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. 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.
This quote’s been getting a lot of traction in the blogosphere and the media. That’s because it’s from Charles Munger, Vice Chairman of Warren Buffett’s Berkshire Hathaway investment firm — a company that according to Bloomberg News “is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co.”
Munger says it’s going to be really hard to change the rules to bar these grotesque practices.
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. It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.
But if Munger’s firm is the biggest private shareholder in some of the biggest financial players, why’s he only talking about having Uncle Sam reigning in these players? Why isn’t he also fighting so shareholders like Berkshire Hathaway could nix this influence? For example,
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.
Even if we can somehow manage to change the rules, millions more will be spent to gut the rules. That’s how we got into this crisis in the first place. Shareholders can’t do anything about it today because although they “own” the company via shares, they don’t have the power that real owners do. Why not fight so shareholders can keep financial companies from spending millions to change the rules in ways that screw everybody else over? And fight so that folks like the rest of us, whose money is in 401(k)s and pension funds, can vote as to how 401(k) and pension managers use the “ownership” we have in financial companies to make sure they advocate for what we think is good for us. In short, create some checks and balances.
I can guess why somebody running an investment firm might not wanna go there. But the next time someone does another lovefest interview with somebody from Hathaway, maybe they ought to ask.
