Skip to content

Guest Post: The Banker Bonus Diversion

Zero Hedge
Monday, January 18th, 2010

Submitted by Deadhead

I am so tired of the absolute nonsensical and foolish approach in regards to Banker Bonuses taken by both the Obama administration as well as the bankers themselves.   Here’s what is really going on and what should should be going on if we lived in a world that was dependent on telling the truth, prudent financial management, reduction of systemic risk, and if a cure to our banking system malady is genuinely being sought.

If one accepts the postulation that the primary core of our banking system problem is the fact that many our our banks, including the group of 19 tagged as “Too Big to Fail”, have severe capital shortfalls, then one is forced to accept the fact that the solution to the problem requires a rebuilding of capital on the balance sheet.  Gee, that’s fairly complex, isn’t it?

Here’s the deal in a nutshell:

1.    Banks have significant capital shortfalls that are being masked by FASB FAS 157 modifications that allow marking of assets to bank “models” versus a mark to market. Got a pile of CDOs or RMBS paper worth 30 cents on the dollar?  No problem, mark it at 90 cents and watch the profits roll in.  The egregious matter here is that both banks and U.S. Regulators continue to tout the high capital ratios of the group of 19 yet conveniently fail to mention that FASB 157 is the primary reason for this illusion. Do you guys think that these assets are going to magically run back up to par in the future? Do you guys think that a lot of this garbage is going to cash flow?

2.    While on the subject of capital shortfalls, FASB FAS 166/167 provisions became effective November 2009 (after being postponed from November 2008, interestingly) for Q1 2010. ZH readers are aware that this requires that banks bring off balance sheet assets back on to the balance sheet and it is unlikely that this tsunami of garbage paper is worth anywhere near 100 cents on the dollar.  With bank profits quite handsome for Q4, and capital accounts woefully inadequate,  it would be prudent to allocate this profit to capital accounts to reserve for losses on this incoming pile of fecal matter, but, no, let’s just kick the can down the road further.  The FDIC has decided to give a pass to the banks for one and one half years to begin the process of allocating capital in regards these assets. Read it yourself:

TuneUp Utilities 2010

3.    With multiple billions of profit earned (engineered?) in Q4 2009, the bankers have decided to abandon prudent balance sheet management and put the vast majority of these profits in their pockets.  This is the ultimate in piggishness as well as a dereliction of fiduciary responsibility to properly manage a balance sheet on the behalf of the bank’s owners and bondholders.  Then again, I’m not so sure that bank equity owners and bondholders are the smartest group in the world, as their investment rests on the good “graces” of the Obama administration regulatory ineptness and the Federal Reserve Bank, an organization with a track record that leaves much to be desired.  Caveat Emptor.

4.    U.S. Regulators have decided that they simply are not going to require the profits to be allocated to capital accounts for loan loss provisioning either.  The  citizenry of the USA have loaned and given (via Fed balance sheet purchases and who else knows what) the banks trillions of assistance because of these capital shortfalls and now that some money from profits is available for balance sheet reconstruction, our regulators have simply put their fingers in their ears and started yelling “La, La, La, La, I can’t hear you”.  This is a total and epic failure of the banking regulatory authorities in the U.S.

5.    The Obama administration, now that the bankers are going to pocket the money, has decided to tax some of this money to fund stimulus version X.0, “X” being a number somewhere between the current number of stimulus items and the eventual Minsky moment.  The point of the matter is that Obama’s wall street endeared team (it’s not political kids, it’s the same group that ran the show under Bush, Clinton and many other Presidents) has, once again, failed in its responsibility to ensure proper bank capital standards and, once again, has left the door open for systemic risk.  Helluva job, guys and gals!

Here’s the simple answer folks.

The bankers should have taken every nickel of profit and allocated it to capital accounts to provision for loan losses: past, present, and future.  The regulators should force every nickel on to the balance sheet irrespective of the menagerie of FASB FAS 157.  The government should not be taking this needed capital from the banking system.  If we follow this path for a few years, maybe we’ll have a chance to avoid a complete zombification of our banking system.

I cannot believe after what we have been through since the lessons of Bear Stearns and Lehman that we are simply not fixing a not so complex matter.

View the original article at Zero Hedge

Related Posts with Thumbnails

Posted in Finance & Economics, Washingtons Blog Articles.

Tagged with , , .

0 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.

Some HTML is OK

or, reply to this post via trackback.

Support #altnews & keep Dark Politricks alive

Remember I told you over 5 years ago that they would be trying to shut down sites and YouTube channels that are not promoting the "Official" view. Well it's all happening now big time. Peoples Channels get no money from YouTube any more and Google is being fishy with their AdSense giving money for some clicks but not others. The time is here, it's not "Obama's Internet Cut Off Switch" it's "Trumps Sell Everyones Internet Dirty Laundry Garage Sale". This site must be on some list at GCHQ/NSA as my AdSense revenue which I rely on has gone down by a third. Either people are not helping out by visiting sponsors sanymore or I am being blackballed like many YouTube sites.

It's not just Google/YouTube defunding altenative chanels (mine was shut), but Facebook is also removing content, shutting pages, profiles and groups and removing funds from #altnews that way as well. I was recently kicked off FB and had a page "unpublished" with no reason given. If you don't know already all Facebooks Private Messages and Secret Groups are still analysed and checked for words related to drugs, sex, war etc against their own TOS. Personally I know there are undercover Irish police moving from group to group cloning peoples accounts and getting people booted. Worse than that I know some people in prison now for the content they had on their "secret private group". Use Telegrams secret chat mode to chat on, or if you prefer Wickr. If you really need to, buy a dumb phone with nothing for the NSA/GCHQ to hack into. Ensure it has no GPS tracking on it and that the battery can be removed. These are usually built for old people to get used to technology storing only a set of numbers to call. However they have no games, applications to install or other ways people can exploit the computer tracking device you carry round with you most of the day - your smart phone. If you are paranoid ensure that you can remove the battery when travelling around and do so to prevent GPS tracking or phone mast triangulation. Even with your phone in Flight mode or turned off, it can be turned on remotely and any features like front or back cameras, microphones and keylogging software can be installed to trace you.

So if your not supporting this site already which brings you news from the Left to the Right (really the same war mongering rubbish) then I could REALLY do with some..

Even if it's just £5 or tick the monthly subscription box and throw a few pound my way each month, it will be much appreciated. Read on to find out why.


Any support to keep this site would be appreciated. You could set up a monthly subscription for £2 like some people do or you could pay a one off donation as a gift.
I am not asking you to pay me for other people's articles, this is a clearing house as well as place to put my own views out into the world. I am asking for help to write more articles like my recent false flag gas attack to get WWIII started in Syria, and Trump away from Putin. Hopefully a few missiles won't mean a WikiLeaks release of that infamous video Trump apparently made in a Russian bedroom with Prostitutes. Also please note that this article was written just an hour after the papers came out, and I always come back and update them.

If you want to read JUST my own articles then use the top menu I have written hundreds of articles for this site and I host numerous amounts of material that has seen me the victim of hacks, DOS plus I have been kicked off multiple hosting companies, free blogging sites, and I have even had threats to cease and desist from the US armed forces. Therefore I have to pay for my own server which is NOT cheap. The more people who read these article on this site the more it costs me so some support would be much appreciated.

I have backups of removed reports shown, then taken down after pressure, that show collusion between nations and the media. I have the full redacted 28/29 pages from the 9.11 commission on the site which seems to have been forgotten about as we help Saudi Arabia bomb Yemeni kids hiding in the rubble with white phosphorus, an illegal weaapon. One that the Israeli's even used when they bombed the UN compound in Gaza during Operation Cast Lead. We complain about Syrian troops (US Controlled ISIS) using chemical weapons to kill "beautiful babies". I suppose all those babies we kill in Iraq, Yemen, Somalia and Syria are just not beautiful enough for Trumps beautiful baby ratio. Plus we kill about 100 times as many as ISIS or the Syrian army have managed by a factor of about 1000 to 1.

I also have a backup of the FOX News series that looked into Israeli connections to 9.11. Obviously FOX removed that as soon as AIPAC, ADL and the rest of the Hasbra brigade protested.

I also have a copy of the the original Liberal Democrats Freedom Bill which was quickly and quietly removed from their site once they enacted and replaced with some watered down rubbish instead once they got into power. No change to police tactics, protesting or our unfair extradition treaty with the USA but we did get a stop to being clamped on private land instead of the mny great ideas in the original.

So ANY support to keep this site running would be much appreciated! I don't have much money after leaving my job and it is a choice between shutting the server or selling the domain or paying a lot of money just so I can show this material.

Material like the FSB Bombings that put Putin in power or the Google no 1 spot when you search for protecting yourself from UK Police with "how to give a no comment interview". If you see any adverts that interest you then please visit them as it helps me without you even needing to give me any money. A few clicks per visit is all it takes to help keep the servers running and tag any tweets with alternative news from the mainstream with the #altnews hashtag I created to keep it alive!

However if you don't want to use the very obvious and cost free ways (to you) to help the site and keep me writing for it then please consider making a small donation. Especially if you have a few quid sitting in your PayPal account doing nothing useful. Why not do a monthly subscription for less money instead. Will you really notice £5 a month?