Admitting They're Too Big To Exist

President Obama met with the nation's top bankers yesterday, and I think "jovial" would best describe the atmosphere, at least from press reports. The White House has calmed their rhetoric toward Wall Street of late, and after the meeting the bank CEOs were all smiles. They even might do us all the favor of keeping taxpayer money, which is awful nice of them.

Obama apparently did impress upon them the need to curb their excesses, at least in public.

Sitting at the center of a round table in the state dining room, Mr. Obama spoke firmly about how there had been a “cultural shift” regarding executive bonuses and Wall Street pay. He said that Americans had a right to be angry. “The anger is real,” the president said, according to people who attended the meeting. “The industry needs to show that they get it on the compensation issue.”

“Excess is out of fashion,” Mr. Obama added, noting that pay must be linked to performance.

The bankers nodded, but made no firm commitments.

As to any real change in compensation rules, I'm not from Missouri but they'll have to show me.

But I agree with Moe Tkacik that JP Morgan CEO Jamie Dimon might have offered a bit too much truth in the post-meeting press scrum:

"One of the main root causes [of the crisis], and this has been going on for a long time, was the huge trade and global financing imbalances which fueled very low rates and excess consumption, and over a long period of time I do not believe you can run those kind of trade deficits..."

Dimon was getting at one of the root structural causes of the current crisis -- America takes, the world (China especially) makes, an unsustainable situation sustained above all by an increasingly usurous financial services industry. As the CEO of PNC Financial Services just pointed out, banking is the biggest sector of the American economy -- and it's been to the detriment of everything else.

...it was precisely Wall Street and corporate America that relentlessly lobbied the government over that very long period of time to enable those gaping imbalances to gape ever wider. What both Barack Obama and Jamie Dimon implicitly understand is that publicly traded corporations are not engineered to look out for their long-term interests. By allowing the financial sector to bloat "too big to fail", the country lost the kind of industries that are too vital to fail -- which is to say, manufacturing.

This is the point that my father, he of the 40 years in the textile industry, has made repeatedly to me since he lobbied Congress to save his industry - in 1979, mind you. A society that loses its industrial base at the expense of, in this case, the financial services sector, puts itself in great peril. The size and the increasingly lucrative nature of an overgrown financial sector combined with the desire for perpetual growth creates just the kind of bubble-based economy, and dangerous aftermath, that we see today.

I don't think Dimon was actually calling for the shrinking of his own industry, but that was the effect, at least on me.

In Charge And Mad You're Not Happy About It

Chris Bowers has the depressing details on the financial services industry, through their advocates in the Senate, continuing to hold up eminently sensible foreclosure reform.

A House-passed bill that would allow bankruptcy judges to modify the terms of troubled homeowners' mortgages has entered a holding pattern in the Senate, where the necessary 60 votes remain elusive.

The bankruptcy provision - often referred to as "cramdown" - is a key component of the Obama administration's housing initiative, but it worries moderate Democrats in both chambers.

Indiana Democrat Evan Bayh and Pennsylvania Republican Arlen Specter are leading a group of Senate moderates in an effort to limit the bill's reach in a way that could attract 60 votes.

Senate leaders had hoped to have the bill go straight to the floor as early as this week, but it may now have to go through the Senate Banking, Housing and Urban Affairs Committee as proponents of the measure search for a deal. On March 11, the bill was referred to the panel.

"There are still significant concerns with the bill on both sides of the aisle," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, a group that lobbies on behalf of the banking industry.

Lenders fiercely oppose the cramdown language, which would allow bankruptcy judges to reduce the principal owed on a primary-residence mortgage and order other modifications in mortgage terms.

These lenders lied on forms to get customers into loans, lied to their customers about the terms of those loans, sold these unstable loans around the world and caused a near-collapse of the global financial system.

In America, that not only means they still have a check on legislation, they think the lawmakers are being too mean to them as well.

“When I hear the constant vilification of corporate America, I personally don’t understand it,” (JP Morgan CEO Jamie) Dimon said in his speech. “I would ask a lot of our folks in government to stop doing it because I think it’s hurting our country.”

Jamie Dimon and all his buddies are lucky they aren't sharing the same cell right now. The audacity of these people, to have rewritten the rules of the US economy only to see it fail, and then demand courtesy!? We have paid you our tax dollars, given you the capital to finance your adventure (h/t Jon Stewart), and now you want a chocolate from us?

Oh, they also want all accounting laws changed so they can more easily fudge the numbers, too.

Before financial institutions have collapsed over the past several months, they have come to the Financial Accounting Standards Board, pleading for a change in mark-to-market accounting rules so that they can continue to appear to be solvent on their balance sheets.

Robert Herz, head of the FASB, told a panel of lawmakers Thursday that the loudest critics of fair market accounting practices have been the very same banks that have gone belly up when regulators would not let them adjust their accounting.

"There seems to be a clamoring for changing mark-to-market rules that seems to come largely from institutions that may be insolvent," Rep. Alan Grayson (D-Fla.) said to Herz at a meeting of the Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

Grayson said that, from Herz' testimony, it seemed that "there may be institutions that are insolvent and they haven't been forced to write down their books to the point [of insolvency] yet, and those are maybe the same institutions that are asking us to modify the mark-to-market rules so that they won't have to admit that they're bankrupt. Is that correct?"

Herz said that it was.

As Grayson says, "We have people who break every rule in the book and then they think that the answer to their problems is to break more rules."

I'm all for criticizing the Obama Administration for their failure to come up with a workable plan to fix the banks; heck, I've done it on occasion. But I save some special loathing for these criminals running major companies into the ground, lying to everybody about the inner workings of their companies, exerting the same power and influence over the legislative process as if nothing happened, and coming back for more changes and work-arounds so they can keep the Wurlitzer playing for just a few hours longer. I think trained chimps in the corner offices of every firm on Wall Street could do better. And they wouldn't ask us to stop being so mean to them.