Banking on Bigger: The Roots of Our Financial Folly

[marmar]

from Too Much: A Commentary on Excess and Inequality:



Banking on Bigger
America's banking giants have spent the last two dozen years wheeling and dealing their way to fortune — and financial folly.
July 21, 2008

By Sam Pizzigati

Doctors. Lawyers. Architects. A decent society certainly needs them all. But what about bankers? Is banking also a necessary profession? Or is banking merely a grubby game where the few enrich themselves at the expense of the many?

These days, the answer seems fairly obvious. We’ve simply seen too much enriching at our expense — bank mergers that have transformed local banks into faceless fronts for faraway corporate empires, escalating “fees” that bleed our checking and savings accounts, subprime mortgage shell games that devastate entire neighborhoods.

Now banks appear to be paying the price for this great greed grab. One giant Wall Street investment bank, Bear Stearns, has already tanked. Citigroup, America’s largest bank, last week posted a $2.5 billion quarterly loss. Share prices in the banking industry have tumbled down 50, even 60 percent and more.

Bank boards of directors, amid this turbulence, are scrambling to find shining knights who’ll rescue them — and they're offering fabulous rewards to give these power-suited knights an incentive to succeed.

Earlier this month, for instance, Wachovia, the nation’s fourth-largest bank, brought on a new chief executive, former Goldman Sachs alum Robert Steel, with an pay package that could be worth over $38 million.

Citigroup’s new chief exec, Vikram Pandit, joined the banking giant last year after Citigroup shelled out $800 million to buy the hedge fund he had started the year before. That transaction netted Pandit $165 million. Then this past January, a month after elevating the India-born Pandit to CEO, Citigroup awarded him a stock incentive package worth another $30 million, a sum, the Economic Times of India has noted, that equals nearly six times what all India's banks taken together last year paid their top executives. .....(more)

The complete piece is at: http://www.toomuchonline.org/articlenew2008/july21a.html