Subscribe to Print Edition | Tue., October 27, 2009 Cheshvan 9, 5770 | | Israel Time: 03:43 (EST+7)
Haaretz israel news English
web haaretz.com
Jewish World Haaretz Toolbar
Diplomacy
Defense Opinion National
Print Edition
Car Rental
Focus U.S.A. Strenger than Fiction Business Travel Magazine Week's End Anglo File Books
Share |
The tycoons are living it up again, at our expense
By Eytan Avriel
Tags: Israel News

One of the conclusions voiced by world leaders last month, on the first anniversary of the fall of Lehman Brothers Investment Bank, was that something like this must not be allowed to happen again. The leaders spoke about increasing supervision of the financial system, broad international cooperation, lowering leverage and risks, and the return to a more basic and conservative financial system.

These ideas are still being discussed. At President Shimon Peres' second president's conference, cabinet ministers and central bank governors said they had a responsibility to the public that funded the exit from the crisis, to build a safer and more just system. Perhaps, they said, banks should be simpler and less profitable.

Words, however, are separate from deeds. The leaders may have rescued the financial system from total collapse, but in practice, in their day-to-day operations, the financial systems have returned to all their old habits. Just like before the crisis and during it, more than a few financial bodies are continuing their core business dealings: extracting as much as possible from their clients and paying as much as possible to their senior executives.
Advertisement
In honor of the official announcements of the end of the battle with the crisis, here are five ways the financial bodies are celebrating at the expense of their clients:

Of course the most successful and senior bank executives will receive millions in bonuses this year. Goldman Sachs, like other banks, knows it has a public relations problem - and is looking for ways to placate the public's resentment, such as by allocating larger sums for donations and advising employees not to show off their wealth. Lowering the numbers was never mentioned.

Why is the bank giving such bonuses? "Because it can," says one university professor.

The main issue, however, must not be forgotten: Goldman Sachs and the other banks survived only because the American administration saved them with public money (which was repaid last month), and because they are fully insured. No one will let a big bank like Goldman Sachs fall and take with it the entire global financial system.

Goldman Sachs can continue taking risks. If they pay off, the bank will get richer. If they fail, the government will help. Last week words abounded regarding a ceiling on executive salaries, but everyone knows that bankers and brokers will receive their bonuses on time.

Why is the bank doing this? Because they can, and because credit card transactions are a losing proposition for the bank. Citi has 92 million credit card holders, and anyone who doesn't like the interest rate can switch banks.

What about those who can't? They'll just have to pay up. The public paid when it saved Citi during the crisis, and it is paying again so this nationalized giant can turn a profit and pay its executives bonuses.

At Africa Israel, too, controlling shareholder Lev Leviev and all his top executives, advisers and lawyers are all being paid their salaries from money that belongs to the public, regardless of the debt arrangement's final terms.

And what can the man in the street do?

There is no magic solution. Wherever money flows like water, competition is minimal and the dynamics are incomprehensible to most of the public, the little man almost always foots the bill.

In the world of finance three rules are worth remembering.

One: There is no free lunch and no high yields without risks. If a story sounds too good, it is probably also too risky.

Two: Do whatever you can to reduce commissions and management fees, because over time they add up to astronomical sums.

Three: Finance industry representatives have a limited ability to deliver what they promise, explicitly or implicitly, and many are more interested in their own welfare than their client's wealth.

Be wary, check and double-check, consult and compare - and in most cases a direct investment such as exchange traded certificates are preferable to the performance of investment managers who charge high commissions.
PROMOTION: Mamilla Hotel
Bookmark to del.icio.us  
 
Hamas war call
Hamas political leader: War will settle Jerusalem dispute, not talks
J Street's challenge
J Street convenes in Washington, but can it take on AIPAC?
Special Offers
Advertisement
Eldan Rent a Car
Israel's leading car rental company offers you a 20% discount on online reservations
Date Local Jewish Singles
Ready to meet your match? Join Jdate today!
Junkyard
Junk a car - get free towing nationwide and a tax-deductible receipt
More Headlines
02:08 EU lawyers: We've got names of IDF officers suspected of war crimes
02:24 Clinton touts steps to bolster beleaguered Abbas
02:27 In shadow of Israeli 'boycott,' J Street meets in D.C.
03:17 Comment / Human Rights Watch applies same standards to Israel, Hamas
03:29 Comment / Netanyahu surrendered to Barak on Gaza inquiry
02:03 Jews who survived wartime Europe have higher risk for cancer
22:24 TV ROUND-UP: Netanyahu, Livni rekindle ties; Turks protest against Israel
15:01 Iran hints at acceptance of nuclear deal with West
19:22 Israel Unposed / Peres and peers 'Facing Tomorrow'
22:02 Religious Zionist rabbis: Ascend the Temple Mount
21:30 Egypt boycott of Lieberman pushes off Med Union summit
Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | Site rules |
| Advert: Recommended Restaurants | Makom: Engaging on Israel
| Search engine marketing
Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.
© Copyright  Haaretz. All rights reserved