Sunday, May 3, 2009

Berkshire Hathaway's (BRK.a) Charlie Munger Says 'Venal' Banks May Avoid Needed Reforms

One thing about many quite old people is they have a lot of wisdom and are not afraid to speak their mind. Via this Bloomberg article we have Berkshire Hathaway's Charlie Munger following in the footsteps of Simon Johnson [Apr 21: Simon Johnson on Yahoo Tech Ticker] , Joseph Stiglitz and a few others who have called the financial system out for what it is; essentially America's Oligarchs. But that's ok - as long we can push this stock market up, we can look past all the handouts to those in a select few spots because we successfully "saved the system" (from them). I'm neither quite old, nor quite wise - but I share Charlie's views that nothing will ever change because the rule makers are beholden to the mightly dollar the oligarchs sway to make sure they stay in office. So we'll have superficial changes for a period, and then back to business as usual.

I am almost laughing that the solution to "too big to fail" has been to make our largest institutions "too bigger to fail". And trust me this does not just go for banks, but in the past decade they have really taken over the lead from other industries. (hat tip to reader Thomas for catching this one)

Main Entry:
ve·nal           Listen to the pronunciation of venal

1: capable of being bought or obtained for money or other valuable consideration
2: originating in, characterized by, or associated with corrupt bribery

  • Berkshire Hathaway Inc. Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society.
  • This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”
  • Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. “We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been -- and as stupid as they’ve been.”
  • Munger said the financial companies spent $500 million on political contributions and lobbying efforts over the last decade. They have a “vested interest” in protecting the system as it exists because of the high levels of pay they were earning, he said. The five biggest U.S. securities firms, only two of which still exist as independent companies, paid their employees about $39 billion in bonuses in 2007.
  • They would like to get back as closely as possible to business as usual, and they have enormous political power,” he said.
I was scooting around TV this morning and lo and behold actually found something in plain English so that the "unwashed masses" can understand what exactly is going on, on Good Morning America. ABC in its 1990s thinking is still not allowing embedding of video but you can see a nice simple 5 minute video on "the banking system" (they even included the word oligarch) here. I think even a 2nd grader could understand when it's spelled out like this...

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012