The following three minutes of absolute perfection uttered by CNBC's Rick Santelli is dangerous for anyone living in Kyle Bass' "intellectually dishonest" alter-world of denial and "unicorns and rainbows" as the Chicagoan goes off on theignorance of everyone in these so-called markets. When every talking head is bullish and the world is going so great that we should all "buy stocks," Santelli demands we ask Bernanke - "what are you scared of," that keeps you pumping this much money into the system for this long? Simply put, Santelli's epic rant is the filter that every investor (or member of the public) should be viewing financial media and the Fed today (or in fact every day).
On CNBC and all the channels that cover business, we have person after person after person, buy side, sell side, upside, downside:
- How is the economy? Economy is great.
- What about stocks? You got to buy them.
- What if they break? You have to buy the dips.
- What's wrong with the economy? I don't hear these people saying anything is wrong with the economy.So what's wrong, Ben? Why can't we get out of crisis management mode?There's always going to be something....Why don't these people kick the tires?They take a press release from the Federal Reserve and they think it was written by God.
One of Rick's most epic rants to date:
A new banking report is published today in the UK.
There are jobs that nobody wants to do really, aren’t there? As your kids are growing up, you hope they don’t ask you one day to come and sit down as they have something serious to talk to you about. Dread! You know what’s coming: “Hey, mom, dad, I’m…I’m going to be a…a banker!”. Then, your whole life falls apart. It’s like being on a par with gutting social-unacceptable jobs like debt-collector and bailiff, isn’t it? The money might be there, but the morals aren’t?
Well, George Osborne, Chancellor of the Exchequer of the UK, has all eyes focused on him with the idea of the century, it seems. A banking commission headed by Conservative MP, Andrew Tyrie has made 80 recommendations to make the banking sector the place you want your kids to work in when they grow up. Morals will change and the banking will be a good job to have!
George Osborne is giving the Mansion-House (residence of the Lord Mayor of London) speech to the city tonight, an annual speech in which the Chancellor of the Exchequer traditionally gives his impression of the state of the British economy. It seems rather unlikely that he will announce some of the recommendations to the bankers that will be seated at the tables in front of him, however. Not unless he wants them to choke on the spicy ingredients that he have been concocted. These include making bankers wait up to ten years to receive bonuses and going to prison. Heard it all before? Thought it? Dreamt of it? The Report did it.
The report is a hefty two-volume reader’s digest of what to do and what not to do in the banking system, entitled “Changing Banking for Good”. Snazzy little tittle that can be read in two different ways as well. Well done Mr. Tyrie. Only a few pages into the report it states that past regulations and supervisory controls had:
- “little realistic prospect of effective enforcement action, even in many of the most flagrant cases of failure”.
It goes on to state that:
- “remuneration has incentivised misconduct and excessive risk-taking, reinforcing a culture where poor standards were often considered normal”.
To take out the excessive risk-taking from the lives of bankers in the workplace, the report puts forward the suggestion not only that the bankers should receive the bonuses after a period that could last up to ten years (now that’s time to forget what you have actually done to get the bonus, isn’t it?) but also that the remuneration be in bail-bonds. It also suggests that for wider cases of misconduct remuneration should be cancelled and that if the taxpayer has to foot the bill, then they should definitely not be made. We know from a recent report from the Chartered Institute of Personal Development also that the majority of bankers are in agreement. They think that they are paid excessive amounts and sometimes they don’t know why they get all the money they do. So, if we all agree, let’s cut the bonuses and improve regulation. What are we waiting for?
The report states that banks have failed the UK in ‘many respects’. £133 billion have had to be injected in bail-outs, amounting to £2, 000 per every person in the UK today. But, it seems that it is also the shareholders that have been let down too. They have had ‘poor long-term returns’.
Excessive risks that were taken in the period leading up to the financial crisis were not down to miscalculation of mathematical equations that boiled down to the bankers getting their sums wrong, but to the fact that the banks were and still are too big to fail. They are able to take greater risks because they are too complex and too enormous. We can’t let them fail and that they know only too well. It’s all very well saying ‘yes, let them fail and then they will see’. But, what will the average person be eating then? Bread and water will be more than just dietary supplements, they will become the staples. Banks today have access to cheaper credit. Their success is determined not so much by the careful and planned placing of financial equity, but the guarantee that lies steadfastly behind them.
The report clearly states that bankers should not flippantly refuse to accept that public anger at high salaries is purely jealousy-driven or petty ignorance. “Rewards have been paid for failure”. Bonuses may have fallen, although the report points out that this has been off-set by fixed-pay rises.
It has also been suggested that there needs to be greater equality in terms of employing women. Women take fewer risks traditionally on the trading floor and so the report asks for employment policy to be changed in banks.
Senior bankers have also come in for a belting from the report, accused of wearing blindfolds as to their responsibility. They are accused of being so far removed from the misconduct that they have ended up being admonished of all responsibility. The report suggests that a prison sentence would certainly make senior officials think about what is being done. The report states that it would “give pause for thought to the senior officers of UK banks”. However, to what extent would senior officials of any bank really consider their potential criminal liability? It also raises the question as to what extent it would be possible to actually see a conviction and criminal liability recognized in a court of law? Hard to prove.
The reports can be found here. Enjoy! If anything actually gets done. Previous suggestions were already ignored by the British government with regard to changes in the banking sector and the report states that it is “disappointed” that this has happened. Aren’t we all?
However, clearly the report states quite a few home truths; things that the average citizen has been feeling and voicing for many a year now. But, until now that has been largely left just as words from angry and jealous members of the public that also want to strike it rich and get paid for doing wrong. Now though, how long will the suggestions that have been made be ignored and how long will the Chancellor of the Exchequer be able to turn a deaf ear to what is being said? The report comes at a timely moment; Mr. Osborne looks like he may still have time to rectify his speech for tonight’s dinner!
The report states “An important lesson of history is that bankers, regulators and politicians alike repeatedly fail to learn the lessons of history”. This time it is (apparently) different. Bankers and everyone else have learned the lessons. Have they?
What do you think? Are bankers going to repeat history or have they learned from their mistakes?