Two Americas: One for us, another for bankers

America #1:

… this fall, she exhausted all options. She had once owned and overseen a group home for homeless people. Now, she succumbed to that status herself, checking in to a shelter.

“No one could have told me that in a million years: I’d wake up in a homeless shelter,” she said. “I had a house for homeless people. Now, I’m homeless.”

Growing numbers of Americans who have lost houses to foreclosure are landing in homeless shelters, according to social service groups and a recent report by a coalition of housing advocates.

We desperately need a second stimulus – or a New New Deal – to help these victims of Wall Street machinations. After all, the people who caused this mess were basically handed trillions of dollars after screwing things up so bad. The hope was that we could avert a greater catastrophe and stop the human suffering. We did avoid a financial armageddon (for now) but we aren’t doing such a good job of stopping the human suffering.

Unless of course you work for a bank in America #2:

Just a year after surviving the financial crisis with billions in federal aid, the banking giant Goldman Sachs reported strong results Thursday that beat expectations and promptly went on the defensive about its bonuses.

… Goldman also disclosed how much it had set aside for its annual bonus pool. It said that it had earmarked $5.35 billion in compensation and benefits, an increase of 84 percent from the year earlier period, putting it on course for a record payout to its executives by the end of 2009.

… In part to allay criticism of its profits and bonuses, Goldman announced a $200 million contribution to its foundation, which promotes education.

Out of over $5 billion in bonuses, they are going to give $200 million to… themselves for “education.” That’s less than 4% of their bonus pool. What a joke. To pay for the New New Deal, we need to tax these Honorable Bankers and recapture some of that bailout tax money. Sure those jokers might not be able to afford their 5th and 6th Ferraris, but we might just keep a few Americans in their homes and out of shelters.

9 Comments

  1. Ian

    I don’t think it is quite as simple as you are making it sound. Certainly the banks are to blame for giving loans to people with bad credit or without the means to pay them back. Shouldn’t we also be extending some of the blame to those who signed up for the loans though? Isn’t this something that is pervasive and wrong within our culture? This notion of spending on credit and never really having to pay it back? There is something seriously wrong with taking out a loan for over $100K and not reading the fine print and figuring out how you are going to budget it all.

    And what about people who lose their jobs? Things like that happen, and well, sorry, they don’t get to keep their houses. I know you can blame them losing their jobs on the irresponsible behavior of bankers, but this kind of thing has been going on since the start of the industrial revolution. It isn’t confined to the banking industry, they are just the latest offender.

    That anecdote you post is interesting, but I’ve heard ones that were a little less biased. NPR interviewed a woman who had been foreclosed upon when all of this mortgage mess was hitting the news. The conversation went like this, paraphrasing:

    Woman: “I lost my job, so the bank came and took my house.”
    NPR: “What do you think should happen?”
    Woman: “I think the government should do something about this. I think they should help people like me.”
    NPR: “Did you always pay your mortgage bill every month.”
    Woman: “No, not all the time.”

    I’m sorry, but if you don’t pay your bills, no, you don’t get to have a house. A house is not a right. I hate that I sound like a Republican here, but sometimes they are right. There needs to be some personal accountability here. The problem is, that accountability needs to exist for the people losing their homes, and the banks making bad deals.

  2. Chris

    Ian,
    It’s the job of banks to manage risk. If you don’t have a job or have no credit worthiness a bank shouldn’t offer you a loan. Simple as that. What happened instead is that banks gave out loans to people they knew couldn’t pay them back, and when they started to miss payments, they jack up in the interest rates and destroy what little chance there was of the loan being paid back.

    It’s also not as if these folks were taking out loans to buy big screen TVs. You’ve read our posts about how real wages have stagnated for 3 decades while the price of necessities, like housing, energy, health care, food and education have skyrocketed. Americans needed those loans to compensate for the fact they weren’t being rewarded for hard work at their jobs.

    On the other side, 401k’s, stock portfolios, pension funds, and more were being swindled into buying these crappy loans from banks. So when the system came crashing down, it hurt the folks with loans first who saw their interest rates explode, then it started hitting the people who relied on those 401ks and pension funds.

    So while it may seem more equitable to blame the current crisis on a widespread dearth of personal responsibility, the responsibility primarily lies with those “professionals” who are paid exorbitant sums to know better.

  3. Sheepywoman

    And see, Ian, I think you are oversimplifying it! I agree that individuals should have had better savings and not spent outside their means. But the problem that most individuals are facing is that they have lost their job, spent all their savings, their health bills go up, their food bills go up, they’re unemployed for several months stretching to years, they can’t get loans to get them through, they can’t get credit cards… In a nutshell, people are trying to paddle upstream in a dried-out river during a drought. And meanwhile the bankers are hording their money and not giving back to society. Yes, it is a pity and yes, there are individuals who should have made better choices. But one bad decision does not deserve the punishment that some of these individuals are seeing, especially those who have contributed to society in very good ways.

  4. Clint

    Interesting related comment from Krugman this morning, who points out that only some of the banks have managed to rebound.

    “Banks that are actually in the business of lending, as opposed to trading, are still in trouble. Most notably, Citigroup and Bank of America, which silenced talk of nationalization earlier this year by claiming that they had returned to profitability, are now — you guessed it — back to reporting losses.”

    http://www.commondreams.org/view/2009/10/19-4

  5. Ian

    Chris:

    “they jack up in the interest rates”

    I think I acknowledged that the banks were at fault too. They definitely were using predatory tactics, but all of the interest stuff was in the fine print of the loan. It takes two people to form a contract. Officials elected by the people, or appointed by other elected officials, put in place the system to make this stuff possible.

    “who are paid exorbitant sums to know better”

    Wrong. They are paid exorbitant sums to make more money for their stockholders, and they primarily care about their own bottom line. These guys are not paid to give a damn about the people.

    “It’s also not as if these folks were taking out loans to buy big screen TVs.”

    It’s also not as if I ever suggested something so trivial.

    “the system”

    is what you should be mad about. Not the people who use the system to their advantage. As long as a system like our economy is in place, this kind of thing will continue to happen. Just like giving bailouts to floundering companies, taxing your way to “justice” won’t change the fundamental problems.

    Sheepy:

    “And see, Ian, I think you are oversimplifying it!”

    Ditto. Your last sentence especially. It isn’t the result of one bad decision, I don’t think. I don’t know, that’s something altogether hard to quantify.

    I am in general agreement with the spirit of Chris’s post and your ideas Sheepy. I have a family member stuck with a crappy ARM loan and others who have dealt with unemployment and mounting medical bills. I am sympathetic here. I am only asking for a little more nuance to the discussion than “Banks are evil! Poor little people!”

    This economic and political system we have in the US is a complete joke. You cry about “evil banks” and want regulation (or taxes), but who would institute such things? Politicians who are able to be elected because of “evil banks” and other wealthy special interest are elected by people they screw over. Such irony in Americans foaming at the mouth over whether the Democrats or Republicans are best for the country while both sides continually screw them over.

    “You’ve read our posts about how…”

    And you’ve read my posts about how I think the American people are as much to blame for the current government as anyone else. As long as people buy into the Rush Limbaughs, the Rachel Maddows, the Bill O’Reilly’s, the Keith Olbermann’s, its just going to be more of the same crap. We made our bed, now we are laying in it.

  6. Chris

    Ian, you said:
    “[Bankers] are paid exorbitant sums to make more money for their stockholders, and they primarily care about their own bottom line.”

    But they didn’t even do that. Making good loans is supposed to be good for the stockholders and the bank’s bottom line. Making bad loans, which they did, should have put them out of business. Sure they are making money by the boatload right now, but only because of government largesse. Without the Fed and Treasury bailouts, the invisible hand of the market would have punched those bankers — and their stockholders — in the nuts.

  7. Ian

    “But they didn’t even do that.”

    But they did, it was just temporary. They didn’t expect it to fall through. I think by the time they realized what was coming, it was too late. They knew it was bad business practice to lend like this, but the system allowed it to artificially be good.

    “Making bad loans, which they did, should have put them out of business. Sure they are making money by the boatload right now, but only because of government largesse.”

    Which is exactly what I meant when I said: “that accountability needs to exist for the people losing their homes, and the banks making bad deals.”

  8. David

    Ian: “Certainly the banks are to blame for giving loans to people with bad credit or without the means to pay them back. Shouldn’t we also be extending some of the blame to those who signed up for the loans though?”

    There were gamblers on both sides of that deal. One side were compensated, the other side are homeless. You OK with that so far? So: shouldn’t we have extended some of the BAILOUT to those in danger of losing their homes, rather than just wasting it making fat people fatter?

  9. Ian

    I don’t know if there should’ve been a BAILOUT to begin with.