Opinion Bulls,not pigs
Wall Street cheated its customers,bought off politicians,and now wonders why were angry?
Citigroup is lucky that Muammar el-Gaddafi was killed when he was. The Libyan leaders death diverted attention from a lethal article involving Citigroup,saying it had to pay a $285 million fine to settle a case in which,with one hand,Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers securities that it knew were likely to go bust and,with the other hand,shorted the same securities that is,bet millions of dollars that they would go bust.
It doesnt get any more immoral than this. The complaint quoted one unnamed trader outside Citigroup as describing the portfolio as resembling something your dog leaves on your neighbours lawn. The deal became largely worthless within months of its creation, The Wall Street Journal explained. As a result,about 15 hedge funds,investment managers and other firms that invested in the deal lost hundreds of millions of dollars,while Citigroup made $160 million in fees and trading profits.
This gets to the core of why all the anti-Wall Street groups around the globe are resonating. I was in Tahrir Square in Cairo for the fall of Hosni Mubarak,and one of the most striking things to me about that demonstration was how apolitical it was. When I talked to Egyptians,it was clear that what animated their protest,first and foremost,was not a quest for democracy although that was surely a huge factor. It was a quest for justice. Many Egyptians were convinced that they lived in a deeply unjust society where the game had been rigged by the Mubarak family and its crony capitalists. Egypt shows what happens when a country adopts free-market capitalism without developing real rule of law and institutions.
But,then,what happened to us? Our financial industry has grown so large and rich it has corrupted our real institutions through political donations. Our Congress today is a forum for legalised bribery. The financial services industry,including real estate,spent $2.3 billion on federal campaign contributions from 1990 to 2010,more than the healthcare,energy,defence,agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.
We cant afford this any longer. We need to focus on four reforms. 1) If a bank is too big to fail,it is too big and needs to be broken up. We cant risk another trillion-dollar bailout. 2) If your banks deposits are insured by taxpayers,you cant do any proprietary trading with those deposits period.
3) Derivatives have to be traded on transparent exchanges where we can see if another AIG is building up enormous risk. 4) Finally,an idea from the blogosphere: US congressmen should have to dress like race-car drivers and wear the logos of all the banks,investment banks,insurance companies and real estate firms that theyre taking money from.
The public needs to know.
Free advice to the financial services industry: Stick to being bulls. Stop being pigs. Thomas L. Friedman
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