Pandering Pandit
Maybe I should change the title of this piece to “Panhandling Pandit.” Citigroup (C) CEO Vikram Pandit went public this past week in the Financial Times with the opinion that Basel III would impose restrictions too oppressive for healthy world banking activity.
The Basel III proposal has been criticized for having much too slow an implemantation process, among other things. Friday, MIT professor and former IMF chief economist Simon Johnson wrote a rebuttal to Pandit at the Huffington Post. Johnson provided a rather robust argument, supported by a distinguished group of academics, that Bassel III does not require enough capital reserves for banks.
The bottom line of this argument has nothing to do with the effective operation of banks, according to Johnson. Simon says it has everything to do with compensation. As capital requirements are raised on banks there is less opportunity to achieve outsized salaries and outrageous bonuses. In other words, the availability of money to steal through leverage and manipulation is reduced. The operation of the banks to conduct commercial activity is not at issue. The ability to gamble is being threatened.
The banking lobby will argue that the compensation allows the retention of top talent. Well, this “top talent” can go on the World Poker Tour or start new careers in Las Vegas casinos. Maybe the “top talent” can be replaced with real bankers.
Matt Taibbi’s giant squid can be sent to the fish market and start to feed society instead of sucking the life out of it.
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