The New York Times featured a story on how bailouts and other government actions such as monetary policy have helped fuel a new era of Wall Street wealth. This, just months after former Goldman chief and then Treasury Secretary Hank Paulson was literally on his knees begging Nancy Pelosi for a taxpayer bailout of our financial sector.
Paulson spun TARP as an investment; I wonder if he meant an investment in our unemployed citizens, or an investment to benefit shareholders of investment banks, er, 'bank holding companies' such as Goldman Sachs and Morgan Stanley? As the Times article points out, these days it is great to be a titan of finance:
From across the pond, Goldman's chief economist Jim O'Neill tells the United Kingdom to 'chill out' over the fiscal cost of the government's fiscal situation:
Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.
So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza.
“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”
Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.
“The fiscal costs of this crisis around the world, including the U.K., in my judgment are not as severe as people keep talking about,” he said, speaking on a panel with Prime Minister Gordon Brown and economists in London today. “To be obsessively focused on getting the deficit down as quickly as possible is not the right thing to do...There’s a ridiculous stigma with the whole thing in this country,” O’Neill said. “There’s lots of other countries doing unconventional monetary policy things and people should chill out a bit about it.”
Easy for him to say. Hmmm...does anyone else see the irony here?