Krugman: "no reason to believe wizards of Wall Street contribute anything to society"

[lame54]

http://www.nytimes.com:80/2009/04/27/opinion/27krugman.html?_r=1&th&emc=th

OP-ED COLUMNIST
Money for Nothing

By PAUL KRUGMAN
Published: April 26, 2009
On July 15, 2007, The New York Times published an article with the headline “The Richest of the Rich, Proud of a New Gilded Age.” The most prominently featured of the “new titans” was Sanford Weill, the former chairman of Citigroup, who insisted that he and his peers in the financial sector had earned their immense wealth through their contributions to society.

Soon after that article was printed, the financial edifice Mr. Weill took credit for helping to build collapsed, inflicting immense collateral damage in the process. Even if we manage to avoid a repeat of the Great Depression, the world economy will take years to recover from this crisis.

All of which explains why we should be disturbed by an article in Sunday’s Times reporting that pay at investment banks, after dipping last year, is soaring again — right back up to 2007 levels.

Why is this disturbing? Let me count the ways.

First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks...

[Why Syzygy]

1. k/r . Not the American society anyway... nt

[valerief]

2. Wall St. wizards are wastes of oxygen. Maybe that's why CO2 Bachmann

defends them.

[w4rma]

3. True! (nt)

[WCGreen]

4. They get their money for nothing...

But their chicks sure ain't free

[Oregone]

5. These wizards are the dopamine of our bi-polar economy...

We sure love em during the highs. :) Too bad we won't take our medication and go on cruise control. Instead, we gotta have these guys waving their wands from one crisis to the next.

[unblock]

6. the wizards of wall street contribute a lot. it's the amoral greedy bastards of wall street

who ruin everything for the rest of us.

these are not the same people. the wizards are the ones exploited by the amoral greedy bastards.

sandy weill was one of the amoral greedy bastards, he was never a wizard.

[JHB]

27. How many of the "real wizards" fought the AGBs, politically?

Did the "real wizards" fight against the deregulation that shielded the system against the most ruthless swindlers? Or did they go along with it because the smell of money was too tempting?

[unblock]

32. by a hefty majority, actually wall street workers are democrats and liberal.

they live in nyc, after all.

and yes, a good chunk of them contribute financially to liberal campaigns, although their jobs leave them little time to volunteer. most of the real wizards understand that their bonus and compensation is NOT greatly influenced by little things like that. individual performance and department performance affect them a lot, often more than company-wide performance. not so for the top dogs. it's the top dogs who do rotten things to get more money regardless of the implications because THAT is what THEIR compensation is based on.

[ooglymoogly]

40. Whoooooo ahhhhhhr yoooooooooo?

asked the caterpillar to little Alice whilst smoking his crack.

[unblock]

41. just one of them wacky liberal wall street wizards :)

[kenfrequed]

45. Full of crap alert

Wow. I don't even know where to begin to refute this unattributed nonsense. Please cite me an actual source that states that '...most wall street workers are democrats and liberal.'

Are you including the janitors that have to clean up all the paper mess left all over the place? Or the people that scrub the toilets? Are you talking about the building maitenance engineers? Or maybe you are referring to the people that repair the phones and the computer technicians.

Wall street (NY stock exhange) is not just the building when you are talking about economic establishment power. It is an ideology and a mindset. It means doing whatever maximizes profit measured by quarterly return on rate of investment to the shareholder. It means taking that and going the next step to further maximize it the quarter after that and after that.

Who deregulated and who benefited? Liberal Democrats? Do you mean environmentalists, labor unions, teachers, health care workers? The poor?

No. Follow the money.

Because Democrats tend to win New York does not mean all New Yorkers are Democrats and is not adequate to support your assertion.

[unblock]

48. wow, using unattributed full of crap nonsense to paint my post as unattributed full of crap nonsense

my actual source is me, i've spent most of my career in investment banks and in the high financial industry, mostly in the new york area.

i agree most of the rather few people with serious power on wall street are amoral greedy bastards, as i said, and yes, they spent a ton of money lobbying for laws and loopholes that reflected their amoral greedy bastard mindset.

but i really don't care for the insistence on tarring everyone on wall street with the same brush, and no i'm not just talking janitors. most of us, whether quants, traders, programmers, etc., tend to be liberal, or at worst moderate, despite easily making six figures. for the most part, it seems to be just the salespeople and the senior executives who are seriously republican.


as for the "ideology and mindset", again, MOST of the actual workers are highly skilled in things like prudent lending, risk management, compliance, and so on, and are very well aware of risks and recommend against doing risky deals. once again, it's the amoral greedy bastards with the power who overrule and take risks that benefit themselves at the expense of other paries.

[kenfrequed]

49. Actually ....

When you call someone to provide sources, you are calling them to provide sources.

When you fail to provide sources you CAN be accused of using unattributed BS.

Your idiot "I know you are but what am I" is equivalent to... oh wait I just said it.

[unblock]

50. you did NOT simply ask for a source.

you jumped to a conclusion of your own and attempted to justify it based on nothing beyond your personal statement. i at least claimed anecdotal history of an entire career. i'd prefer a nice scientific study, but i'm not aware that one has ever been done specifically on political leanings of wall street employees.

you want to characterize my personal experience as "full of crap", and argue an opposite position? you should provide your own support, sufficient to meet your own standards that you so eagerly imposed on me.

[kenfrequed]

51. Lets see...

Someone comes out against the "wizards of wallstreet"

You leap to their defence. Suggesting that somehow they are all great hardworking honest guys.

Someone calls you out to ask what these "wizards" you know of did to avert the financial crises and fight against the deregulation that allowed every trick and chicanery that got us into this mess.

You simply state that the majority of them are liberal democrats.

I decide to call you on that because it seemed like bullshit and I called your ARGUMENTS full of crap. I then call on you to give me some damned sources.

You throw out this experience crap that none of us can refute without somehow calling you a liar.

And now you invert it and throw a fit stating that I must call forth counter-evidence to assertions you have failed to prove. Never mind the fact that in science, journalism, and hell even basic logic you have to back an assertion with evidence and CANNOT turn around and force someone to prove a negative against your argument.


I'm sorry but given Walstreets current mess and how hard and heavy the republicans went to bat to ensure every regulation was gutted and all regulatory bodies were declawed, I find anyone throwing out a meme that reats: "Well most of us wizards of wallstreet are democrats" to be a lot like trying to spread the pox onto both of our houses. It feels like spin. It feels to me like you are trying to play this board into buying a broke bunch of goods.

This is the kind of shit that repukes do when they are caught red handed. They squeel "Well the democrats do it to, and they do it worse than us" and then they truck out a few red herrings and assorted nonsense to convince us that we are all corrupt.

This is sort of the smiley face version of that.

[unblock]

52. i most definitely am NOT claiming that "democrats do it too"

in fact my point was that the democrats on wall street deserve better than to be tarred with the same brush as the owners and lobbyists. i'm just saying to put the blame where it actually belongs, which is on most of the wall street powers-that-be, and NOT on the majority of the "wizards".

sorry i don't have a study available, but even in a court of law, one must settle for the best evidence available, not the best evidence possible. if there's a study on political identification of wall street workers, i'm not aware of it, so my own anecdotes will have to do. that does not mean my argument is full of crap, just that it is supported with weaker evidence than we all would prefer, but as far as we know, it's the only sort of evidence available.

[Warpy]

7. They create illusory paper profits for the super wealthy

and that is why they're so handsomely paid.

[Phoebe Loosinhouse]

29. Illusory being the key word. Not only is it a house of cards, it's a house of imaginary cards. nt

[HillbillyBob]

8. I have said this to a few friends..now I think i really mean it

I m glad Im too po to play the wall street casino game. I never thought I would actually mean it though.
We take what little we have and are sinking it into our little farm stead.
With the idea that we will eat and have a place to live now to get it paid off.
P.S.
My partner has been saying since 98 that the wall streeters were blowin smoke to inflate the values and then when they thought they could take their chips and cash out, they would. They did, though we kid of expected it to go a year earlier and tried to plan accordingly.
A few times I did try to say to others that this was coming and I was shouted down for being doom and gloom.

[closeupready]

9. If it's just you, fine. But if more people did this, they would find a way to pull you in to their

web. Rest assured. They aren't going to let anyone just walk away from a game in which they hold all the cards, stacked in their favor.

[sendero]

24. I quit "investing" in stocks..

... around 2001 after taking a haircut on the dot com bubble.

I have a pittance in stock mutual funds that I haven't bothered to move, other than that I am out.

The fairy tales that the media has been telling us for 2 decades about buy and hold and you lose money unless you are in stocks, well bullshit I will take my chances.

I don't think for a second that I'm alone here. The dot-com bust was bad enough, barely 8 years later we have another 40% drop ( it has retraced ONLY TEMPORARILY some ). Do the math. If you got into the market in the late 90s you are FUCKED. And how long will it be before this limping economy is running again? Years if not a decade.

Stocks are a rigged game to make money for wall street. Fuck them, I will find a way to live without their sorry lying cheating stealing asses and like I said, I am not alone.

[bvar22]

11. We did the same.

Wall Street will just have to live or die without us.

We are no longer Good American Consumers.
Next year, we will consume even less.

[Grinchie]

18. I am a member of the same club.

We eat like kings, make our own hours, listen to the plants grow, pull the wings off flies, scold the birds for singing too loudly, and generally make everything we consume that we can. We buy things with the requirement that they are repairable, well designed and functional, with focus on safety, performance and durability over style or looks.

Strangely, we living with these criteria, almost nothing sold in Home Depot even comes close to any of these requirements. The only place where I can find quality tools are at estate auctions, and flea markets.

We were thinking of buying a bargain basement house, but now we think we will just hew some logs and build one out of raw materials, the old fashioned way. A broadaxe is an amazing tool! Quiet, efficient, non-polluting, and great exercise.

[Norrin Radd]

15. Those who shouted you down were just projecting on to you.

Sometimes, no, often in history it has indeed been gloomy and doom-y. Nothing wrong in being prepared.

[Joe Chi Minh]

23. If you're a hill-billy, pity you and the Clampetts weren't running the government

during the Bush years. When we actually thought you were.

[bvar22]

10. "...a return to business as usual is just around the corner."

<snip from the referenced article>

"So what’s going on here? Why are paychecks heading for the stratosphere again? Claims that firms have to pay these salaries to retain their best people aren’t plausible: with employment in the financial sector plunging, where are those people going to go?

No, the real reason financial firms are paying big again is simply because they can. They’re making money again (although not as much as they claim), and why not? After all, they can borrow cheaply, thanks to all those federal guarantees, and lend at much higher rates. So it’s eat, drink and be merry, for tomorrow you may be regulated.

Or maybe not. There’s a palpable sense in the financial press that the storm has passed: stocks are up, the economy’s nose-dive may be leveling off, and the Obama administration will probably let the bankers off with nothing more than a few stern speeches. Rightly or wrongly, the bankers seem to believe that a return to business as usual is just around the corner.

The time to impose regulation is BEFORE handing out the money.
There is absolutely no leverage AFTER they get their money.
Expect to see any form of regulation fought tooth & nail by the Too Big to Fail Wall Street Banks. They will be joined by the DLC/BlueDog Conservative Democrats who are on the Wall Street payroll.

The REAL irony is that some of the money used to fight re-regulation will be coming from YOUR pocket.

[truedelphi]

12. K & R for later reading. n/t

[Wednesdays]

13. K&R

:kick:

[rpannier]

14. Wizards of Wall St...The Wizard of Id

Both about as competant

[TomClash]

16. The article was false

"Wall Street pay" only "soared" because of the severance payouts. Just look at the PIT for NY. It has collapsed and is projected to be worse in 2010. Wall Street bonuses made up a large portion of the NY PIT.

[Silent3]

20. PIT = Personal Income Tax?

Could you TTBABLC?

[TomClash]

46. Yes, Personal Income Tax nt

[leftofthedial]

17. goddamned capitalists

are a waste of genes.

[tomp]

19. i've known that all my life. it's kind of obvious. nt

[Joe Chi Minh]

21. Reminds me of something Buffet said about a small group of people

washed up on a desert island. All performed various tasks for their little community, except one - who speculated" I wish I could remember it properly. It was very amusing and more relevant than ever, of course, today.

[moondust]

22. Yes but...

didn't they go to the finest schools and get the highest grades? They must be the best and the brightest, to be valued above all others. Why else would they get paid so much? The system works! The system works! The system works I tell ya! The system works!

:sarcasm:

[RandomThoughts]

31. Just read an article on college students and History knowledge.

http://www.usatoday.com/news/education/2007-09-17-history-test_N.htm

Article says college students average 50% on a civics test, and only score 54% as seniors.

You can take the test from link in article. I am currently PUI and am tired, and still got over 90% although some of the questions had a political philosophy push to them, which pissed me off. :shrug:

But on the bigger topic, even if the Wall Street people were smarter or better or more worthy, they are not 1000 times more smarter or better or worthy. So they do not own or earn their wage.

They are overpaid because they create money, then skim off the top to give it to themselves. It is not that complicated, and is ridiculous, and I have to think happy thoughts when thinking on the topic to avoid commenting more on it.

[harmonicon]

25. "there’s no longer any reason to believe that the wizards of Wall Street actually contribute....

.....anything to society"? When was there a reason to believe that?!

[olegramps]

26. I thought they were the Lizards of Wall Street

[closeupready]

35. I think you mean "parasites".

n/t

[Skidmore]

28. Remember the scene in "Pretty Woman"

when Vivian asks Edward to tell her what he does.

[Octafish]

30. Somebody's got to lose.

Aqualung

In the beginning Man created God;
and in the image of Man
created he him.

2 And Man gave unto God a multitude of
names, that he might be Lord of all
the earth when it was suited to Man

3 And on the seven millionth
day Man rested and did lean
heavily on his God and saw that
it was good.

4 And Man formed Aqualung of
the dust of the ground, and a
host of others likened unto his kind.

5 And these lesser men were cast into the
void; And some were burned, and some were
put apart from their kind.

6 And Man became the God that he had
created and with his miracles did
rule over all the earth.

7 But as all these things
came to pass, the Spirit that did
cause man to create his God
lived on within all men: even
within Aqualung.

8 And man saw it not.

9 But for Christ's sake he'd
better start looking.

-- Ian Anderson

[InfiniteThoughts]

33. my $0.02

i am NOT AGAINST high salary jobs in any sector. I do believe that there are lot of opportunities in finance sector that deserve high salaries because of the risk-quotient in the jobs.

What i AM AGAINST is HIGH PAYING jobs with the risk transfered to taxpayers. Since the collapse last September, the banks have had it good on both sides - ability to borrow at near-zero rates and charge higher rates to consumers. On top of it, they received front-door TARP funds and back-door AIG CDS unlocking funds. In effect, the only loser in the government and hence i see no reason why the companies can pay huge salaries.

What the Obama administration can do is to cap salaries & bonuses (inc. ESOPs etc) at $1 million. If there are folks who will leave for private equity / hedge funds / niche FI firms, so be it. I don't think there is a paucity of either talent or supply in financial services market.

[TankLV]

34. Krugman - RIGHT AGAIN AS USUAL- he's batting a Thousand on the economy...!!!

God bless him...!!!

[xchrom]

36. recommend

[Vidar]

37. Wall Street is a cess pool. Krugman is right as always so far.

[Javaman]

38. wall street execs = welfare queens...

"But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a “welfare.”"

[EmeraldCityGrl]

39. The gig is up. Investing in Wall Street is nothing more than

legalized gambling and the house always wins. They will always find a way to pull the money off the table.

[benld74]

42. "We built our WEALTH the old fashioned way,,, WE EARNED IT!"

Anyone recall the commercial that stated something to that effect?

[Kat45]

54. Was that for Paine Webber?

With John Houseman, maybe?

[DeSwiss]

56. It was....

....the Smith, Barney commercials done by John Houseman.


- And it was still a lie back then too....

K&R

[benld74]

43. More like the - Wizards of Waverly Place - than the Wizards of Wall Street!!

[Beavker]

44. Despite the situation, the talking heads keep a coming...

Especially on CNBC. I have to listen to it at work, though I do where earplugs it doesn't block it out completely. I just marvel at the neverending supply that CNBC can parade before us on this network of GOP Wall Street Analysts, CEO's and Managers that still basically spend their time bashing Obama. They speak like they are such important cogs in the economy and their ideas, generally leaning to the right, are the be all end all of public policy. The world revolves around them. Their arrogance is palpable.

I finally heard one of them say a simple thing yesterday when they were talking about policy, politics and the administration (which is what they do all day instead of providing good Financial News as Bloomberg does). Basically he said, "People don't like our industry" or, "they don't like us". Correct. Start acting like it.

[rollingrock]

47. They fit the definition of parasites and leeches

what have the Wall Street leeches ever done but steal and destroy everything in their path?

Jesus condemned the money changers and usurious money lenders.
And if there is a hell, that is where they are going.

[bertman]

53. k & R. This is a good one. Krugman nails it again.

[Greyhound]

55. The "financial industry" is nothing but a drag on the real economy. An infestation of parasites

that will inevitably kill the host.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford

Too late to rec.:(