Perhaps most amazing is many people's apparent assumption that banks would never engage in this kind of behavior.
It seems the most cynical predictions and explanations of large bank behavior are likely to be the ones closest to the truth.
It seems the most cynical predictions and explanations of large bank behavior are likely to be the ones closest to the truth.
That means we need a proactive and well-funded SEC, of course.
Are there roads in your town? Do you think they were paved by the honest lowest bidder?
In the article, Matt Taibbi says it's "a business worth $3.7 trillion". A few percentage points of that is still interesting amounts.
I used to be in an elected position and would sign off on stuff like this. The "lowest bid" thing does actually tend to be enforced, at least where I was, and it was a huge pain in our butt for totally different reasons.
You're presuming that every deal is a gladhanded corruption thing. Sometimes, but not most of the time. Often we would know what we wanted, have a good deal for it, it's not a very significant purchase (like a $500 piece of equipment or somethign), but we have to spend hours of employees' time getting ahold of 3 options so that we can get the one we were going to get anyways.
The way worse situation is on big ticket items, like your example of roads or other big capital projects. Where I was they are actually done by the lowest bidder, by law. But we'd wind up paying way more than that, because in order to become the "lowest bidder", the contractor would have to unrealistically underbid and then run way over on the contract. At that point, we'd be screwed and it's usually a better idea to pay a little more to finish the project than to sue and have a half-finished project sitting there while you burn 6-7 figures on legal bills. Contractors with the professional integrity to give an honest estimate were unlikely to get the gig, because of the lowest bid law.
Also, I'm more familiar with commercial than federal contracts. Did your contracts have not-to-exceed clauses or any penalties built in to manage overrun issues?
I was sort-of witness to a shouting match between a well educated son and his hard-working working-class rest of the family over the fact that banks give out let's say ~ten times as much as they actually have. They called him stupid, outrageous and how could any company possibly do this and they can certainly not run their small wood-shops and small companies like that so how should a bank be able to do that? Mind you, these are average good natured law abiding folks, the kind that certainly is the majority of the population.
This goes to show that there certainly is a vast amount of blind trust in banks in the average population; looks like acting all serious-business and putting on a suit AND being able to control or at least have an important stake in a lot of major aspects of working-class citizens' lives (tight budgets, making ends meet) makes for a powerful combination.
Edit - Some sources:
http://www.ritholtz.com/blog/2012/04/debunking-the-housing-r...
They're participating in the system, and not only do they have no clue how it works, but believe it works in a way that it hasn't for generations.
This is not true. As far as I can tell, this misconception stems from the correct notion that banking (fractional reserve banking) expands the money supply. This is sometimes extrapolated to "banks create money" and then to "banks loan out more money than they have".
Banks do not "give out" "~ten times" their deposits. They give out (for sufficiently large banks) 90% of their deposits [1] in exchange for obligations to repay. The money supply expansion that results from this (Alan deposits $100, bank loans $90 of Alan's money to Bob who gives it to Charlie who deposits it in a bank, which loans out $81 of Charlie's money to Dan, etc.) is the ten time expansion that you're probably alluding to; but the bank can't know that Charlie's money is money that it lent to Bob.
The banks are not doing anything wrong here; there's a larger argument about the societal benefits of banking, and whether banks should be restricted in how they give out their money, but starting with distorted facts makes these discussions very confusing.
[1] http://www.federalreserve.gov/monetarypolicy/reservereq.htm