What you could get away with… if you were a corporation (by Jon Stewart of The Daily Show)

The Daily Show, by Jon Stewart, is one of my TV habits. It’s a satirical news show, that specialises in showing up the political and corporate establishments for their hyprocrisy. Their staple diet is to take sound bites from the day’s news, and then contrast this with archive footage from the same person a few years earlier – typically making precisely the opposite point.

While some of the humour can be puerile, underneath the veneer of Comedy Central lies Jon Stewart’s insightful and incisive depth of understanding of the political scene in the US. His interviews are genius, and some of the pieces on the show are breathtakingly brilliant in their analysis.

One of the best I’ve seen in a while was from Tuesday’s edition, in which Jon tried to help us see the depth of corruption and hubris found on Wall Street. The segment was called “In Dodd We Trust”, and you can see the 10 minute video here or below (if you’re not in the UK, that is). (Get past the first five minutes or so, to reach the truly great bits!)

In the wake of the recent revelations about the accounting practices at many global banks, as Deutsche Bank, JPMorgan, UBS are charged with fraud, and last week’s announcement of new legislation from Chris Dodd, the Banking Committee Chairman, Jon firstly satirises the government and banks’ responses (or lack thereof).

But then he turns genius. He tries to work out what would happen if he, as an individual, behaved the way that banks have been allowed to act.

He points out that Lehman Brothers committed accounting fraud by moving $ 50 billion dollars of bad assets to a separate company just before reporting at the end of each quarter, and bring it back again just afterwards. If we did that, we’d be put in jail. But at Lehman Brothers, nobody is going to jail. Everything they did was technically legal – or has been deemed to be so by the government.

If corporations have the same rights as individuals, shouldn’t individuals have the same rights as corporations – or at least, be allowed to bank like corporations. If you wanted a loan for $ 1 million, for example, of course you’d need to provide some collateral. You have a $ 900 car. But, you also have another corporation, like Moody’s for example, who will rate it for you. They could easily just issue a certificate valuing your car at $ 2 million, making it easy for you to secure your loan. This, in fact, is what happened before the financial crisis, as really bad loans (the so called sub prime mortgages being the most well known example) were rated higher than their actual value. So, now you can get the loan.

As a person, that loan would be given at an interest rate of somewhere from 9 to 30%. As a corporation, you can borrow from the Fed Discount Window, which charges interest at a slightly lower, 0% (the names of companies who take such loans are kept secret!). For being such a genius as the head of Yourself Inc, you also pay yourself a bonus of $ 1 million. You have to do that – you’d hate to see talent like you leave Yourself Inc and work for someone across the street.

So, now you have borrowed a million dollars and paid yourself a bonus on the basis of an underlying asset – a $ 900 car! Creditors are barking at the door. A person might lose everything, but APerson Inc is just getting started. You start a new company, called Amalgamated Me Inc and sell your cheap junk car to them for (what would make your bottom line look good?), say $ 2.5 million.

Wait now just a minute. Who do you think you are? CitiGroup? Well, that’s exactly what they did!

What happens when you want the $ 2.5 million back? Well, in order to do that, I am going to have to burn down my neighbour’s house for the insurance money. Yes, that’s right, I took out insurance on an asset I didn’t even own. Corporations do that all the time – it’s what Goldman Sachs were doing with AIG when they collapsed and brought down the American economy at the same time.

Is that wrong? Should I not have done that? Oh sorry, I’ll just leave then, and walk away with a severance package of… what? $ 10 million! That’s wonderful – thanks so much, Me Inc. Where did you get that kind of money? Oh yes, you were bailed out. You were too big to fail.