Written by Econintersect
Paul Jay of theAnalysis.news has interviewed GEI contributor William K. Black. The session is entitled “Bill Black: Cities Face Catastrophe; Finance a Cancer on Real Economy” Longtime readers will know that Bill Black is a college professor and former bank regulator from the days of the savings and loan crisis of the late 1980s and early 1990s. His biography is found at the end of this article.
Please share this article – Go to very top of page, right hand side, for social media buttons.
The caption graphic is an allusion to Matt Taibbi’s famous metaphor for finance (specifically Goldman Sachs):
“The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Bill Black has a few descriptive phrases of his own in this interview:
[Finance sector]profits total 25 percent of total corporate profits at this time are going to finance sector. Right. Which is supposed to begin a tiny little sector that’s just a middleman helping out the productive sector. Instead, you can see it’s become a massive sector. But here’s the really bad news. Twenty five percent is nothing. On the eve of the Great Depression and on the eve of the great financial crisis, this one industry that’s supposed to be lean and mean finance, didn’t earn, but it received 40 percent of total corporate profits in the United States. In other words, this beast that’s supposed to be lean, efficient and simply a helper to the dominant industries that actually, you know, make things and employ people has become a monster,that instead of increasing productivity. It acts like a parasite that is dramatically reducing productivity and productivity has been cut roughly in half. And in over a period like 50 years, that’s an enormous difference in people’s lives
Finances become a monster that is actually eating capitalism instead of creating a more effective capitalist system.
people have probably noticed, we’re getting these recurrent financial crises, and they’re getting vastly bigger.
That cancer on the real economy at that point, its finance. So the next stage of it is that finance does something else terrible, and that is it serves as this form of alleged discipline. Right. So since this is as obscene as it is, the idea is the finance folks are the responsible ones.
You know, those stupid car makers and things like that. Right. So the adults are supposedly in finance. And what they have done instead, and this fits in with this incredibly perverse executive compensation system we have, is everything is shaped in terms of short run interests in stock price, and that affects the CEO bonuses.
You’re going to do everything to avoid those kinds of productive expenses. Because nobody cares about 12 years at Black Rock.. What’s going to happen 12 years from now? Worse than that. What happens if all the games you’re playing, which include lots of accounting fraud, don’t work enough? So now the price isn’t as high. The stock price isn’t as high as a CEO you would like because it wouldn’t maximize his bonus. Well, then it’s easy. You control the corporation. You use it to buy back stock.
The entire transcript is available here.
.
include(“/home/aleta/public_html/files/ad_openx.htm”); ?>
