Banker's Bonuses

Legislators, facing the challenge of jobs, the economy and their own paycheck, voice the cry, “spend baby spend.” True, consumer spending drives the major segment of our consumer economy, but the well is dry. The accumulation of wealth in the upper five or ten percent of the population leaves little left over to drive a consumer economy. Compound that internal sequestration of wealth with our outsourcing: telephone services, technical services and manufacturing to low labor cost countries and you see the point.


An economy based on, shifting wealth from one class to another, cannot last, and it hasn’t. We have not yet come to grips with the causes of this depression and it is not over. The banking excesses caused the depression of the 30s. Banking did so again much earlier and obviously orchestrated the depression of today. This was the fourth banking-real-estate scandal. This one challenges prosecutors in its complexity but is no less a ponzi scheme.

Arguably, banking has a fiduciary responsibility; law and regulation codified that responsibility shoring up the recovery from the 30s. The tricky financiers of today shout deregulation as a war cry freeing them to “create new financial instruments” and better compete on the international market.

Deregulation also allowed banks to merge into institutions with more financial clout than the federal government. Mergers meant branch banking where local managers have no authority. The money pump moves local capital right out of town to the few remaining banking giants. Banks combine with brokerage houses and become more creative yet and creative in ways that regulators cannot track. Banking regulators find it difficult to track securities transactions and SEC regulators have little authority over banking.

Add to that the further mergers and acquisitions of insurance companies by banks and investment houses. The distinctions become blurred creating an unrestrained environment, one that extracts money from the system and pays it out in bonuses and dividends, not to customers, but to investors. Banking serves the critical infrastructure of capital. As such, banking needs regulation and scrutiny.

Spend baby spend, misses the point that we have already done that one. Recovery from our depression necessitates a shift in the economy in creative directions. We are already moving in that direction but much too slowly. We need education, infrastructure, capital, innovation and local labor. John Is, my agrarian economics professor, defined the factors of production: land, labor, capital and entrepreneurial ability. I would underline land, our land and labor, our labor. By that, I mean manufacturing in our own land and labor by our own hands. Legislators have the power and the responsibility. They need to remember the history and act.