I was reading the Wall Street Journal recently and there was an article titled, “Morgan, Goldman Get Help from Fed,” as part of the annual stress test the banks undergo since the financial crisis 10 years ago. Apparently, the Fed made an unprecedented move calling the banks, letting them know they would have failed, but giving them an option to keep their buybacks at their current levels and by doing so, avoid the black eye of a failure and pretty much continue as they’re operating.
It’s a little troubling to me that they get special treatment and it also means, according to this article, it helps the profitability measures that the companies use to determine how much the CEOs get paid and so the CEOs might make more money thanks to this phone call.
According to the sources in the article, it’s an unprecedented step. The one guy was quoted saying, “New ref, new rules.” So the administration has taken a tactic where they are not going to be as hard on the banks as other’s had been in the past. Maybe that’s a good thing, maybe that’s a bad thing, but it smells a little funny.
I don’t like the idea of there being different rules for different players, especially the biggest, most profitable banks. Maybe the rules that are in place are too hard and this stress test was supposed to be for a pretty bad scenario, but that’s also the point of it because things got really bad 10 years ago and we don’t want to revisit that. Anyway, that’s my two cents on it, it was a great article and I thought that the people who wrote it did a fantastic job and I think you should check it out if you can.