- Commentary & Insight -

August 10, 2009 (FinancialWire) (By Susanne Trimbath, Ph.D.) — Last Friday’s trading day ended with EuroBancshares Inc. (NASDAQ: EUBK) gaining $17.3 million on volume of 52,596 shares and Fannie Mae (NYSE: FNM) losing $144.0 million on volume of 5,830,000 shares. In the face of such seemingly daily developments and volatility, FinancialWire(tm) editorial contributor, Dr. Susanne Trimbath, offers some perspective:

New York State Attorney General Andrew Cuomo released a new report on bonuses paid to the employees of nine recipients of the TARP bailout money. He called it “The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.” AG Cuomo concluded that even “in these challenging economics times, compensation for bank employees has become unmoored from the banks’ financial performance.” The report is only about banks, of course, since all the investment banks and brokerage firms changed their status to “bank” to become eligible for TARP bailout money.

Despite the hue and cry of the public, these bonuses have continued. In my view they will continue. Although we may think that sticking labels on the banks behavior, or asking Congress to enforce some discipline, will make a difference, it is unlikely to change anything. After the early 2009 bonuses were revealed, the banks claimed that the bonuses were required by contracts and could not be broken without violating the rule of law. They got away with this claim even as contracts with the United Auto Workers were being revised. Therefore, I offer you this modern fable, with a tip of the hat to Joel Chandler Harris.

A TARp Baby Tale For 2009

Brother MainStreet was trying to catch Brother WallStreet for messing with his 401k plans. One day (in October 2008), after Brother WallStreet fooled with his 401k plans again (in September 2008), Brother MainStreet went to Congress and got some tar and mixed it with a bailout and fixed up a contraption that he called a TARp Baby. And he took this here TARp Baby and he sat it in the big open market and then he lay off in the bushes to see what the news was going to be. And he didn’t have to wait long, either, because by and by here came Brother WallStreet pacing down the road - just as sassy as a jay-bird. Brother WallStreet came prancing along until he spied the TARp Baby, and then he fetch up on his hind legs like he was astonished - even though his Uncle Paulson told him what to look for.

Brother WallStreet set to conversing with the TARp Baby, certain that the TARp Baby would recognize Brother WallStreet for the Master of the Universe that he is. But TARp Baby didn’t bow. Brother WallStreet said, “I’m going to teach you how to show some respect to the Master of the Universe if it’s my last act.” As soon as Brother WallStreet touched the TARp Baby, he had trouble pulling off his extravagant parties at resorts; when Brother WallStreet kicked the TARp Baby to try to get loose, he had trouble pulling of his thousands of million-dollar bonuses. Seems the harder Brother WallStreet tried to get away from the TARp Baby, the more entangled he became.

Before you begin to wipe the tears from your eyes about Brother WallStreet, you wait and see what about Brother WallStreet is going to fetch up. Because Brother WallStreet and his family is at the head of the gang when any racket is at hand and there they stay.

“Well, I suspect I got you this time, Brother WallStreet,” said Brother MainStreet. “Maybe I ain’t but I suspect I do. You’ve been running around here sassing at me a mighty long time, but I suspect you done come to the end of the row. You been covering up your capers and bouncing around in this neighborhood until you came to believe yourself the boss of the whole gang. Who asked you to become Brother Bank and there you are, and there you’ll stay until I fix up a brush-pile and fire her up because I’m going to barbeque you this day, for sure,” said Brother MainStreet.

“Do what you want, string me up, drown me, skin me, but don’t throw me in the Federal Reserve System! They’ll only loan me money through private, unregulated corporations! Oh, please, don’t throw me in the great big Federal Reserve briar patch!” cried Brother WallStreet.

Because Brother MainStreet wanted to hurt Brother WallStreet bad as he could, he caught him by the hind legs and slung him right in the middle of the Federal Reserve System and threw in Federal Deposit Insurance guarantees to boot. There was a considerable flutter where Brother WallStreet stuck to the overnight lending window and the troubled asset lending facility. Brother MainStreet sort of hung around to see what was going to happen. By and by he hears somebody call him, and way up the hill he sees Brother WallStreet sitting crosslegged on a New York Stock Exchange combing the TARP out of his hair with a public offering of shares. Then Brother MainStreet knew that he had been default swapped-off mighty bad. “Bred and born in a briar patch, Brother Fox, bred and born in a briar patch!” And with that he skipped out just as lively as a cricket in the embers.

Dr. Trimbath also contributes regularly to Investrend Weblogs (http://infoescrow.net/f/?q=http://www.investrendweblogs.net/strimbath), and invites readers to connect with her via Twitter (http://infoescrow.net/f/?q=http://twitter.com/SusanneTrimbath).

Susanne Trimbath, Ph.D. is CEO and Chief Economist at STP Advisory Services, LLC (http://infoescrow.net/f/?q=http://www.stpadvisors.com/). She was Senior Research Economist at Milken Institute and Senior Advisor on a USAID-sponsored capital markets project in Russia. Her early career included financial services operations at national clearing and settlement organizations in San Francisco and New York as well as at the Federal Reserve Bank of San Francisco. She also worked on Wall Street at the Pacific Stock Exchange and Depository Trust Company. A multi-published author, co-author and editor, Dr. Trimbath holds a Ph.D. in Economics from New York University.

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