The problem with bank bonuses

An article in the NYT explains how Wall Street bonuses work:

Though Wall Street bankers and traders earn six-figure base salaries, they generally receive most of their pay as a bonus based on the previous year’s performance.

Of course, the problem isn't so much that they are paid millions of dollars when they make lots of money; it's that they aren't penalized millions of dollars when they lose lots of money. It's all upside, never any downside for those guys. And that's what pisses everyone off.

Overdraft "protection"

A good editorial from the NYT, which rightly calls out the abusive banking practice known as "overdraft protection":

Some bankers claim the system benefits debit card users, allowing them to keep spending when they are out of money. But interest rate calculations tell a different story. Credit card companies, for example, were rightly criticized when some drove up interest rates to 30 percent or more. According to a 2008 study by the F.D.I.C., overdraft fees for debit cards can carry an annualized interest rate that exceeds 3,500 percent.

Overdraft protection is really just a loan--a loan that occurs without borrower opt-in, that does not make the borrower aware of the loan's terms, and that comes attached with usurious interest rates. It needs to be regulated like any other kind of loan.

(Photo by The Consumerist)

I sat out Kosovo

If you want to understand the situation with bank bailouts, I highly, highly recommend the latest TAL. Among other things, I finally learned what the hell liabilities, assets, and capital are on a balance sheet!

Also: truly informative sources, like these finance-related episodes of TAL or, say, Krugman's blog, make you realize just how awful the mainstream press is at actually educating people about the issues of the day. Could you imagine Brian Williams explaining how a bank balance sheet works on the evening news?

How did the world function before the internet? I'm coming around to the conclusion that, pre-internet, everyone was just far, far dumber.