Saturday, November 12, 2011

Psycho Finance, Qu'est-ce Que C'est

Ce que j'ai fait ce soir-là
Ce qu'elle a dit ce soir-là
Réalisant mon espoir
Je me lance vers la gloire... OK -- Talking Heads

George Monbiot is shrill:

In a study published by the journal Psychology, Crime and Law, Belinda Board and Katarina Fritzon tested 39 senior managers and chief executives from leading British businesses. They compared the results to the same tests on patients at Broadmoor special hospital, where people who have been convicted of serious crimes are incarcerated. On certain indicators of psychopathy, the bosses's scores either matched or exceeded those of the patients. In fact, on these criteria, they beat even the subset of patients who had been diagnosed with psychopathic personality disorders.

The psychopathic traits on which the bosses scored so highly, Board and Fritzon point out, closely resemble the characteristics that companies look for. Those who have these traits often possess great skill in flattering and manipulating powerful people. Egocentricity, a strong sense of entitlement, a readiness to exploit others and a lack of empathy and conscience are also unlikely to damage their prospects in many corporations.

In their book Snakes in Suits, Paul Babiak and Robert Hare point out that as the old corporate bureaucracies have been replaced by flexible, ever-changing structures, and as team players are deemed less valuable than competitive risk-takers, psychopathic traits are more likely to be selected and rewarded. Reading their work, it seems to me that if you have psychopathic tendencies and are born to a poor family, you're likely to go to prison. If you have psychopathic tendencies and are born to a rich family, you're likely to go to business school.

Monbiot avers to the classic "all poodles are dogs, but not all dogs are poodles" chestnut, which is at least intellectually honest:

This is not to suggest that all executives are psychopaths. It is to suggest that the economy has been rewarding the wrong skills. As the bosses have shaken off the trade unions and captured both regulators and tax authorities, the distinction between the productive and rentier upper classes has broken down. Chief executives now behave like dukes, extracting from their financial estates sums out of all proportion to the work they do or the value they generate, sums that sometimes exhaust the businesses they parasitise. They are no more deserving of the share of wealth they've captured than oil sheikhs.

Here we're getting closer to the nut. Success in the high-stakes finance world is not predicated on raw skill; there is very little chance that Jamie Dimon or Lloyd Blankfein possesses skill sets that the average college graduate could not be trained for in, say, a year or two. Yes, they are highly specialized skill sets, but not uniquely so.

More and more, it becomes clear that their defining characteristic is willingness to push boundaries, to engage in what would previously have been considered transgressive behavior.

Finally the crux of the biscuit.

The rest of us are invited, by governments and by fawning interviews in the press, to subscribe to their myth of election: the belief that they are possessed of superhuman talents. The very rich are often described as wealth creators. But they have preyed on the earth's natural wealth and their workers' labour and creativity, impoverishing both people and planet. Now they have almost bankrupted us. The wealth creators of neoliberal mythology are some of the most effective wealth destroyers the world has ever seen.

Exactly. The persistent myth has been that taxes and regulations must be kept low in order to maintain robust growth and profits. Well, what of that, then? Both have been at historic lows for the entirety of this preceding decade, the paper profits of which have been wiped clean -- except, of course, for the engineers of that destruction. Securitization policies were upended to facilitate this mendacious scamboogery, and we can all see the results.

Yet again, the myth persists that if we just stay the proverbial course, the ship will right itself anon.

Taibbi, per usual, has been all up in this shiznit. Handing Social Security and Medicare over to these thieves was a dreadful idea before they monkeyfucked the world economy; it is incomprehensible that any remotely serious person would still be considering such a thing at this stage of the game.

As Taibbi points out, not only is their chicanery exhaustively documented and simple to trace (though hopelessly convoluted in scope, and hence beyond the attention span of the average 'murkin, which is precisely what they count on), but so is their incompetence. You have to give props to people who have the balls to demand to be thanked and rewarded not only for their malfeasance, but for their ineptitude as well.

Here's how I've explained the situation to people, to make it a bit less muddled, feel free to use or modify as you see fit:

Say you have an idiot brother-in-law. He fancies himself a pigskin prognosticator, and decides to take a loan out on the value of his house to bet on the Super Bowl. But wait -- not only is the bank allowing him a loan at full value, they're allowing him to "leverage" on a 30:1 margin. That is, his house is worth $200K, but Bank of Stupid is letting him borrow $6 million. Still with me? Okay, good.

You can guess what happens next -- he bets on the Steelers, who lose to the Packers, and he's on the hook for way more money than he's ever going to see in his life. The bank basically tells you and your neighbors that you get to pay for it, since your asshole b-i-l sure as hell ain't gonna cough up a thin dime for his stupidity.

Of course, there are additional layers of complexity to this admittedly feeble analogy, but the point still stands. It's public subsidy/private profit at its worst.

Now, to add insult to njury, the richies are bemoaning their lot, and pushing back against the tubthumping DFHs in the park, with their usual condescending sneer:

Mike Bloomberg wants you to believe the banks didn’t want anything to do with those unworthy borrowers. Yet in reality, the banks not only went to every conceivable length to take on the home loans of those subprime borrowers, they actually invented new technology to make clones of those Barney Frank debtors.

And there were thousands upon thousands of those synthetic deals, meaning each and every one of those deadbeat subprime borrowers have been Xeroxed by the banks fifty or a hundred times over, and are flying around the globe to this day as toxic assets.

Nomi Prins pointed out in her book It Takes a Pillage that we could have paid off every subprime loan in America at the start of the crisis for about $1.4 trillion dollars. But the bailouts ended up being four, five, perhaps as much as ten or twelve times that size.

Why? Because we weren’t paying off the underlying loans of those subprime, personal-responsibility-deficient homeowners. We were paying off the banks' bets on those loans. We were adopting all those clones they made.

Anyway, there's is a massive gap between making a bad decision with one’s personal finances and committing criminal fraud in billion-dollar amounts. Morally, the two acts are not even in the same universe.

Here is a perfect example of why I detest bien pensant limo libs nearly as much as I despise the usual mouth-breathing, window-licking, up-to-the-fourth-knuckle nose-picking conservatards. Animals like Mike Bloomberg, who presents a media-friendly image and aligns perfectly with their socially-liberal-but-fundamentally-authoritarian impulses, know perfectly well that there's more than enough blame to go around.

As long as Bloomberg appears "progressive" enough on vital issues such as abortion and gay marriage, these putatively librul tools could give less than two shits about whether he regards the peons as human beings. Not that abortion and gay marriage aren't relevant issues, but I'll go out on a limb and stipulate that everyone's right to live a decent life commensurate with the work they put out is a tad more critical.

But Bloomberg, his proxies, and complicitly his starstruck audiences, they're all happy to lay it all at the feet of the one group that has no media or political presence whatsoever -- the working stiffs who got juked into these bullshit mortgages.

Yes, they should have known better, yes they should have done the math and figured it out. But a lot of people made -- and are still making -- a shitload of money for all that, really for taking deliberate advantage of their lack of financial sophistication.

Even worse, in addition to the foreclosed millions you hear about, there are millions more -- I count myself among them -- who did everything right, spent wisely, lived frugally, locked in the mortgage rate opportunistically, didn't use the HELOC as an ATM, and still got fucking hosed by decimated property values, reduced credit limits, fewer decent job opportunities, etc. Trust me folks, there's no reward whatsoever for doing things "right", and indeed only the finest of lines between those folks and the folks who are being jeered at by smug billionaires for their supposed stupidity and recklessness.

Really, if there's one thing that Bloomberg and his scumbag friends have proven time and again, it's that stupidity and recklessness pays quite handsomely, provided one has taken care to rent the right people ahead of time.

As the slow burn of Europe continues apace, and eventually spreads here, and shit really starts raining down, keep all that in mind when it's time to choose a side. Wall Street has the moral compass of a Mexican drug cartel. These motherfuckers would skin you alive and feed you your own nutsack if they thought it'd gain them two cents on their portfolio.

Has nothing to do with the virtues of "capitalism", the magic of the "free market", or the vicissitudes of the peons. It's just the nature of the beasts. Perhaps a viewing of Grizzly Man might jog one's perception of how this thing really works.


Florida Accountants said...

Explains the stress level and pressure , which financial professionals go through everyday.

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