$700 billion reprise: Conservative bankers? Surely you jest!

How in the world is Dodd supposed to provide leadership or any worthwhile scrutiny of the public money and well being when his contributors are the culrpits of the crimes. So, with all this sad mess in mind I thought it was time to underscore an important concept. The biggest lie of all is that bankers are conservative.

Reprise from November 2007:

For most of our lives bankers have been represented to us as conservative creatures, dressed in pin-stripe suits, nary to part with a dollar and certainly adverse to taking any risk. This image was cast in our movies, television shows, and novels. Unfortunately, with events playing out as they are today, this carefully crafted stereotype couldn't be further from the reality.

Mr. Drysdale, who managed Jed Clampett's millions in the Beverly Hillbillies television show of the '60s is just that -- a TV character. If you look back over the last few decades it has all been a facade, and the government has participated in this fraud by loosening banking laws and allowing these institutions to wander farther and farther from rational and safe behavior in pursuit of the highest returns they could get without limit.

If you are old enough, you might remember back three decades when the banks were seeking high returns in South America, when inflation and interest rates tempted them and they all took a big bath. Then, a decade later in 1989 the commercial real estate market collapsed amid over-valuations, and many banks and thrifts collapsed along with them...right into the arms of the federal government, which was forced to take them over with yet another bailout. This took about five years to turn around and things were brighter by early 1995.

But just four short years later, in October 1998, after first foolishly chasing foreign market returns, followed by once again making the aforementioned valuation and over-development mistakes, we learned that the new culprit -- extreme leverage. That was the boogeyman that brought down the Nobel laureates of Long Term Capital Management (LTCM). Alan Greenspan was so concerned that this company might cause a global financial catastrophe that he assembled a group of the nation's largest financial institutions along with federal support to bail them out and "take them out" -- sheer genius!

This brings us to the present, where we find that the federal government has let the banking industry do whatever it wanted to, with very little oversight. Once more the industry is seeking relief. It wants the government (read: John Q. Public) to bail it out once again.

While my editors have given me complete freedom to express my ideas with very few limits, they will not let me use the language that I feel most appropriately describes the slipshod and disgraceful behavior of the banking industry and the Federal Government's lack of governance.

This goes beyond government oversight. Consider that just last year the boards of directors of Merrill Lynch (NYSE: MER) and Citigroup (NYSE: C) asked for and received the resignations of their Chief Executive Officers Stanley O'neal and Chuck Prince for having "run the ship aground." It is amazing to me as investors we put money into institutions based on the limited public information from which we must depend, but that the boards of these institutions do not even know what's going on until tens of billions of dollars in losses can be cloaked no longer. This is truly obscene.

It would not be fair to portray the entire industry as bad apples although the largest of them reside in the Big Apple. There are many banks that have not strayed from their core long term businesses pursuing higher returns and assuming the commensurate higher risk. However, it seems it is a matter of degree and not complete abstinence. The banking industry is in the midst of mind-boggling fiasco AGAIN and we can be sure that there is more bad news to come. The most important thing to remember going forward is that BANKERS ARE NOT CONSERVATIVE... they just dress that way.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I owned BSC and now own shares in its acquirer JPM.