Wall Street is worse that a Casino - it has become a crack dealer. The "Crack" is the high got from easy money. The Wire is more than a metaphor!
Jake Tapper of ABC made this important point this weekend:
As the Bush Administration asks for close to a trillion dollars to prevent a worldwide financial cataclysm, here are some numbers you might find interesting -- courtesy of the ABC News Research Center and ABC News' Barbara Paulson.
In 2007, Wall Street's five biggest firms-- Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley - paid a record $39 billion in bonuses to themselves.
That's $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.
Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines --their worst year since 2002.
This type of pay is corrosive and has many long term impacts on the world that extend beyond any moral judgment. As I walked the dogs today - I began to see more clearly what these were. My thought are rooted in my own reasons for leaving this market - so I will start there.
In 1984, I made a crucial decision for me. I stepped away from the line in investment banking and joined the staff. All my friends thought me mad. I had in the late 1970's been the institutional sales person with the largest numbers in the Canadian system. The Middle East and Saudi in particular had been my territory. In the early 1980's I had joined CIBC in London to set up their Eurobond operation. It had gone from nowhere to top of the Canadian Dollar league tables. I was not the top of the A list in London but I was definitely a player.
But, in 1984, I knew that if I did not get off this, my marriage would fail and I would have sold my soul. For other than crime - no other way of making a living paid so well. If I staid - this would be my life.
I wanted to stay married - though Robin did not see that at the time - and I wanted more freedom than being a Capo who could never leave. I also wanted to do more complex work. I wanted to see if I could make an organization grow and work well. I knew that if I did not leave now - I never would be able to go in the future.
I tell you this because in my story are the reasons why the pay system in investment banking is so corrosive and has to be changed.
First of all, like drug crime, it sucks the best kids away from all other ways of making a living. In the inner cities it is not the incompetent boys who get into the drug business, it is the kids with talent and drive. They mostly end up on the dark side. So too with investment banking. Most of the most talented kids in school aspire to join Goldman Sachs.
Because of this attraction of huge piles of money, this talent is not available for the other more important and productive parts of our society.
Secondly, investment banking no longer mainly works to ensure that the productive parts of our world are financed. Now it mainly plays with money. It was in 1984 that the power began to shift from the Investment bankers who financed projects to the trading rooms that dealt for their own book. Most of the action on Wall Street - where most of the serious money is made and hence where the attention is paid - is connected to trading for the house - either for a bank or for a hedge fund.
So the huge paydays pull the best people away from the productive parts of the society and economy and into activities that are no better that drug dealing. For this giant casino is absolutely toxic as we are discovering.
The great Casino undermines the real world. It destroys the value of our lives. It too makes us all addicts of easy money. They are the crack dealers and we are the punters. They make the money and we become helpless and impoverished.
For like drugs, easy play money feeds on itself. All the imagination and energy go into making the payday even bigger. All the imagination goes into new ideas of how to get us to do the wrong thing. So as we are finding out, the piper who pays for all of this is us. We pay in losing our homes and we pick up the bill for the dealers.
Any system of reform has to look into the "System". At the heart of it is how people are paid. If we don't change this - then nothing will have changed and we will end up in even worse trouble.
