05 Jul Rebuilding the pyramid

Just when you thought the financial crisis might be settling down, the New York Times’s Frank Rich delivers a scathing (and link-studded) assessment of the foxes rebuilding the chicken coop. Moneyquote:

As the economist Joseph Stiglitz wrote in this month’s Vanity Fair, “In the developing world, people look at Washington and see a system of government that allowed Wall Street to write self-serving rules which put at risk the entire global economy — and then, when the day of reckoning came, turned to Wall Street to manage the recovery. They see continued re-distributions of wealth to the top of the pyramid, transparently at the expense of ordinary citizens.”

Not just in the developing world, but in America. Look at what we saw last week alone.

To beat out the implementation of new regulations, banks are rapidly jacking up checking-account charges and credit card fees, even for those who have paid their bills on time. As Eric Dash of The Times reported on Thursday, the institutions that received the most bailout loot are often the biggest offenders.

That would include the too-big-to-fail Citigroup, which has so far received $45 billion in taxpayers’ money, along with guarantees on $300 billion in toxic assets, to mitigate its reckless risk-taking during the reign of such obscenely rewarded (and now departed) executives as Charles Prince and Robert Rubin. While taxpayers will soon own some 34 percent of Citi, it is not only increasing our credit card interest rates (to nearly 30 percent in some cases) but raising its own base salaries (by 50 percent) to work around Washington’s new restrictions on bonuses. New rules may come and go, but loopholes remain eternal.

We also have learned, from The Wall Street Journal on Thursday, that Goldman Sachs, another bailout recipient, is on track to pay its employees an average of $700,000 each in 2009, which, incredibly, is a bit higher than its compensation average in the pre-crash year of 2007. In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”