Big Arrogant Banks

Todays discussion with my account manager at a big bank regarding the cutthroat prices they're charging me got me thinking about how little you and I - the retail customer - matter to these giant cash machines.

Knowing that there are now even larger big banks than before the whole mortgage bubble doesn't really put me and my mind at ease when it comes to the importance they asign the individual client nor regarding the systemic risk they pose.

In that spirit I loved this quote from J.Granthams last letter to investors (here on the topic of big banks regulation)

"I can imagine the company representatives on the Titanic II design committee repeatedly pointing out that the Titanic I tragedy was a black swan event: utterly unpredictable and completely, emphatically, not caused by any failures of the ship’s construction, of the company’s policy, or of the captain’s competence. “No one could have seen this coming,” would have been their constant refrain". Their response would have been to spend their time pushing for more and improved lifeboats. In itself this is a good idea, and that is the trap: by working to mitigate the pain of the next catastrophe, we allow ourselves to downplay the real causes of the disaster and thereby invite another one. "

He says at another point in his letter regarding lessons learnt in the bonous-culture world;

"Just look at Goldman’s recent huge “profits,” two-thirds of which went for bonuses. It is now estimated that this year’s bonus pool will be plus or minus $23 billion, the largest ever. Less than a year ago, these same guys were on the edge of a run on the bank. They were saved only by “government” – the taxpayers’ supposed agents – who decided to interfere with the formerly infallible workings of capitalism. Just as remarkably, it is now reported that remuneration for the entire banking industry may be approaching a new peak. “Well, we got rid of some of those pesky competitors, so now we can really make hay,” you can almost hear Goldman and the others say. And as for the industry’s concern about the widespread public dismay, even disgust, about excessive remuneration (and, I would add, plundering of the shareholders’ rightful profits)? Fuhgeddaboudit! In the thin book of “lessons learned,” this one, like most of our other examples, will not appear."

"In a bank with a hedge fund heart, you can’t reasonably expect ethical or non-greedy behavior, and you haven’t seen it." (Jeremy Grantham, GMO)