Banking Compensation Back In The Spotlight And Paul Volcker's Call To End Taxpayer Subsidies For Wall Street's Gambling With Our Nation's Savings
Paul Volcker's voice has been marginalized for some time. Volcker clearly understands the risks we continually write about as it pertains to Wall Street firms using society's money to gamble in risky schemes. But let's be clear. Volcker does not go far enough. These banks must be removed from the American economy. Monopolies limit competition and the free flow of capital in the underlying economy. At the minimum we should be returning to community banking - something we have highlighted repeatedly since this crisis started. Community banking will return naturally as localization takes hold regardless of what policy makers do. But, the government should encourage this process to speed up any sustainable recovery. A part of that encouragement would be to break up large banks.
In a perfect world we would actually migrate to a public banking structure or a combination of public and community banking. The only DEMOCRATIC banking structure is a public banking structure which serves the common good, democratizes access to capital and democratizes capital formation in the American economy. This would have an impact of blowing up the destructive private equity firms, blowing up most hedge funds, blowing up mergers and acquisitions business, blowing up investment banking, blowing up derivatives and on and on and on. None of these entities increase the capital stock of society. Period. And certain of these entities and products actually contributes substantially to the destruction of capital and democratized economics. In other words, most of Wall Street's businesses add no value to the underlying economy or to society. Which, if you haven't figured out by now, is why these entities are actually blowing up. The natural selection of what is sustainable is simply reflecting what was a universal truth all along. Wall Street's current business model must collapse. Our government should be facilitating that process with an orderly dismantling of the Frankenstein they allowed to be built with more and more deregulation.
Were we to have a public banking system, we wouldn't need to regulate compensation or the risky schemes that excessive compensation encourages. Public banking and-or community banking would return us to the only sustainable business model for banking. That is the 3-6-3 banking model. Pay deposits at 3%, process loans at 6% and be on the golf course by three o'clock. And do so primarily for purposes of wealth creation or investment and not consumption. Everything else contributes to inefficiency which adds little or no value to society. The compensation issue is going to take care of itself regardless of what government does. Wall Street's business model is completely unsustainable. In a period of less than ten years, it's current business model has completely imploded. It has no sustainability. If government would listen to what the markets were telling them instead of accepting billions in banker lobbyist money, they would already know this.
Remember, even though Goldman and others are minting profits right now, we believe their business model is completely unsustainable. And have written that it is highly plausible Wall Street firms will eventually fail without transformational business strategies. Whether that is failure by more risky bets gone bad or a blow up in Frankenstein finance or a distributed capital model we have written of or some other mechanism is irrelevant. Failure may take the form of government receivership or outright failure or some unforeseen event. But we remain extremely concerned about the fate of Wall Street. Especially Goldman Sachs which relies almost exclusively on unsustainable businesses.
In a perfect world we would actually migrate to a public banking structure or a combination of public and community banking. The only DEMOCRATIC banking structure is a public banking structure which serves the common good, democratizes access to capital and democratizes capital formation in the American economy. This would have an impact of blowing up the destructive private equity firms, blowing up most hedge funds, blowing up mergers and acquisitions business, blowing up investment banking, blowing up derivatives and on and on and on. None of these entities increase the capital stock of society. Period. And certain of these entities and products actually contributes substantially to the destruction of capital and democratized economics. In other words, most of Wall Street's businesses add no value to the underlying economy or to society. Which, if you haven't figured out by now, is why these entities are actually blowing up. The natural selection of what is sustainable is simply reflecting what was a universal truth all along. Wall Street's current business model must collapse. Our government should be facilitating that process with an orderly dismantling of the Frankenstein they allowed to be built with more and more deregulation.
Were we to have a public banking system, we wouldn't need to regulate compensation or the risky schemes that excessive compensation encourages. Public banking and-or community banking would return us to the only sustainable business model for banking. That is the 3-6-3 banking model. Pay deposits at 3%, process loans at 6% and be on the golf course by three o'clock. And do so primarily for purposes of wealth creation or investment and not consumption. Everything else contributes to inefficiency which adds little or no value to society. The compensation issue is going to take care of itself regardless of what government does. Wall Street's business model is completely unsustainable. In a period of less than ten years, it's current business model has completely imploded. It has no sustainability. If government would listen to what the markets were telling them instead of accepting billions in banker lobbyist money, they would already know this.
Remember, even though Goldman and others are minting profits right now, we believe their business model is completely unsustainable. And have written that it is highly plausible Wall Street firms will eventually fail without transformational business strategies. Whether that is failure by more risky bets gone bad or a blow up in Frankenstein finance or a distributed capital model we have written of or some other mechanism is irrelevant. Failure may take the form of government receivership or outright failure or some unforeseen event. But we remain extremely concerned about the fate of Wall Street. Especially Goldman Sachs which relies almost exclusively on unsustainable businesses.
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