In its second panel, the Financial Crisis Inquiry Commission, heard from Kyle Bass, of Hayman Financail Advisors, who read a statement that had some real dynamite it. I don't know this guy, but it's pretty clear no PR flack scripted him.
He took direct aim at the fiction that top traders at troubled institutions like AIG must receive top compensation or we will lose the vital “talent” needed to unwind the complicated bets that were made. Those traders at AIG placed more than $450 billion in bets on toxic securities. The traders, of course, made these bets because of the enormous fees and bonuses they received.
But why should we continue to pay these traders, given their disastrous track records and the fact that the taxpayer is bailing out AIG to the tune of more than $150 billion? Unfortunately, the Obama administration is going along with the idea that these traders need to receive large compensation packages because if they leave AIG, it will hurt the taxpayers’ investment.
But Bass demolished that argument by saying flat out that he knew of hundreds of unemployed derivative brokers who would gladly to do the job for $100,000 a year instead of for millions. The trading emperors have no clothes.
Too bad the commissioners didn’t bring up that argument to the CEOs before them in the AM session.
Bass also did us a favor by saying that Fannie and Freddie should be owned and run as public non-profit agencies of the government instead of government-backed private enterprises that use implied public backing to make private profits and to make disastrous investments. He asked why the taxpayers are shouldering all the losses instead of the creditors and investors who bet on Fannie and Freddie. Good question.
The commission should hire Bass for its staff.
Panelists Peter Solomon and Michael Mayo also added some strong comments. Both took on Mr. Dimon's claim that JP Morgan wasn't really too big to fail. Solomon said the top banks formed an "oligopoly."
Who will have the guts to bust the trusts or to at least say it?
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.