Congressman Compares CEO's To Bank Robbers

The soundbite is the currency of TV news, the primary political information source for most of America - simple, nice, neat, easy to pronounce phrases that an announcer can whip off after the guy behind the camera starts waving that they have ten seconds left until the commercial break.

If we lived in soundbite sized homes, and worked at soundbite sized factories, and got soundbite sized bills, and had soundbite sized problems, soundbites might remotely begin to have a chance at being relevant.

But until the majority of the public gets tired of wallowing in their stupidity – and if it offends you because I am saying this, yes I mean you - it will remain the currency that counts, because we don't demand any better.

I’ll use Massachusetts Representative Michael Capuano as an example of what happens when you substitute soundbites for the real thing. Capuano went on a tear this afternoon during the bailed out bank hearings today on Capitol Hill.

If you’ve saw Capuano on the news last night, or read about what he had to say in today's paper, you probably got this brief clip:

"You come to us today on your bicycles, after buying Girl Scout cookies and helping out Mother Teresa, telling us: 'We're sorry. We won't do it again,' "said Rep. Michael Capuano (D., Mass.). "America doesn't trust you anymore."

Or this one:

"You come to us today on your bicycles after buying Girl Scout cookies and helping out Mother Theresa and telling us, 'We're sorry, we didn't mean it, we won't do it again, trust us.' Well, I have some people in my constituency that actually robbed some of your banks and they say the same thing."

But it just so happened that I saw Representative Capuano speak live during the hearings, and listened to his remarks in their entirety. No soundbite in the world can begin to do justice to what he had to say to the panel of bankers.

Capuano's opening questions really served as a rhetorical introduction of sorts for the five minute statement he made, a monologue that married the emotions on Main Street with a solid understanding of Wall Street accounting chicanery to perfectly articulate the disgust so many Americans have right now with the entire industry.

I've transcribed the ubiquitous Youtube video of his performance below:

REP. CAPUANO
"I've got a couple of more detailed questions. Of all of you, just by a show of hands, how many of your banks, either directly or indirectly, and by indirectly, I mean by loaning money to people you knew would be using this money to invest in credit default swaps, how many of you engaged in that?

None of you engaged in that?"

UNIDENTIFIED BANK CEO
"We engaged in credit default swaps - but, uh, when you asking the question 'are we lending money for them to do that - I'd have to come back to you with specifics - I cannot tell you."

REP. CAPUANO
"Okay, how many of you directly engaged in purchasing or investing in credit default swaps? How many of you directly or indirectly engaged in credit, uh, in CDO’s? How many of you have, uh-"

COMMITTEE CHAIRMAN FRANK
"Excuse me - very good recorder, but recording raised hands doesn’t work - we'll need something oral–"

REP. CAPUANO
"We can fill that in later. How many of you, um, how many of your banks had or currently have Special Investment Vehicles - those off the books, somehow unregulated subsidiaries of the bank, or sister corporations?

UNIDENTIFIED BANK CEO
"We have SPV's"

REP. CAPUANO
"So, basically all or most of you engaged in all or at least some of the activities that actually created this crisis in my opinion.

Because every one of those activities, especially the SIV's, especially the SIV's – to me I think they're illegal. I cannot believe no one has prosecuted you on this, but then again, we’ve had no prosecutorial action whatsoever from the last administration and the new administration has a little time to figure this out. We’ll find out whether anybody really cares.

How can possibly any regulated bank have something on its books that's totally unregulated that for all intents and purposes does the same thing the bank does? That's for your lawyers to answer, and I my hope is that you will be answering those questions in court someday - we'll find out later on.

But basically, you come to us today, on your bicycles, after buying Girl Scout cookies, and helping out Mother Teresa, telling us 'we’re sorry, we didn’t mean it, we won't do it again. Trust us.'

Well, I have some people in my constituency that actually robbed some of your banks, and they say the same thing. 'They’re sorry, they didn't mean it, they won't do it again. Just let 'em out.'

Do you understand that this is a little difficult for my constituents to take, that you 'learned your lesson?' And it’s all the same people doing this - the same people who created SIV's, who created CDO's, who created credit default swaps - that never existed a few years ago - you created them, you created the mess we’re in, and you're not the only ones - you just happen to be the ones here today. I can’t wait to get the credit rating agencies here some day again.

And now you’re saying 'sorry, trust us, and by the way, we don't even want the money.'

Interesting, no one has ever come to me and said, 'you must take billions of dollars.'

And as I heard earlier, you have an option. Basically, they said 'you have to capitalize better, because we no longer trust your books.' You can either take this money and do it, or you can do it on your own – if you don't want the money, you can give it back, you just have to come up with the capital. As I understand it, and if you can't do it, I think many of us would be happy to change that law.

You have to understand, I don't really have a question, but I was told I can use the five minutes, cause the questions I have, you've answered them, and you're going to continue to answer them, and that's all well and good.

The problem I have is that honestly, none of us - America doesn’t trust you anymore.

I for one, between myself and my various campaigns and my own personal business stuff, I get a lot of money to put in banks. I don't have one single penny in any of your banks.

Not one.

Not one.

Because I don't want my money put into CDO's and credit default swaps and making humongous bonuses - me personally. Until that changes, none of us really believe - I don't believe - anything will change.

Until you change the people who brought you into SIV's - who was the brilliant person who came and said 'let’s do credit default swaps?'

Find him.

Fire him.

Tell me you fired him.

Get out of CDO's. Start loaning the money that we gave you. Get it on the street. And don't say 'oh well, we’re not using that money for bonuses.' Come on! Money's all of a sudden not fungible in your entities. It’s fungible everywhere else, but not in your entity.

Get our money out on the street. And if you don't want to give it back, don’t come here and tell me that you can't. Yes you can. As long as you live up to the requirements of the program you're in now.

In the new world that you created and we have to clean up."

Soundbites have made their own contribution to this mess, by allowing otherwise sane adults to believe that they can remain fully informed about the world around them by watching a thirty minute or an hour long program on TV that is made up of dozens of these little news chicklets.

Wall Street And The Art Of The Big Con

The movie The Sting, with Robert Redford and Paul Newman, was one of my favorite films growing up. I didn’t really know much about Redford or Newman or con men or gambling, but I was awed anyway by every turn in the convoluted plot, by every piece of the elaborate plan Paul Newman's character devised to rob a mob banker of his money.

Their performances won the movie an Oscar for Best Picture.

Today, we will have a similar production take place on Capitol Hill. Rich men who run our nation's largest banking institutions will leave their private jets in their hangers for the day and get on trains and commercial flights to commute to Washington, as if they are ordinary Americans.

They will be ushered in front of a committee of Congress. Camera crews from all the major news networks will jockey for position. Lights will shine. And the committee members will peer over their glasses, frown, glare, and explode in righteous anger at these bank executives for half a day or so.

And after the lights go off, when the executives are on their way home and the members of the committee are through answering questions from political reporters, you and the rest of the American citizenry will be in exactly the same position the mob banker in The Sting was - wondering what the hell happened.

You won't know anymore by tonight than you do right now, because the entire setup is just like the make believe gambling parlor in movie, designed to give you the impression that what you are seeing and hearing is the real deal.

You won't come any closer to knowing, for instance, what it is that is so God awful in the books of these banks that has our government racing to hand them billions upon billions of dollars at the blink of an eye.

The anecdote President Obama used on Monday night to explain in a thumbnail sketch what the banking crisis was all about - "what got us into this mess initially were banks taking exorbitant, wild risks with other people's monies based on shaky assets and because of the enormous leverage, where they had one dollar's worth of assets and they were betting thirty dollars on that one dollar, what we had was a crisis in the financial system" - pretty much laid it all right out there in front of everybody, except he forgot to tell you how many trillions of dollars worth of assets these banks wagered.

You won't be getting that number today either.

According to Ian Welsh, over at FireDogLake:

"...the Fed and the Treasury together have spent, loaned, and guaranteed in excess of 8 trillion dollars at this point. That's more than the entire loans and leases portion of the domestic banking industry. Given the net assets of the banking industry are only about 1.3 trillion dollars, for a fraction of that price, they could have bought out the entire banking industry."

Now you should understand why there is such antipathy towards spending any real time, money, and energy on the educational system here in the United States. The entire gambling industry relies on the fact that most of us don't understand probability. And the men who will gather at Capitol Hill today to put on their show are counting on our ignorance to see them through.

The mob banker in The Sting ended up losing half a million dollars because he had a little success at first based on inside information, which is pretty much the same thing that happened to the nation's banks when they first started fooling around with derivatives. So the mob banker started making bigger and bigger bets. Robert Redford's character sucked him in gently, slowly ratcheting up the level of the mob banker's trust as he fed him tips that always won. By the time Redford and Newman were ready for their big score, the mob banker was hooked on Redford's system. He couldn't live without it, so he literally bet the bank.

The men whose faces you will see on your TV's all day today, or on the news tonight, got hooked on the same kind of sure thing.

I've seen some numbers bandied about the internet lately that attempt to "guestimate" how big the gap is between our nation's banking liabilities and the actual value of our nation's banking assets. I'm not going to print them here because they are likely to be pure speculation. The actual numbers, for all practical purposes, aren't important anyway - whether it's a twenty dollar difference or a twenty trillion dollar difference between what they have and what they owe, if it's more than they've got, then it's more than they've got.

So even though what you see and hear today will have very little relationship to the truth about the bank bailout, and even though the men testifying really represent the failings of an industry-wide corporate culture, you need to pull for these rich bankers this afternoon. You need to hope they get those investors who watch CNN International from around the world to believe enough to place their next bet at the Wall Street window.

Irony of ironies - just like in the movie, you end up pulling for the bad guys.



Related Article: "Bad Banks" for Beginners