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xssve -> RE: Bank of America helps destroy the economy (9/14/2011 7:40:59 AM)
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quote:
ORIGINAL: thompsonx
quote:
ORIGINAL: xssve
Because stocks are primarily a form of executive compensation (options). They're a bank, they don't need stock, plenty of banks operate just fine without stock, but a hit to the stock is a direct hit to their bonus structure, they have to preserve the bonus structure at the expense of the more expendable employees.
It's pretty much how all publically traded companies operate nowdays, and will be until they are required to expense stock options: Devil take the hindmost - get used to it.
How does the above answer my question?
Because they probably are not in the shitter per se, they're holding a lot of toxic assets (non-paying mortgages) and having trouble maintaining operating capital while at the same time paying the bonuses they're accustomed to to themselves - so they're cutting operating expenses.
My guess is they have plenty of money, the problem here is credit related, banks lend to each other, and if no other banks will lend to them it puts a crimp in operations.
To large extent, the recession at the moment is still related to how nervous banks are to lend, even to each other - economic recovery isn't going happen, let alone growth, until credit loosens up - the Fed has even stopped printing money, but they continue to pump capital into the credit side trying to coax banks into lending.
The fact they paid off the TARP loans so fast, and went back to paying bonuses immediately indicates that capital shortage is not, and never was the problem, they have the money, they don't want to risk loaning any of it out.
I suspect the hit on BoA stock was the market telling them to cut operating expenses, since hitting their stock is a direct hit to management's pocket - clearly, they heard that - only reason they haven't been cannibalized is probably because nobody want's a bunch of paper on foreclosed mobile homes.
It bodes not well for the rest of the economy, or Obama, since till banks start lending again, the economy will continue to tread water - meanwhile, pubs block any attempt to shore up the jobs market, which is about the only thing that would reassure the banks, because, duh, that will help them get elected, since everybody will blame Obama, even though congress controls the budget, and banks control credit.
Obama really doesn't control shit here, all he can do is sit there with his balls are in a vise.
So really, it's nothing new, this is the established economic recovery pattern of supply side economics and monetarism since the Eighties - jobless recovery, each one a little longer and deeper than the last, it's what you get for abandoning the principles of capitalism and letting the financial sector get out of control, they're pretty much calling the shots now, with no oversight, and trust me, they take care of number one, hell they'll tell you that if you ask them, so it should come as no shock, they basically said "fuck everybody, we're here to make money, period" way back in the Eighties.
Why the working class pub rank and file keeps bending over for them I'll never know, they hate labor more than anybody, hell supply side economics itself was expressly and explicitly designed to eradicate the middle class in order to control variable costs - hostile takeovers and outsourcing aren't accidents, it's the design.
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