If the author is even nearly correct aboutr Prince’s decision making while at Citi, he’s either a crook & a liar or was inept & out of his deepth & shouldn’t have been in the position in the first place. Or conceivably he was just a victim of bad luck. There appears to be no fourth choice. IMO it boils down to choices one, he’s a crook, or two, he was unqualified for the position. Between the latter two choices, I lean toward the first, he’s a crook.

The shareholders will be jointly and severally responsible to pony up the shortfall between the banks’ assets and liabilities from their personal wealth, upto the par value of the stock.

This will certainly force the banks’ stockholders (and its managers) to avoid leveraging the bank’s deposits and creditors’ money flippantly.

Why not abolish the FDIC and bring back the notion of double liability of shareholders?

A good law review article can be found here:
http://www.grantspub.com/UserFiles/File/ Miller_and_Macey_2.pdf

When he was being confirmed I think we had to sleep with the devil to keep the whole thing from coming down, but now that people like Michael Lewis have given us a clearer picture, it is time for Obama to retool his economic team. Summers stuck his head in the sand when he fought to eliminate Glass Steagall and fought regulation of CDS on the lame excuse that regulating CDS at that time would disrupt the existing CDS market.

There are a lot of people out there with a lot more sense than those two, so Obama needs to get better advisors. If Summers and Geithner are still working for Obama in 2012, I will not vote for him.

Wall Street keeps saying they need these big paychecks to keep talented people. If Rubin and Prince could not figure out that taking Bbb mortgage backed bonds and repackaging them in a way that made a high percentage of them get a AAA rating required some sort of fraud, then they do not deserve minimum wage. They did not perform due diligence.

I think they are liars, I think they gave themselves “plausible deniability” and I know there were a lot of people in the Nixon White House who used that excuse, and still served time in prison.

They need to spend the rest of their lives in court, defending themselves against lawsuits and fraud charges. These guys make the clowns at Enron look good by comparison.

Their shadow dims the sunshine of our day,
As they go lumbering across the sky,
Squawking in joy of feeling safe on high,
Beating their heavy wings of owlish gray.
They scare the singing birds of earth away
As, greed-impelled, they circle threateningly,
Watching the toilers with malignant eye,
From their exclusive haven–birds of prey.
They swoop down for the spoil in certain might,
And fasten in our bleeding flesh their claws.
They beat us to surrender weak with fright,
And tugging and tearing without let or pause,
They flap their hideous wings in grim delight,
And stuff our gory hearts into their maws.
–Claude McKay

Likewise, Ken Lewis’ worst sin of all was allowing the threat of losing his job to influence his decision on the ML acquisition. I don’t think Jamie Dimon is a diety, but I could imagine him calling Hank and Ben on their bluff. I think Dimon would have quit before caving.

Sadly, this all comes back to the agency problem and the fact that boards and corporate governance are a shadow of what they should be. Would Chuck or Bob have levered up their own personal balance sheets anywhere near that much? What if their own economic interests were truly, and more deeply, bound up in the equity of Citi? Please.

Yes, short term incentives have always caused bubbles and consequences. Regulation is needed, but not just for the executives. Short term stockholder requirements drove the bubble. If these guys didn’t deliver, they would be replaced with others who would have done the same.

Congress hasn’t authorized any regulatory agency to come down on anyone making too much money. Big picture, Congress is the problem and they need to fix themselves, but I doubt the voters will let them.

They need to kill the mortgage interest tax deduction. Homeowners think they are getting a break, but if there was no mortgage interest deduction, loan demand would be less and mortgage interest rates would be even lower. The banks and stockholders are the real beneficiaries of the mortgage interest tax deduction.

If someone sees a bubble, they don’t have to push for the $10m bonus this year or work for the company that has a 3-month horizon. Shareholders, highly paid executives and boards should all monitor short-term risk-taking and look for long-term profits, and there are readily available incentives for all three. The fact that greed, stupidity, complacent regulation and intellectual laziness obstructed the operation of these incentives does not mean that doing the right thing was impossible.