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Crybaby bankers

Be sure to sharpen your pitchforks before reading Gabe Sherman's New York magazine schadenfreude-fest about pouty investment bankers, who from behind the cloak of anonymity complain about how unfair life has suddenly become for them. It turns out the bankers are "angry" because they are having to pay higher taxes and because their plutocratic bonuses seem to be a thing of the past. As Sherman notes, "In a witch hunt, the witches have feelings too" -- but then, one could sympathize with the witches because they were singled out unfairly by an unruly mob of religious bigots. The fury at the bankers, in their callous cluelessness and their reckless endangerment of the global economy in pursuit of an extra Hamptons mansion or two, seems altogether justified and rational. The bankers aren't some misunderstood group of well-meaning citizens; they are a group that prided themselves on their sharklike mercilessness and tenacity in extracting every last bit of advantage for themselves, and they would smirk when they rehearsed the exculpatory excuse that such single-minded greed had the inevitable by-product of economic efficiency. They were wrong about that, and they should probably get as much forgiveness as they would give us if we were opposite them at the bargaining table.

When bankers were capitalism's winners, they had no problem lording it over everyone else; it seems appropriate they taste the full sting of loserdom. Sherman writes that Wall Street bankers, analysts, and traders "had believed Wall Street was where the winners of American capitalism went. Now they were feeling shamed for their work." To which I would say "good" -- only the rest of the article makes it clear that they are a group incapable of feeling shame.

What I found most irritating is the expression of overclass entitlement in such complaints as this:

“No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.
This is a good reminder that those cretins at "elite" schools really do think they are better than you, regardless of what they or you do -- or rather that whatever they do is inherently more important and valuable because of their pedigree. As Sherman puts it, "they see themselves as the fighter pilots of capitalism," to which Time blogger Justin Fox replies, "Actually, they may more closely resemble the bumper-car drivers of capitalism, spending more time tangling with each other than doing anything useful."

From the sound of the people whining to Sherman, the bankers lost sight of the principle that meritocracy have some clear relationship to merit. Instead they assert a marketocracy and claim that it amounts to the same thing. One banker declares, "The truth is, the market determines what people are worth." Um, that's not the "truth" as in being some fundamental law of society. That's an ideological precept that has been concocted to rationalize drastic income inequality. And do bankers really want to start measuring what people are "worth" by the money they make, by market performance, at this juncture? Considering all the value banks have destroyed, that must mean the investment bankers are actually "worth" less than nothing -- they owe society several years of their working lives, by that sort of accounting. The "truth" is that people who work for no other reason than money will take as much as they can get at all times, unless some greater authority sets a limit. Will that limit seem arbitrary to them? Of course. But the amount at which they would feel content will always be arbitrary as well, since it is always at least one dollar more than whatever they are currently receiving. Listening to investment bankers' advice on compensation would be like canvassing for ideas about drug-law reform in the parking lot at a Dead show.

Sherman recounts how Wall Street came to gobble up a greater percentage of the corporate profits earned in the U.S. economy, which supplied them with the firepower to press for more financial deregulation. He quotes economist Simon Johnson, who's article on the subject in the Atlantic is essential reading: "“The system as a whole became unstable because Wall Street developed this disproportionate influence. It’s an entire system of belief they had to create." That belief system involved the idolatry of deregulated markets (which basically render them less transparent) and risk-spreading procedures which maximized the cut for middlemen -- which is essentially what investment bankers are. But the ideology they espoused claimed that this process was generating economic efficiency, not profits for parasites. Perhaps at the dawn of the financial free-for-all, bankers worked harder to find better ways to allocate capital, but by the end they were merely rent seekers who felt entitled to their cut by virtue of their pedigree, by a sort of plutocratic fiat. Their hard work went into what Johnson has labeled "tunnelling" -- insiders funneling money out of legitimate enterprises because they know the end of the bubble is near.

In short, the New York article succeeded in accomplishing its goal with me; it made me disgusted and angry. Ryan Avent implies that there might be something irresponsible in this:

Personally, I find this all very disconcerting. A round of all-out class warfare would be good for no one, and I generally agree with the idea that markets ought to set compensation levels. The brazenness with which executives are disregarding public concern over these issues is just adding fuel to an already uncomfortably hot fire.
I don't agree that "markets" (in practice, often boards of directors) set compensation levels appropriately -- it seems like a market for lemons, at this point, and is ripe for reform. And if it takes class-warfare rhetoric to steel the resolve of politicians to do something, than articles like Sherman's are probably valuable. The problem is that financial journalists do little complaining about executives' brazenness during ordinary economic times, when political action might actually work as preventive care rather than triage.

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