Ward on Words

On Sunday, the NY Time reported that Rahm Emanuel, Obama's chief of staff, was going to be attending JP Morgan Chase's board meeting. Today, he's changed his mind . In a world where appearances mean so very much, having a key Obama operative hanging out with Jamie Dimon and the others who've profited so very nicely from the collapse of the economy might send a wrong signal. I'm left wondering what Rahm was going to be doing at the meeting. Perhaps asking for a refund? Suggesting that Chase share its profits with the middle class that's been royally screwed by the crisis? Or cementing the feel-good relationship between Washington and Wall Street? We'll never know for sure.

Since learning of the massive bonuses earned by the Wall Street execs who drove their firms (and the economy) off a cliff last fall, I've been wondering a lot about what happened to the English language to render a "bonus" something granted to a highly paid executive - no matter what. I had always thought (and had always experienced) a bonus to be a reward for superior performance. Not, as we've seen this year, something expected in return for running a business into the ground and taking the nation's economy down with it. So I was thrilled to read an essay by Jon Danielsson and Con Keating on Vox explaining just how the bonus culture took over the financial community. Once upon a time in finance, according to Danielsson & Keating, bonuses were rewards for success. That changed when the financial partnerships that once were the norm in finance were replaced by limited liability corporations: "Partnerships have disappeared over time, and the p...

Stumbled across a frightening story in the Financial Times (sad when terror can be found in the pages of a financial rag, but these are those kind of days!) A couple of weeks ago, when writing in FT about the fed's Public-Private Investment Program, Lucien Bebchuk asked this question: "Should banks with large amounts of troubled assets be allowed to participate as managers or investors in funds set up under the US’s public-private investment programme?" I'm astonished that such a question is even being asked. Apparently, it is not merely rhetorical. According to Bebchuck, "media reports indicate that some such banks are considering participating in funds established under the administration’s programme." I've learned lately that Wall Street is an alternative universe, a place where bonuses are not rewards for successful behavior, but legal obligations bankrupt firms must honor no matter what. A place where great brains thought it would pr...

In February, Frontline aired a documentary "Inside the Meltdown, " a documentary on the financial crisis. I was very busy with work and missed it when it aired on TV, but watched it last night online. I recommend it as a great resource for anyone looking for information about the collapse of our economy. At one point, Senator Dodd recounts the moment the Treasury Secretary informed an elite group of Congressmen about the situation. After being told that Congress needed to hand over vast sums of money or the global economy would collapse, says Dodd, "there was literally a pause in that room where the oxygen left." We were all left gasping for air when we were told that "the system" was drowning in toxic assets and the great titans of capitalism needed socialism to save them. Money from the feds was needed - vast sums of money, trillions of dollars had to go to these Wall Street firms to "bail them out" - no strings attached. That ...

According to a story in yesterday's NY Times, those who work at Wall Street firms "are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits." I have to wonder - where is this money coming from? Aren't these firms clogged up with toxic assets? Didn't the negative balances on the books of these companies drag down the country's economy? So why aren't profits for this quarter being used to recapitalize after the losses of last year? Have we reached a point in American capitalism that only the taxpayer responsible for the losses on the books of the Wall Street firms?

The Washington Post is reporting that Goldman Sachs has had a highly profitable quarter: "...Goldman said its profits were $1.8 billion, or $3.39 a share, compared to $1.5 billion, or $3.23 a share in the same period a year earlier. That was more than double the $1.6o a share, analysts had been expecting on average." The company is now promising to return the TARP funds they were given when Hank Paulson, one of their own, was the Treasury Secretary. Some experts, however, are not happy to hear that profitable financial institutions want to pay back the money. Seems it will expand that separation between healthy and diseased banks we've been so worried about. Diseased banks will remain diseased - and like lepers of old, they will be shunned and isolated, causing them to eventually collapse. So the theory goes. I wonder just how long these experts think the US government should keep diseased firms on life support. I think Goldman should pay back the TARP lo...

As part of Paulson's Troubled Asset Relief Plan, JP Morgan Chase received $25 billion from the feds last October, making it one of the largest recipients of TARP funds. In his October 10, 2008 press release defining the plan, Paulson assured the public that "this is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything." Paulson, of course, was referring to the investment costs of TARP - and apparently felt that his plan would be a good deal for consumers. As he said in his press release: "We expect all participating banks to continue to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure. Foreclosures not only hurt the families who lose their homes, they hurt neighborhoods, communities and our economy as a whole." Back in those days, the housing crisis was the great issue confronting the Treasury Secretary - all those many loans handed over to consum...

In America, we learn early in school about the great work accomplished by our Founding Fathers - the work of carving out a democracy in America. In the 18th century, we broke away from the British monarchy and forged a new country in an unspoiled, nearly empty continent. A few forward thinking and brave men created a vibrant democracy, where liberty and the pursuit of happiness were guaranteed by the one (white) man/one vote principle (which evolved over the years to add minorities and women to the roster of the enfranchised.) Now, in the 21st century, it is being suggested that vibrant the democracy we read about in our schoolbooks has been overturned by an oligarchy. One of the definitions the Merriam Webster dictionary offers for oligarchy is "a government in which a small group exercises control for selfish or corrupt reasons." The May issue of The Atlantic carries a story called "The Coup" by Simon Johnson that defines our government in such terms. Si...

TARP:  A Word with Multiple Meanings In layman's terms, a tarp is a piece of material used to cover and protect exposed objects or areas. Here you see how my family employs a tarp to protect us from the elements during a camping trip. In the current language of American economics, TARP is the acronym for the federal government's Troubled Asset Relief Program, led by the brilliant investment banker, Henry Paulson, who now serves as the nation's Treasury Secretary.  TARP is the Fed's attempt to protect the nation from the collapse of our economy. TARP is also a shifting landscape – in a statement today, Paulson announced changes in how he wants to invest those billions of TARP-assigned tax dollars.  He's decided that purchasing illiquid mortgage-related assets is no longer "the most effective way to use TARP funds."  He's now looking at shoring up the consumer credit market (because consumers need more debt in their lives) and "exploring ...