is that, to the baby boomer generation, any
point of view that wants to hold banks and Wall St. accountable for what they
have done is "communism" or "socialism" or "fascism" or some other nonsense.
It's like anything that goes against any business is automatically
discredited.

It is absolutely plainly obvious that banksters basically _hate you_ and the
government is right along with them. Look at the UBS whistleblower Bradley
Birkenfeld, who is in prison right now while _every single one_ of the
_19,000_ tax cheats who diverted _billions_ in taxes are free (save for one
guy on a two-year probation). He was wealthy right along with his clients...
but he went against the grain. It's interesting to note that Eric Holder was a
lawyer and represented UBS at one point, and won't touch the case.

But you just can't make this point in some circles.

~~~
carmelo5
"...while every single one of the 19,000 tax cheats who diverted billions in
taxes are free..."

Maybe because we live under a rule of law that says you're innocent until
proven guilty.

~~~
jcromartie
Plenty were proven guilty. They were just rich enough to get away with it.

Birkenfeld was sentenced in August of 2009. UBS paid $780 and avoided all
criminal charges. Individuals have since been fined or put on probation, or
set free... except for Birkenfeld.

Extremely wealthy tax evaders can afford to pay measly slap-on-the-wrist fines
for their crimes. $780 million for UBS is a complete joke compared to the
billions in evaded taxes.

~~~
carmelo7
Can you cite specific sources? I'd like to know specifically what you're
referring to.

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todayiamme
This is just an observation about such distress calls, but I am trying to
learn economics, and something shocks me every time I read up about it.

Absolutely no major book, be it pop or a college text touches on the role of
power in the relationship. It might be easier to project and create models by
assuming human beings to be rational beings, but that still doesn't mean you
need to ignore the calculus of power.

What we have over here is something most economists simply don't study.
Systematic use of power. These banks strut like mafia bosses, because they're
exactly like mafia bosses.

Their strength and survival depends on having power to push the consumer into
beneficial deals. Their survival _also_ depends on pulling the carpet from
underneath when the consumer fails to jump through enough hoops.

Yes, it's all related to capital in the markets etc., but it's all driven by
power.

I don't know why we want to ignore this, but as a society these power
relationships lurk everywhere. It doesn't mean that they are immoral or
anything like that. They're just a fact of human nature. Every contract signed
or transaction made is made with the assumption that someone with power will
ensure that it will go off without a hitch.

What is a contract except for the threat of violence sublimated into abstruse
jargon? Think about the robber barons and their ideological descendants wall
street bankers. The only difference is that now they're holding a gun made out
of paper (or a database).

In this case, of course the law makers and everyone else are on their side,
but like everything else it's all a matter of time. As things change power
will get redistributed from Morgan to Milken.

What I'm trying to say is that I think that economics doesn't make sense
without this variable. These people call the shots, because they have power.
Not capital assets. Those are just symbols of power they have accumulated by
various means.

Yes, this can't explain everything, but it's just a very different way to look
at it and things just make sense after this.

~~~
byrneseyeview
_Absolutely no major book, be it pop or a college text touches on the role of
power in the relationship._

I recommend reading up on game theory, which might as well be understood as
the study of the role of power in relationships.

Interestingly enough, your portrait of banks abusing customers is a lot like
my view of how I abuse my bank. They give me risk-free credit, help me manage
my money, and make basically zero revenue from me. All I really have to do is
read the fine print and avoid going into debt, which isn't especially hard.

Milken is an interesting guy to mention, actually. He started out as a great
example of powerlessness--a low level employee who happened to be one of the
few Jewish guys at a sleepy, Waspy firm, where he was stuck analyzing the
stuff nobody else cared about. I guess he had some secret reserve of power
that helped him fake his way into basically running the company and making a
killing before getting shut down by some overzealous regulators. Milken
doesn't contradict your theory, but he does fill in the missing variable--
power is something people accumulate, and very often they accumulate it within
their lifetimes.

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martythemaniak
This is an example of why I think the next crisis won't be many decades into
the future, but much sooner. Basically, nothing changed after the crisis of
2008 - no one was punished, laws were not changed (they were tweaked at best)
and the most important, the culture of fraud and criminality on wall street
has only been emboldened.

I don't expect Wikileaks to change anything either. They may have helped the
Tunisian revolution along, but no matter how complete and damning their
evidence against BoA is, nothing will be done against BoA.

~~~
carmelo5
The "culture of fraud and deception" is illegal. Acts of deception can range
from fines to decades in jail. Wall Street firms make money from customers who
choose to do business with them. Any hint of deception completely destroys any
future business with that client, as well as many other clients. I know this
might sound like a shock to some of you, but banks make their money by
providing services to customers who choose to pay for those services. It's
basic capitalism.

~~~
rbarooah
You're obviously a troll. You aren't seriously trying to claim that Wall
Street firms don't engage in deception are you?

~~~
carmelo7
Please cite specific examples of common deceptive practices (not just
anomolies) if you're claiming that Wall Street fully practices deception on a
daily basis. To claim that they do so is just absurd. Taking a populist
opinion without understanding specifically how the banking industry works, and
what it can and can't legally do, just wreaks of the Dunning-Kruger effect.

~~~
rbarooah
What's the point? You can google for yourself.

If I bring up examples they will be flawed because they are populist and
because I don't understand banking as well as you do.

The banking system is flawless but you have to be a banker to understand this.

~~~
carmelo7
Well, if you cite specific examples about what you're referring to that's from
a factual and objective source (since there could be thousands of different
viewpoints), I would know your premise. Simply calling a whole industry as
engaging in deceptive practices as a common occurence -- and freely accepted
among those in the industry -- is unfair, absolutely untrue, and does nothing
to help the financial system become more effective for society at large.

~~~
rbarooah
I didn't call out the whole industry as engaging in deceptive practices as a
common occurrence. I do however think there is some deception occurring and
that if it isn't uncovered and corrected, it will grow.

You did however did claim that any hint of deception would destroy their
business and that therefore deception is not happening.

I think your claim is absurd and does nothing to help the financial system
become more effective for society at large.

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gadders
I'm so old I can remember when Krugman was an economist, rather than an op-ed
columnist.

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loup-vaillant
Tragically unsurprising. And the tip of the iceberg, considering that private
banks basically create money out of thin air, then loan it _at an interest_.

We could, I dunno, give back the control of the money to elected people?

~~~
nazgulnarsil
actually we need non-centralized currency. centralized currency regardless of
who is in control is bad, just like with any other good.

what we need is at the very least state currencies that float against each
other.

~~~
jcromartie
So what about BitCoin? It seems like a thoroughly decentralized currency. The
only problem is the limited size of the Bitcoin economy. There is currently
5.68 million BTC, or $5,108,175 USD, worth of Bitcoin in the world right now,
with a max of about 21 million.

Could multiple open distributed digital currencies work?

~~~
nazgulnarsil
the number in the world doesn't limit anything. bitcoins float against the
dollar. if demand for them increases their value will increase dollar wise.

money is not magical, it is a convenient commodity of exchange. the rules of
supply and demand govern it.

~~~
jcromartie
I see. I also did not know that BTC was divisible into very small amounts.

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tomelders
Where are the accounts from the people who maned the phones and signed the
letters that made all this possible? I doubt any BOA executive picked up the
phone and told a customer to default on their mortgage. That would have been
someone like me or you just doing their job, doing what they're told.

Where are their accounts of what the were told to do?

I'm worried that these people don't care about the people they helped screw
over. I hope thats not the case, but I'm worried that it is.

~~~
brown9-2
_I'm worried that these people don't care about the people they helped screw
over. I hope thats not the case, but I'm worried that it is._

Or they are just more worried about the NDAs they signed and the army of
lawyers the bank's employ.

~~~
tomelders
Perhaps. But there's ways and means to get their accounts out into the open.
And no NDA can prevent a person from speaking in court.

