Wall Street Sees ‘No Exit’ From Financial Woes as Bankers Fret

[Benny Profane]

I picture a bar, Maori, and a second episode at the cemetary

And lots of sheep jokes, of course.

[philth]

And these guys aren't creating value. All they do is manipulate money. They aren't Steve Jobs, they aren't entrepreneurs or business or factory owners, they are stock brokers. The only jobs they create are low paying ones like house keeper (illegal immigrant), landscaper (illegal immigrant), barista and cooks.

Do you really believe all of Wall Street are "stock brokers". And no I'm not going to explain what the other 95% of the financial services industry does. I love how the OWS borg think its all the same. The number of people that actually traded CDO's and CDS's in all of wall street is probably less than 200 people.

[philth]

And I lived in New Zealand. Loved it.

[StuntCok]

Just to clarify a few things. The NZ house trade, as I understand it, is not to avoid tax, make a fortune or or even to live in. It is a portfolio investment for the uber rich, not the ones making 500k but the REAL swingers who can afford a NZ house with cash and not have it become a overly significant part of their wealth. Basically, it is a hedge on the possibility os social unrest, particularly social unrest directed by the wealthy. The people I know who have bought such real estate continue to do their jobs and live in NY, or London or wherever and hope never to have to actually move to NZ (but rest assured, NZ will take them. Like most countries, if you invest enough you can get a visa).

Also to clarify, these uber rich people are generally NOT stock brokers. The money men in finance are not agency people but people who handle bank capital- traders of some sort or investment bankers.

The real theoretical benefit of anyone working in finance, be it agency advisors, loan officers or prop traders is not the trickle down of their consumption, as DBT is suggesting, but the efficient allocation of capital. Competing capital ultimately decides if we make more cars or more houses or if Ford gets cheap expansion capital or Chrysler does. Getting these decisions "right" is one of the most important sources of wealth creation. Indeed, the use of financial markets to allocate capital in a competitive forum is one of the most important explanatory variables in explaining why one country is rich and another poor. Unfortunately Like democracy, it is an awfully flawed system, but it is a hell of a lot better than what is second best.

That is not to say that the system as it stands is not in drastic need of an over-hall. Lack of proper regulation that understands finances' role in the economy has allowed the banks to move away from their role as allocators of capital and risk, to the "printing" of money through the expansion of their balance sheets. Both stated financial leverage and unstated leverage.

Think of this, in the 2000's the financial industry grew so fast that soon 40% of profits in the US was coming from financial activity, which is ridiculous when you think that finance's role is to make the rest of the economy more efficient. If they were raking in 40% of the listed economy's profits, they were either doing a really bad job allocating or they were doing something else. Really, what they were doing is creating money (not wealth) through balance sheet expansion, be it on balance sheet through explicit leverage, or off balance sheet through the writing of derivatives and whatnot and taking a cut of this new creation.

There is also the role of "liquidity provision" that comes up as a defense of speculative risk taking by financial firms. Personally, I think this liquidity seems to come at too high a price. Speculation in the name of liquidity has created a CDS market, for instance, that at its hight dwarfed the underlying real debt market these derivs were supposed to be "insuring" by a factor of 10x and is at the heart of contagion in the banking system when it wobbles. The net effect of a credit event is zero, due to the fact that for every loser there is also a winner, but when the bets get so large and you don't know the exposure of your counter-party, you don't want to take the chance on their solvency and the money system dries up.

Not only does this liquidity provision lead to systemic risk, as I explained in the example above, but liquidity never seems to be there when you really need it anyway. Just TRY and unload debt derivs in a crisis. You will find that because the crisis was made all the bigger by liquidity providers, no one wants to deal and there is no liquidity!

So what is needed? Generally rules that allow financial institutions to go about their business as asset allocators but curbs their ability to over-expand their balance sheets. Specifically, the options are legion but my bias is toward regulation that allows bounded freedom rather than a guiding hand. Breaking up securities firms, and banks (again) would be a good start as would more stringent capital adequacy requirements that includes the leverage extended off balance sheet through derivatives etc. Anyway, I could go on and on but this post is making TGR posting feel a bit like work. I discipline myself against posting about politics, religion and economics but sometimes I lapse...

[Downbound Train]

Volcker rule, Glass Steagle, higher short term capital gains taxes, transaction fees, higher margin requirements, a strong SEC and CFTC for derivatives.

There is nothing wrong with an individual working legally to maximize his income for himself and his family.Unless you just want to do away with the concept of individual freedom.

Looks like the REAL culprit is the GOVERNMENT that set up the system that allows this evil.

[BigDaddy]

And Brazil is too expensive, maybe? From everything I read, that place is goin' off but it is getting expensive.
Might have a higher potential for zombie civil disobedience and tidal waves when apocalypse hits, but there's also a lot of jungle. Bet we hear about a revolt in Paraguay soon. It's been festering for a while.

Too funny... one of the country's being advocated by this billionaires club, is Uruguay. Have no idea why?

I'll hunker down in VT, where we have sheep, skiing and it's close to Ste-Catherine Street.

[4matic]

Looks like the REAL culprit is the GOVERNMENT that set up the system that allows this evil.

The government that passed Glass Steagle or the one that repealed it? The government that proposed the Volcker Rule or the one that opposes it?

Unregulated markets> Tea Party fantasy world.

[hutash]

There is nothing wrong with an individual working legally to maximize his income for himself and his family.Unless you just want to do away with the concept of individual freedom.

Looks like the REAL culprit is the GOVERNMENT that set up the system that allows this evil.

Give it the fuck up already. Greed is what does it prue and simple. If these bastards weren't so greedy there would be no need for government systems in the first place.

"Greed is good". G. Gecko

[iceman]

I picture a bar, Maori, and a second episode at the cemetary

And sheep, lots of sheep.

[iceman]

And lots of sheep jokes, of course.

heh, ^^^ I posted before I saw that.

[iceman]

See the thing about corporate greed is that it's neither good nor evil, it's simply the natural state of affairs. Corporations are amoral. Every company must be driven by the bottom line, and that's fine. The thing the Republicunts think is that if you impose some regulations, parameters, on what a company can and cannot do, the companies will simply quit trying to make a buck.

This is patently false. What they will do is attempt to circumvent the regulations to the greatest extent posible and then go about trying to make as much money as possible in the new environment. That is why government must regulate the playing field, because the corporations, left to their own, by nature cannot regulate themselves.

Take an easy one, like The Clean Air Act. Left to their own devices, companies will pollute to the maximum extent possible. That's what they need to do, they are slaves to the bottom line. But when the bottom line is changed, what is the result? Do the companies simply throw in the towel or rather does the air get cleaner and the companies still make as much money as they can in the new environment?

Governent regulation, by for and of the people, is essential to preserving and improving the life of the citizenry when capitalism left to its own devices is unable to respond to that need.

Similar to corporation, the -very- rich, in large part, are unable to resist the siren call of "more". But when the government says that 80% of "more" is all they can have, will they reject that 80%? Of course not. They'll hire lawyers and accountants and try to make it 81%, or 82%, but in the final analysis they will accept as much "more" as they can get. They're not going to take a vow of poverty, they're not going to quit trying to get "more", they're simply going to end up contributing more to the financial wellbeing of the populace than they would otherwise, while still behaving exactly as they always have done.

Government regulation is essential to the greater good. And no amount of petty greedy whining bullshit from the corporations, the very rich or their delusional hypnotized minions is going to change that.

It's not that difficult to understand.

[SeatownSlackey]

So what is needed? Generally rules that allow financial institutions to go about their business as asset allocators but curbs their ability to over-expand their balance sheets. Specifically, the options are legion but my bias is toward regulation that allows bounded freedom rather than a guiding hand. Breaking up securities firms, and banks (again) would be a good start as would more stringent capital adequacy requirements that includes the leverage extended off balance sheet through derivatives etc. Anyway, I could go on and on but this post is making TGR posting feel a bit like work. I discipline myself against posting about politics, religion and economics but sometimes I lapse...

And the ancillary "benefit" of removing excess leverage from wall st will be a reduction in profitability which will put real downward pressure on compensation. Enough to get some of the best and brightest to pursue careers that are more beneficial to society than I-banking? dunno but certainly a step in the right direction.

[BraddA]

See the thing about corporate greed is that it's neither good nor evil, it's simply the natural state of affairs. Corporations are amoral. Every company must be driven by the bottom line, and that's fine...
It's not that difficult to understand.

Agreed. Here's a blunt portrayal of the nature of business you refer to:

http://www.npr.org/2011/10/04/141033...creation-myths

[hutash]

Got to agree with pretty much Ice said, with one caveat, if we are going to consider corporations to have individual rights, as the supreme court recently did, then they have to behave as such with the moral responsibility that go along with those rights. This is why I find that ruling so troubling.

[BraddA]

Got to agree with pretty much Ice said, with one caveat, if we are going to consider corporations to have individual rights, as the supreme court recently did, then they have to behave as such with the moral responsibility that go along with those rights. This is why I find that ruling so troubling.

Money=Speech? WTF?

[skiballs]

Government regulation is essential to the greater good.

It's not that difficult to understand.

To much of a good thing , often has negative effects .

[montanaskier]

best Ice post ever?

[Downbound Train]

Give it the fuck up already. Greed is what does it prue and simple. If these bastards weren't so greedy there would be no need for government systems in the first place.

"Greed is good". G. Gecko

OK, I'm sure you have a solution for that. How much food is in your pantry? How much better is your life that the poorest of the poor. To them YOU are GREEDY.

Greed isn't good or bad. Saying greed is bad is like saying rain storms are bad. To some they are good to some they are bad but to both they are a force of nature that is impossible to do away with. Why whine and cry about forces of nature? Deal with it.

What do you want to do with that Brokers $500k? Take it away? Give it to the general fund of the US Treasury? Eliminate his job because YOU don't like how he makes his money?

There are environmentalists who would shut down every ski area and fire all the employees because that canyon should be left to nature.

"More people - More scars upon the land" - John Denver , Rocky Mountain High

Lefties are freedom sucking control freeks.

[Downbound Train]

See the thing about corporate greed is that it's neither good nor evil, it's simply the natural state of affairs. Corporations are amoral. Every company must be driven by the bottom line, and that's fine. The thing the Republicunts think is that if you impose some regulations, parameters, on what a company can and cannot do, the companies will simply quit trying to make a buck.

This is patently false. What they will do is attempt to circumvent the regulations to the greatest extent posible and then go about trying to make as much money as possible in the new environment. That is why government must regulate the playing field, because the corporations, left to their own, by nature cannot regulate themselves.

Take an easy one, like The Clean Air Act. Left to their own devices, companies will pollute to the maximum extent possible. That's what they need to do, they are slaves to the bottom line. But when the bottom line is changed, what is the result? Do the companies simply throw in the towel or rather does the air get cleaner and the companies still make as much money as they can in the new environment?

Governent regulation, by for and of the people, is essential to preserving and improving the life of the citizenry when capitalism left to its own devices is unable to respond to that need.

Similar to corporation, the -very- rich, in large part, are unable to resist the siren call of "more". But when the government says that 80% of "more" is all they can have, will they reject that 80%? Of course not. They'll hire lawyers and accountants and try to make it 81%, or 82%, but in the final analysis they will accept as much "more" as they can get. They're not going to take a vow of poverty, they're not going to quit trying to get "more", they're simply going to end up contributing more to the financial wellbeing of the populace than they would otherwise, while still behaving exactly as they always have done.

Government regulation is essential to the greater good. And no amount of petty greedy whining bullshit from the corporations, the very rich or their delusional hypnotized minions is going to change that.

It's not that difficult to understand.

You are over simplifying.

First, there are market forces that control things like corporate responsiblity. Regulation isn't the only way companies reign themselves in. And regulation, while neccessary, should be the tool of last resort in a free society.

Second, you are wrong that people don't make decisions to reduce production with small increments of change in taxes or regulation. They don't act in a vacumn. In a vacumn, if the government says 80% is enough, of course they'll take 80%. But if the government says 80% is all they get and another government says they can keep 90%. Guess what. Some jobs and some investment will go away.

That's where we are now. The US is not competitive on tax rates and - ESPECIALLY on regulation. The rich get richer because they can go elswhere. The ranks of the poor grow because the rich take their jobs elswhere.

[LeeLau]

^^^ whoa - whoa. DBT is actually engaging in reasoned debate? Oh but of course this is Padded Room and not Poliass

[iceman]

You are over simplifying.

I wanted you to be able to follow along.

[liv2ski]

best Ice post ever?

You know, I was thinking the same think. WTF?

I wanted you to be able to follow along.

Iceman is on fire today!!!!

[Edgnar]

Do you really believe all of Wall Street are "stock brokers". And no I'm not going to explain what the other 95% of the financial services industry does. I love how the OWS borg think its all the same. The number of people that actually traded CDO's and CDS's in all of wall street is probably less than 200 people.

Way to miss the point.

[Edgnar]

OK, I'm sure you have a solution for that. How much food is in your pantry? How much better is your life that the poorest of the poor. To them YOU are GREEDY.

Greed isn't good or bad. Saying greed is bad is like saying rain storms are bad. To some they are good to some they are bad but to both they are a force of nature that is impossible to do away with. Why whine and cry about forces of nature? Deal with it.

What do you want to do with that Brokers $500k? Take it away? Give it to the general fund of the US Treasury? Eliminate his job because YOU don't like how he makes his money?

There are environmentalists who would shut down every ski area and fire all the employees because that canyon should be left to nature.

"More people - More scars upon the land" - John Denver , Rocky Mountain High

Lefties are freedom sucking control freeks.

Iceman is over simplifying? Nobody said take all of this $500k away but you. Thats the thing, you guys think that raising taxes means taking it all. That isn't the point.

[Cono Este]

None of you know any real option traders. Our story is one of tears. We have all been wiped out by screen based trading. Once upon a time, I would not show up for work for less than a 50 cent credit for a front month, closing trade in a single issue. How about triple width relief for internet or genome issues? Or, a dollar's credit per month for a reversal in a hard to borrow, and generally shits and giggles driving every body from New York to Toyko crazy by leaning like an elephant on every order.

I dont how this kid makes 500k a yr today. He must be a real genius and worth every penny.