Why won’t banks create jobs?
Disclaimer: I am pro-Occupy. Repeat: pro-Occupy (read to the end, please). Further disclaimer: Off the top of my head, I don’t know a darn thing about Bank of America’s 2010 financial state, beyond the abstract, and for a quick lunchtime post, I don’t plan to do that research.
That out of the way, I just saw this:
There are two ways to read this tweet. I think the more common one is wrongheaded, and I’m going to spend time on it here. That intent being “Bank of America executives made a stupid, greedy decision, when they could have hired people.”
Yes. They could have. But what would have happened? Analysts, looking at their hiring binge, would be looking for a jump in revenue associated with the investment. Bank of America is a business, and a publicly traded one. They can hire when they have reason to believe that hiring will either lead to greater profits or somehow save them money. If they hire without a plan for usefully turning that labor into revenue or savings, analysts will call them mean names, and their stock prices, bond ratings, and all the rest will suffer.
When they give bonuses, no such expectation exists. Bonuses (ridiculously?) do not need to be tied to revenue. Of course, financial industry bonuses of any significant amount are ridiculous right now, and Bank of America should be booed mightily for rewarding failure (or, at best, rewarding morons for investing freely-given government money in government debt, the single easiest trade in financial history), but they shouldn’t be expected to create jobs with that money. They could lend it out, being, you know, a lending institution, but analysts would call them names for that, too. Or they could pay dividends to investors, I guess.
This is a complicated structural problem. The incentives in our financial system are not currently aligned with the goal of helping the broader economy. The incentives in our financial system are not even aligned with the primary goal of banking: efficiently allocation capital in the broader economy. The incentives in our financial system are aligned with the goal of elevating the profitability of the banking institution and the wealth of the traders and executives that mind that profitability. In a well-coordinated industry in a healthy economy, the profitability of a bank would be intertwined with the healthy spread of capital to useful ends throughout the economy, but we don’t have a well-coordinated industry or a healthy economy.
There is no incentive for Bank of America to hire, and no disincentive for paying bonuses. This is why I prefer a second reading of the tweet, one consistent with the general Occupy ethos, but hard to see through the specificity of this tweet: WHY could Bank of America get away with bonuses like this? What is it about the structure of our economy and the financial sector that is continuing the spread of inequality TWO YEARS after a bust that was supposed to shake the financial industry back to reality? This is a problem well beyond “Nyah, nyah, Bank of America is run by bad guys.” It’s something fundamentally wrong with the way we’re currently practicing capitalism.
I like Occupy because it calls attention to this broader issue. The press is pretty good at calling attention to bonus abuses, but that hasn’t yet lead to significant reform. Occupy stirred people because it offered more than the Gawker-like “look at these assholes.” It said something more like, “how can this be our best option?”
This has been gnawing at me, mostly because I’m supposed to think that Bank of America should just randomly open branches so that people should have jobs. At least, that’s the way I’m taking that. “Hey, BofA! Make some jobs here!” I’m sure they’ve determined whether or not they need branches. And as you said, it’s not their obligation to provide jobs.
Honestly, if someone wants to work for Bank of America, all they have to do is learn Java and they could write their own ticket.
Also, what salary is Occupy Boston suggesting? Are we talking about 878,300 teller jobs for $40k a year? Way to reach high, people! This is what really bugs me about the Occupy movement: the implicit standard of a middle-class life from 30 or 40 years ago seems to be their measuring stick. Can we, perhaps, be a little more ambitious in our thought process than demanding/begging for a mere job?
There are legitimate issues about both bonus rewards for an institution that would have failed if not for government bailouts and the actual way BofA could create jobs: by lending to small businesses and entrepreneurs, which no bank has really done since the near-collapse. But as you said, these are structural issues about how capitalism is practiced.
If these are the points that tweet is trying to make, well, they did not do a good job of it. But hey, random slogans and pointless scapegoating fit into 140 characters; cogent critiques of the banking system don’t.
Oddly, the act of occupying is itself a more cogent critique than almost anything written yet.
This is a bit tangential, but Douglas Rushkoff fairly recently wrote an op-ed about the increasingly archaic notion of the “job.” At the time, my reaction was sort of the same as my reaction to most libertarian theories: “sure, but in reality, what would work?” I mean, even our health care is tied to employment, for the most part. Not everybody is entrepreneurial, and not everybody is well-suited to freelancing. Also, ask any handyman what happens in a recession and everybody with a toolbox hangs their shingle as a handyman. All the reliable handymen are suddenly unable to find work at a reasonable wage. It’s going to happen to designers and accountants soon. I’m not sure what it means to get past jobs as a central concept, but it’s going to be a painful transition, no matter what comes next.
Technology has just completely obliterated a lot of jobs, and they’re not coming back. We’re at a truly odd moment right now that I think must be something like the 1930s, except this time the Joads are people with urban job skills and college degrees.
As for the banks, I really, really, really wish we could disconnect them and their wallets from our government. A public bailout in the form of principal reductions on mortgages (or some other such move) would do so much more for the economy than dumping more money into the pockets of non-lending banks.