When the Rich Jump Ship

Don't Toss Them a Lifeboat (Tell them to tear their asses1--JEF)
by DAVID MACARAY


In the wake of the 2008 financial meltdown, one of the arguments you heard Republican economists and Wall Street executives repeatedly use to defend the amounts of money being paid investment bankers and hedge fund managers was that if these guys didn’t receive exorbitant salaries and bonuses, they would be forced to leave the U.S. and find jobs elsewhere, presumably in Western Europe and Hong Kong. In other words, if we don’t pay them what they demand, they’ll find someone who will.

Even though a simple examination reveals that federal income taxes are lower than they’ve been in many decades, you also hear something similar in regard to raising the taxes on the very rich. You hear pundits say that if we did that, if we nudged their brackets any higher, we’d risk having these people close up shop and abandon the country. Give these armchair pundits credit for being able to something that silly with a straight face.

Instead of being cowed by those absurd threats—instead of being intimidated into abandoning plans for a fairer tax system and stricter regulations on the banking industry—we should greet those condescending arguments with delight. In truth, those defections would not only be welcomed, they would prove salutary because they would give ambitious men and women on the lower rungs the opportunity to move into the top spots.

There’s a corollary to that replacement argument. Wall Street cautions us that, should these financial prodigies leave the industry, the newbies who replace them wouldn’t be nearly as competent or reliable. That line of reasoning may have worked a few years ago, but it doesn’t today. Ever since we learned that it was those very “prodigies” who precipitated the financial disaster that almost destroyed the world’s economy, and required a trillion-dollar taxpayer bailout just to keep us afloat, that old, “We’re too damned talented to be replaced” argument has pretty much lost its luster.

Unfortunately, despite all the hand-wringing and chest-pounding, most of these Wall Street vultures aren’t going anywhere. They can huff and puff all they like, but on Monday morning they’ll show up for work just like the rest of us for the simple reason that they have no place to go. If they honestly believe all they have to do is report to Zurich, briefcases in hand, and they’ll be offered multi-million dollar banking gigs, they’re even more arrogant than we thought. Those European banking jobs are already taken. By Europeans.

But it would be wonderful if they did leave. These soulless whores may, technically, be citizens of the U.S., but by no index are they patriotic Americans. These ultra-materialistic people are cultural eunuchs. They have no sense of honor, no sense of community pride, no sense of “belonging.” They not only live rarefied, privileged lives in gated mansions or penthouses far, far away from the “herd,” but given a choice, they would rather watch America’s great industrial cities fall into decay and despair than voluntarily part with so much as a nickel of their own money.

More condescension: Those Wall Street executives who argued that we’d be losing invaluable “expertise” if we allowed these guys to get away are the same Wall Street execs who argue that if the very wealthy were, in fact, to leave the United States because of higher taxes, they would take their money with them, and that would put a sizeable dent in the economy. That’s a bad argument.
It’s already happened. Wealthy people already have their money squirreled away in places believed to bring them the maximum return. If one of those places happens to be the U.S., then lucky us, because that’s where they’ll keep it. But they’re far more likely to have money invested in convoluted off-shore bank accounts or foreign businesses. And that’s where it will remain, no matter where they live or work.

Let’s be clear. If the very rich threaten to jump ship, we need to do everything in our power to ensure they carry out that threat. What a cathartic moment that would be! The entrenched, inbred, self-perpetuating moneyed class being abruptly vacated—and new blood, new ideas, new faces and new ethnicities rushing in to replace it. Ain’t that what America was supposed to be all about?

Dodd Bill Gives Fed New Oversight Powers

Fed gets new oversight powers under Dodd bill
Kevin Drawbaugh and Rachelle Younglai
WASHINGTON
Sun Mar 14, 2010

(Reuters) - The Federal Reserve would win sweeping new powers over nonbank financial firms and keep much of its authority over banks, under revised legislation to be unveiled on Monday by the chief architect of financial reform in the Senate.

In a remarkable recovery by the U.S. central bank after a steep drop in its political popularity, Senate Banking Committee Chairman Christopher Dodd was poised to release a bill that leans heavily on the Fed, sources said on Sunday.

Not only would a new government watchdog for financial consumers be housed within the Fed, but it would also retain much of its present authority over large bank holding companies and gain new authority over selected nonbank financial firms.

Dodd's bill would give the Fed authority to supervise bank holding companies with more than $50 billion in assets, down from an earlier threshold of $100 billion, sources said.

The bill may also preserve the Fed's power over state-chartered banks with less than $50 billion in assets that are already in the Federal Reserve system, a source said. An earlier proposal had called for transferring responsibility for supervising such banks to the Federal Deposit Insurance Corp.

That would put hundred of banks under the Fed's purview, including such giants as Bank of America and Citigroup, as well as branches of foreign banks, a source said.

The bill from Dodd, a Democrat, would also empower the central bank to supervise nonbank firms designated as "systemically important" by a council of regulators.

Before it became the poster-child for bailouts, former insurance giant American International Group (AIG) would have fit into that category, for instance.

Revamping how the financial system is supervised is one of the Obama administration's top priorities. Since the worst financial crisis in decades tipped the U.S. economy into a deep recession and sent shock waves across world markets, the United States and the European Union have been pursuing reforms.

The White House unveiled a sweeping package of proposals in mid-2009. The House of Representatives approved most of them in December in a massive piece of legislation that passed without a single Republican vote of support.

But with lobbyists for banks and Wall Street working hard to block or weaken reforms, the Senate has yet to act. With congressional elections approaching in November, Dodd is under intense pressure to push a bill through his committee and onto the Senate floor before political campaigns take center stage.

TURNAROUND BY DODD ON FED

Dodd sharply criticized the Fed last year for regulatory failures. In an early draft of his own reform plan, he proposed stripping the central bank of bank supervision and consumer protection duties, leaving it focused almost exclusively on its role as a monetary policy center.

But Fed Chairman Ben Bernanke, other Fed insiders and some banking interests have pushed back hard in recent months to shield the institution, and it appears to have worked.

At the same time that he is proposing new powers for the Fed, Dodd is also considering changes to how regional Federal Reserve bank directors are chosen, a source said.

He also plans to put President Barack Obama's proposed financial consumer watchdog in the Fed. To win support among Democrats for the idea, he will give the watchdog considerable power and autonomy, sources said.

Dodd wants the banking committee to work on his new bill before April, but Republicans have already told him they want sufficient time to consider the legislation.

Dodd's bill will attempt to put an end to a market perception that some financial firms are too big to fail after the government used billions of dollars in taxpayer funds to rescue firms such as AIG.

There is agreement that a fund of about $50 billion should be created to help pay for the cost of unwinding large troubled firms.

Dodd is also expected to give market regulators the authority to regulate the $450 trillion over-the-counter derivatives market with some narrow exemptions.