corruption is boring: the primary hurdle for OWS

Felix Salmon did a tremendous job yesterday detailing the latest accounting skullduggery at BofA, summarizing a shift in derivative assets from subsid Merrill Lynch to the balance sheet of the BoA retail bank. The end effects, although admittedly  unquantifiable, are that a combination of the FIDC/taxpayer and unwitting BofA depositors are now fully insuring the counterparties to a multi-bazillion dollar portfolio of dodgy derivative positions. This is, of course, outrageous on two fronts, both increasing the taxpayer liability for bad investment bank decisions at a time when previous support is generating angry protests, and also because the move highlights the complicity of government institutions who have an actual legal obligation to the state, not the industry.    To the extent that it improves Merrill’s balance sheet, it is also likely to facilitate further aggressive lending with the implicit guarantee that, if the loans go bad, the accounting swap can just happen again. I’m won’t re-hash the details – read Felix’s “BofA puts taxpayers on the hook for Merrill’s derivatives” HERE.

For the majority of Americans, this story is eye-wateringly mundane. Accounting changes do not make for highly-rated CNN exposes. And here, for me, is the central problem for OWS – corruption is boring. Like most things truly tragic in the human sphere (obesity and substance abuse come immediately to mind), corruption occurs through the steady accumulation of small, seemingly meaningless decisions – cheeseburgers versus broccoli to extend an already tortured metaphor – rather than the sudden appearance of a Stalin-like villain that can be replaced.

The idea of a revolution that will end with Lloyd Blankfein’s handcuffed parade through a rotten vegetable-wielding mob is a satisfying one for adolescent minds. Much less satisfying is the prospect of strapping on a tie and beginning the excruciatingly detailed and largely anonymous process of lobbying for accounting reform or, at the very least, the enforcement of existing laws. There is little doubt that the OWS movement would be far more successful from this point forward if, instead of marching on a neighborhood where bankers don’t work anymore, it went door to door raising money for a small army of motivated accountants and lawyers to besiege congressional members. It is, admittedly, a task where recounting your day is unlikely to get you laid on campus and a “No Free Swap into Hold to Maturity” placard is decidedly not going to show up on Tumblr.

I don’t mean to be patronizing, I have no right. I am not willing to head into the bureaucratic pit and slug it out for my interpretation of accounting or regulatory justice any more than the now freezing OWS protestors are. OWS has likely proven the most successful protest movement of the millennia, entirely productive in garnering and focusing attention. But, if anything lasting is to be accomplished its time for the less boredom-prone adults to take over before the wave finally breaks and rolls back. The revolution won’t be telegenic and in the unlikely event that it ever happens, it will be won by dogged lawyers in cheap rumpled suits and over-full briefcases. The real world is just not that exciting.

2 thoughts on “corruption is boring: the primary hurdle for OWS

  1. mario says:

    so true!!!

    I don’t know if you know of Warren Mosler and MMT (Modern Money Theory) but those of us regulars over at that blog agree with you completely in this regard with OWS and changes in general regarding this stuff.

    If only people understood WHY interest rates tumbled lower AFTER the downgrade….they might realize that the government cannot go bankrupt, that our “deficit” is not a problem for our grandkids and that we can always “afford” to deficit spend at the Federal level. The only concern is inflation in the economy and that does NOT include reserve levels as can be seen by comparing the huge rate of change of reserve levels since 2008 to the miniscule rate of change of inflation and the dreaded “money supply” during that same time period.

    Alas these “particulars” in the finance world glaze most people’s eyes over within about 10 seconds and in the case of OWS it appears that they’re eyes are clearly not glazed over but they still can’t “follow the threads” to the real core of the problems today. Wall Street and ridiculous wealth as ideas are fine and dandy…it’s these (not-so) subtle details that cause the problems in the way these institutions are functioning in our society.

    Here’s Warren’s blog if you’re interested in checking it out as well. I highly recommend it.


  2. Interloper says:

    I think there are two kinds of people where economics is concerned – those looking for correct answers and those looking to win political arguments. The latter are maddening.

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