Big Banks and Ceos

President Obama’s planned tax on the large bank’s liabilities, and his suggestions that banks be prohibited from using taxpayer insured funds for trading, is not going over well. These fat cats, for years have imposed themselves on us. They have effectively moved into our homes, eaten our food, and set the house on fire. Now they are complaining that we are cramping their style.

In 1971, Merrill Lynch, and then Morgan Stanley, Bear Stearns, Lehman Brothers, and Goldman Sachs went public so they could compete with international banks that were creeping in on their business of underwriting stocks offerings and advertising firms. In order to have the capital to compete they had to go public. Doing so allowed investment banks to become monsters.

The most serious mistake of the decade was the Securities and Exchange Commission’s 2004 rule change allowing them to increase the amount of debt they could have on their books. That ruling was made at the request of the ” Big Fives CEOs.” Before the end of it, Lehman had amassed more than $600 billion in debt. There was no accountability for any of the big banks.

In theory boards are supposed to oversee the CEOs. In fact the boards weren’t paying any attention or they were so well payed they looked the other way. ” They were deliberately selected because they were unqualified or out of it.” said John Gillespie, a former investment banker at Lehman and Bear Stearns. Gillespie noted that Lehman’s compensation committee included Dina Merill, an heirss to the E.F.Hutton fortune who was 85 in 2008. When Lehman ended it’s 14 years as a public company $45 billion in shareholder value had been destroyed.

J.P.Morgan bought Bear Stearns out at a fire sale price with the help of the Federal Reserve. (which means the tax payers paid after being cheated blind already.) Morgan Stanley and Goldman managed to hang on with huge subsidies made available to them. ( tax payers money again.) Any puny returns comes at a huge sacrifice of share holders. Massive amounts of money went to the Banker CEOs.

The public as owners, taxpayers, and savers have every right to be angry, and to question the banks methods and practices. They took the money out of share holders pockets, paid themselves outrageous bonuses. Families lost their homes by the millions. Many people are out their retirement funds and will go needy into old age.  These CEOs should be considered criminals. The wealth they have accumulated should be taken from them and distributed to their investors in my opinion.

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