Bank Shot

So now that some banks have stabilized and maybe, according to Time magazine, the Banking Crisis of 2008 is over, all that's left is the clean-up:

The banking crisis may be over, but what is left is a reclamation job that will probably take years to complete, will still have a taxpayer price tag of over $1 trillion, and will leave America's largest financial firms as institutions of modest power and a regulated scope which will prevent them from looking anything like what they did two years ago.

There's some bumps ahead on that road to clean-up, per The New York Times:

As the Obama administration completes its examinations of the nation’s largest banks, industry executives are bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages...

...Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money.

It's like teenage boys -- begging for dough when they need it for a car or a prom, but acting all haughtily independent once there's gas in the tank.

While I've had my questions -- not exactly disagreements -- with Nobel Prize-winning economist Paul Krugman as he's heavily criticized Obama Administration economic policy from the Left, I'm in deep agreement with his op-ed today calling for regulations returning to the days when banking was considered as square as can be:

Before 1930, banking was an exciting industry featuring a number of larger-than-life figures, who built giant financial empires (some of which later turned out to have been based on fraud). This highflying finance sector presided over a rapid increase in debt: Household debt as a percentage of G.D.P. almost doubled between World War I and 1929.

During this first era of high finance, bankers were, on average, paid much more than their counterparts in other industries. But finance lost its glamour when the banking system collapsed during the Great Depression.

The banking industry that emerged from that collapse was tightly regulated, far less colorful than it had been before the Depression, and far less lucrative for those who ran it. Banking became boring, partly because bankers were so conservative about lending: Household debt, which had fallen sharply as a percentage of G.D.P. during the Depression and World War II, stayed far below pre-1930s levels.

Strange to say, this era of boring banking was also an era of spectacular economic progress for most Americans.

Krugman goes on to talk about how the high-flying, deregulated bankers who went on to massive personal wealth thought themselves especially deserving, in nauseating hubris made ridiculous by the crash of the system. These are the guys Matt Taibbi was talking about, bald fat men who looked in the mirror as they overleveraged America and saw superheroes staring back at themselves.

Well, bankers are supposed to be boring.

How else can we be expected to trust them with our money?