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View Diary: Why No One’s Occupying Factories (139 comments)

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  •  Don't blame the financial sector (1+ / 0-)
    Recommended by:
    kyril

    In the 1920s, financial sector wages+bonus reached unprecedented levels.  By 1929, the median salary+bonus in finance was higher, relative to the median US take home pay,  than at any time in the nations history.

    So, President Roosevelt decided to do something about it, calibrating fiscal policy to make investment banking that much less attractive.  By the 50s, the best and brightest from Stanford and Harvard were opting for careers far outside of finance.

    Well, during the last decade (but starting in the late 80s), financial sector wages+bonus once again reached the same relative level of the late 20s.  

    If you want to steer more Stanford and Harvard grads to jobs outside of finance, make those jobs less lucrative.

    Government has done that before.  And it can do so again.

    But don't blame bankers for responding to an incentive structure laid out by the federal government.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

    by PatriciaVa on Tue Nov 08, 2011 at 12:23:41 PM PST

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    •  Best of all possible worlds (0+ / 0-)

      direct Stanford and Harvard grads somewhere where they can't do any damage.

      Passengers: Feel free to rearrange the deck chairs, but please remember that the bridge is off limits.

      by happymisanthropy on Tue Nov 08, 2011 at 02:03:19 PM PST

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      •  Yeah, those super educated people are stupid... (0+ / 0-)

        Need to keep them away from the important stuff.

        Do you realize how stupid you sound right now?

        The obvious answers are wrong. That's why we aren't doing them already.

        by atheistben on Tue Nov 08, 2011 at 02:54:22 PM PST

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        •  This coming from someone (0+ / 0-)

          who believes that loaning money to people you know will never be able to pay you back, and then selling the loans to people who don't know they're radioactive, isn't fraud.

          Also signing back-dated affidavits isn't fraud.

          What other frauds that I pointed out are you going to deny or overlook?

          Who looks stupid here?

          Passengers: Feel free to rearrange the deck chairs, but please remember that the bridge is off limits.

          by happymisanthropy on Tue Nov 08, 2011 at 03:47:10 PM PST

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          •  No. Here's what I think: (0+ / 0-)
            loaning money to people you know will never be able to pay you back, and then selling the loans to people who don't know they're radioactive

            is fraud. That is absolutely fraud. That's just not what caused the subprime crisis.

            ...and I'm not saying there wasn't a minor level of fraud that occurred. When I got my home loan, they put there was a typo in the interest rate on one of the like 75 pages I had to sign (which all had the right interest rate). I went back two days later, resigned and backdated the page. Is that fraud? Perhaps. But it didn't cause the 2008 subprime meltdown. So, I don't know what you're talking about when you say back-dated affidavits were being signed. I really don't know what that's about.

            But I know that's not what caused the subprime crisis, because I know what did cause it. It's something a lot bigger than back-dating some documents. It was a systemic failure of risk assessment. It was a failure of financial incentives to loan officers. It was an exposure of a flawed relationship between ratings agencies and investment banks. It was a quirk about how the shorting of mortgage securities generated cash flows that could be packaged into the mortgage securities themselves - which is a big part of why it was so disasterous.

            But fraud wasn't the main element. The banks were issuing more and more mortgage securities because they were in high demand. The banks had people begging to buy mortgage securities. They weren't pawning them off on people - they were doing their best to meet market demand for their investment products.

            I could write dozens of pages on this stuff. I've done graduate school cases on this crisis already - which is why I'm greatly insulted by people here who present an argument that amounts to nothing more than "They're a bunch of lying fraudsters! Tear 'em down!" without knowing the details or being able to weight causality and while criticizing the people who have spent a lot of time in school and studying to really learn about the intracies of what happened. It's embarassing for this community.

            The obvious answers are wrong. That's why we aren't doing them already.

            by atheistben on Tue Nov 08, 2011 at 04:05:14 PM PST

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            •  It was fraud. (0+ / 0-)

              Not little nickel and dime fraud, I agree.

              It was a big fraud.

              It was the idea that finance can create wealth.

              It was the idea that computer models can make risk go away.

              It was the idea that the nastiest of people, acting with the basest of motives, can be trusted with our nation's economic future.

              It was the biggest fraud of all.

              Passengers: Feel free to rearrange the deck chairs, but please remember that the bridge is off limits.

              by happymisanthropy on Tue Nov 08, 2011 at 04:09:25 PM PST

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              •  (adding, obviously) (0+ / 0-)

                that the little nickel-and-dime fraud was absolutely necessary to make the big fraud look legitimate for as long as possible.  So no, an examination of the big collapse cannot afford to overlook the little frauds.

                Passengers: Feel free to rearrange the deck chairs, but please remember that the bridge is off limits.

                by happymisanthropy on Tue Nov 08, 2011 at 04:11:25 PM PST

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            •  Even the congressional paper that came out... (0+ / 0-)

              some time ago cites fraud.

              And you're missing the part where banks bet against their clients.  They knew the stuff was radioactive.

              Just how widespread was this?  Well, a real investigation might help in clarifying this.  But that hasn't happened, has it?

              Gee, wonder why that is.

              •  Towards the end, some banks (0+ / 0-)

                had some conflicting interests. Often the really smart guys in the investment arm at the bank figured out that MBSs had a resonable possibility of blowing up, so they bought CDSs to protect against this possibility while their lending arms didn't think there was a problem and continued lending.

                At the top level of "bank," there's the obvious conflict of interest and allegation of fraud. And a bank only had one employee both selling and shorting MBSs, fraud would be the most likely explanation. But, as I've said elsewhere, banks aren't monoliths. They have different people who work for them who have different opinions and assessments of the value of securities.

                The obvious answers are wrong. That's why we aren't doing them already.

                by atheistben on Tue Nov 08, 2011 at 04:38:27 PM PST

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        •  I didn't say they were stupid (0+ / 0-)

          I just wish competence were assessed on what people know, rather than who your frat brother is.  

          There should be a law in gov't that nobody can hire anyone who went to the same college they did, unless they can objectively prove they're the best candidate.  Ideally, that would cut out a lot of the nepotism and intellectual incest.

          Passengers: Feel free to rearrange the deck chairs, but please remember that the bridge is off limits.

          by happymisanthropy on Tue Nov 08, 2011 at 03:54:59 PM PST

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          •  True, but it would also cut the ability for (0+ / 0-)

            people to hire the well qualified people around them. Personally, I'm not in any frat or anything like that. I go to school at night after work. I know some really smart people at my school whose resumes aren't nearly as good as some of the not-so-bright people at my school. Since I'm around them quite a bit, I can distinguish, but that's not something I could easily do looking at C/Vs. So, there are drawbacks to such a law. But as you mention, there are positives, too.

            I think you just have to let it go, and hope the people who engage in the nepotism and intellectual incest get out-competed by the people who can hire the smart people from their schools instead of their friends. /shrug

            The obvious answers are wrong. That's why we aren't doing them already.

            by atheistben on Tue Nov 08, 2011 at 04:11:21 PM PST

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