James Kwak of Baseline Scenario follows up on the Goldman bonus report:
Like most things, there are two ways to interpret this. For the
optimists, if some of the big banks are making big profits, that gets
us back to a normally functioning financial sector sooner and reduces
the chance that they will face a panic in the short term...
For the pessimists, the phoenix-rising-from-the-ashes profitability
of the big banks is a direct result of massive government aid in the
form of cheap money, liquidity programs, and let’s not forget the
bailout of AIG; it’s also the result of reduced competition resulting
from the consolidation of Bear Stearns into JPMorgan, the failure of
Lehman, and the weakened state of Citigroup and Bank of
America/Merrill.
So what's the takeaway?
The government bought a partially healthy banking
sector (the big question is what Citi and B of A will report) with
public funds, the few winners (Goldman, JPMorgan) are more powerful
than ever, and the government is hoping to get an anemic regulatory
reform package through Congress in exchange.
Doesn't sound like such a great tradeoff when you put it like that.
