Perhaps a little hyperbolic, but given google‘s endorsement of my social commentary, a little playing to the balcony is the least I can do. I know there’s somthing more, but I’m not really sure what ties these stories together in addition to generating an unhealthy sense of foreboding about the financial sector.
First, from Felix Salmon:
File under “things you never knew the Fed did during the financial crisis”: an $80 billion loan scheme known as ST OMO, which was so obscure that even Barney Frank had no idea it existed when he required the Fed to turn over its lending data in his Dodd-Frank bill.
…These loans were insanely cheap — the interest rate on them was as low as 0.01%, even as the Fed’s main bank window was charging 0.5%. Ivry has looked at these charts very carefully, and by measuring how tall the bars are he’s worked out how much money each bank borrowed at any given time; Credit Suisse topped out at $45 billion, for instance.
So much for Walter Bagehot’s advice to lend freely at a penalty rate! Banks get into trouble and receive secret loans. Sods.
Next, citing approvingly Adam Smith’s warning that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices,” the London Banker (via afoe) documents the concentration of power, and information, within the financial sector.
Four global banks are intermediaries in 85 percent of OTC derivatives transactions. The same banks dominate prime brokerage. The same banks own large equity interests in the now demutualised exchanges, clearinghouses and even warehouses of the global markets. Naturally, the same banks dominated underwriting of securitised assets. The implications have scarcely been grasped of what this portends in terms of the information asymmetries and the opportunity to manipulate markets without risk.
We have banks insured against loss by the world’s government and central banks, a small number of firms dominate the sectors they operate in. This means they can gather much more information than anyone else, and rig, or take advantage of, movements in the market in excess of any honest return on their investments. Gits.
Worst of all (you didn’t expect it to get better did you?), banks don’t learn from their mistakes:
Overall, our results show that financial institutions that are negatively affected in a crisis do not appear to subsequently alter the business model or to become more cautious regarding their risk culture. Consequently, the performance in one crisis has strong predictive power for a crisis which starts almost a decade later.
Risky, arrogant, molly coddled, powerful, conniving, cheating, bankers. They wonder why people don’t like them.