The other day Simon Johnson ran a piece on what exactly those that have now come to known as ‘banksters’ actually knew leading up to the crisis. The results are incriminating, if unsurprising. Johnson cites a new paper by Sanjai Bhagat and Brian Bolton to show that the banksters were:
…“30 times more likely to be involved in a sell trade compared to an open market buy trade” of their own bank’s stock and “The dollar value of sales of stock by bank CEOs of their own bank’s stock is about 100 times the dollar value of open market buys”
Johnson puts it succinctly:
If the CEOs had really believed in what their banks were doing, they would have wanted to hold this stock – or even buy more. Disproportionately more sales than purchases strongly suggests that the CEOs felt their stock was more likely overvalued than undervalued.
So, it looks like the banksters knew that something was up.
This highlights a very problematic economic relationship that exists in many countries at the moment. Namely, the tendency for CEOs to see their corporations less as viable companies whose growth is in their own interest and more as cash-cows that can be milked at any whim.
In Ireland, of course, we didn’t have this problem. Our businessmen may be just as cynical, but they are many shades more incompetent. Most of them did hold onto the stock of their companies – bringing their personal fortunes crashing down to earth after the companies fell apart. What we lack in systemic milking of the private sector, we more than make up for in gross incompetence. Lucky us!