Judith Warner has a nice piece in the NY Times today about the frustration of waiting for some kind of justice with the Wall Street crisis. Not so much social justice in a grand scheme, but the mere satisfaction of seeing those guys who chose to go make money and money alone, who have been making hundreds of thousands in base salaries and millions in bonuses, finally lose out over us people who decided to make stuff. “Greed is good,” was originally intended as a morally damning phrase, but moral damnation means remarkably little to a recent college graduate offered a couple of million dollars. For a couple of decades raw greed has been so profitable that any lingering guilt over producing nothing with one’s work could be allayed with hot cars and downtown condos. The sneering arrogance of the petty stockbroker with a year’s experience was something to behold. The “Masters of the Universe” seemed to lose all social skills because, well, social skills don’t matter when greed is good.
“These were the guys who, in college, I used to step over on Sunday mornings when they were lying in a pool of their own vomit,” he said. “And now they’re earning millions and millions – in bonuses alone.”
I was sort of looking forward to those guys getting their come-uppance. Instead, it appears that we (as a society) want the game to continue. The bailout seems focused on preventing any fundamental changes of the rules … which means that greed will continue to be good, and while some will get out, others will find new ways to game the system and set ourselves up for another of these in a few years.
We will, of course, not see an equalization at the very top. The truly wealthy did not play these games with their own money – they played it with ours.
Finance should be a boring profession. jrtom linked to a decent summary on the origins of the credit crunch. Apparently the old rule of thumb was “3-6-3” for banking. Pay out 3% on deposits, charge 6% for loans, and be on the golf course by 3pm. Banks that operate under that assumption simply don’t go out of business unless there is a massive run on the banks and they get swept up in it. On the other hand, the people who run those banks make 5 and low 6 figure salaries. They will very rapidly be bought out by banks offering millions in exchange for screwing up the whole US economy.
A moderately profitable bank, doing sensible business, won’t be able to retain executives, staff, or even compelling office space against the wall stree behemoths.
See you in a decade or so.
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