What Good Is Wall Street? ,, Much of what investment bankers do is socially worthless.

[RedEarth]

What Good Is Wall Street?
Much of what investment bankers do is socially worthless.
by John Cassidy



For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing.

Related LinksAsk the Author: Join a live chat with John Cassidy about Wall Street on Wednesday, November 24th, at 11 A.M. E.T.Primary Sources: Paul Woolley’s chapter from “The Future of Finance: The LSE Report.”
KeywordsWall Street;Vikram Pandit;Citigroup;Citibank;Award Ceremonies;Economy;Investment BanksA few months ago, I came across an announcement that Citigroup, the parent company of Citibank, was to be honored, along with its chief executive, Vikram Pandit, for “Advancing the Field of Asset Building in America.” This seemed akin to, say, saluting BP for services to the environment or praising Facebook for its commitment to privacy. During the past decade, Citi has become synonymous with financial misjudgment, reckless lending, and gargantuan losses: what might be termed asset denuding rather than asset building. In late 2008, the sprawling firm might well have collapsed but for a government bailout. Even today the U.S. taxpayer is Citigroup’s largest shareholder.

The award ceremony took place on September 23rd in Washington, D.C., where the Corporation for Enterprise Development, a not-for-profit organization dedicated to expanding economic opportunities for low-income families and communities, was holding its biennial conference. A ballroom at the Marriott Wardman Park was full of government officials, lawyers, tax experts, and community workers, two of whom were busy at my table lamenting the impact of budget cuts on financial-education programs in Vermont.


Read more http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy?printable=true#ixzz16DPLM7vM

[dkf]

1. Well I guess if you feel the capitalist system is worthless you might agree.

Investment bankers help companies and entities get funding. The problem is that they've gotten too cute with all these crazy products and they've let their greed get to them. But the function they provide is a valuable one and we just need less corrupt people in there. Probably we need to change the way they are compensated to prevent abuse.

[unblock]

3. there are several problem with the way it's currently set up, and the merger of banking and trading

is probably the biggest.

back in the days before glass-steagal was whittled down and finally done away with completely, banking was one business, and trading was another. the banking companies, on which real businesses and the economy as a whole relied, were relatively conservative and subject only to genuine economic risks. the trading companies, were free to speculate and gamble to their hearts content, and if they lost money, for the most part, the damage was contained.

the merger of these functions allowed the banking system to effectively abuse their vital role in the economy to put themselves in a gamble for a private-win-or-public-loss wager.

you are right, though, that the incentive structure doens't help matters, as potential long-term downside is readily ignored in the face of a potential short-term bonanza, especially when your own downside is limited to getting fired and finding a new job doing largely the same thing at another company.

[yurbud]

4. or limit their function to JUST what you said in your first sentence. I can't figure out why

shorting and allowing someone to buy a company solely to dismember it are legal.

A more profound solution is needed like putting enough workers on the board of directors to stop outsourcing, dismemberment, and goosing profits by firing people and shutting down plants that could still make a profit or at least break even, but not a big enough profit to suit rapacious financiers.

If I recall correctly, that was the problem with some newspapers that were shutdown across the country: they weren't necessarily losing money as much as not posting a wide enough profit margin to please the degenerate, spoiled, inbred trust fund babies of Wall Street.

[bread_and_roses]

5. Yes, capitalism is "worthless" - thought that's too mild a word

Capitalism is a death machine. It's sole function is to take wealth from the commons and transfer it to a few at the top of the pyramid. It's rapacious depredations have reached the point of not just killing individuals but of entire ecosystems. It is a mortal threat to all life on earth.

There is really only one thing you need to know about capitalism. There is enough food (still, amazingly) produced to feed everyone on earth. But billions go hungry and millions starve. Capitalism fails at this most basic of distribution problems. Think about that a while, and exactly what capitalism is, how it works, what it does, and where it is taking us becomes crystal clear.

[mbperrin]

6. Yes, the capitalist system is worthless, worse, it's destructive of everything

an economy is supposed to do.

An economy is supposed to maximize production of goods and services.

The capitalist system is only supposed to maximize profits.

These two are mutually exclusive. Read Adam Smith's Wealth of Nations to see how nations prosper. In short, labor produces value.

The current system is nothing but leeches seeking to insert themselves between producers and revenues, exactly the same as Mafia protectors.

The sooner corporations as a business form are outlawed, the better.

[BrklynLiberal]

2. Wall Street is nothing more than government sanctioned gambling..

Savings banks could do just as well financing businesses that need money...without all the trickery...