In defense of those on the Street

Park Place Station, New York City.

It was late in the evening and I was returning from work. As I rushed through the desolate station to catch my 3 train, I noticed a young man sitting near the steps. His briefcase lay a foot away from him, his tie hung loosely and his face was buried in his palms. He was audibly sobbing, shoulders heaving.

I stopped and briefly considered whether to speak to him. My Indian upbringing said I should offer a few words of comfort. But another part of me screamed inside that I was intruding, that I should ignore him and move on.

Maybe he has just lost his job, I thought, or maybe he just broke up with his girlfriend. Or did someone close to him die? What would make someone cry so bitterly and break down so completely in public?

I didn’t want to intrude on his sorrow. So I swallowed my words and ran down the stairs, just in time to catch the train that was just pulling in.

“He’s missing the train!”, I thought to myself in sudden alarm, but I doubt that he cared.

****

Three years later, I suddenly found myself thinking of that young man, all through the weekend and during the last few days.

Actually, I was also thinking of others like him, the tens of thousands of people in Wall Street who are going to be looking for jobs. With the economy being what it is, and with other Street firms fighting for themselves, not all of those laid off workers will find jobs.

I am especially worried about the Indians (and other international workers) among them. Whether on a H1-B visa or awaiting a green card, Indians tend to be especially vulnerable to layoffs. It’s bad enough losing one’s job, but it gets worse because you then become “out of status” – you have to return to India (or elsewhere). How does one sell the home, pull the kids out of school and upend one’s life at such short notice?

Immigration issues apart, I feel awful for everyone who will lose their job. Yes, even the investment bankers among them.

I have been reading a lot of comments in the Internet the last few days about how those bankers deserved what they got. People are envious, they are gloating, they are revelling in others’ misery.

It’s amazing how much joy they are able to find in others’ sorrow. I wonder if these people are plain malicious, or merely misinformed. I am hoping they are just misinformed.

***

I would like to start by pointing out that not all the employees of Lehman or Merill Lynch are investment bankers. There are the traders, sales people, the equity and fixed income research teams and then those in private equity and investment management. But no matter, let’s call all of them bankers.

Here are some of the sentiments I came across :

“Those bankers get paid a lot, and they don’t deserve it anyway. I am glad to see them let go.”

“All those guys who got placed on Day Zero and thought they were kings, now they are out on the Street! Ha!”

Pay is just one aspect of a job, and in fact high pay is often used to make an undesirable job more attractive. In the old days, automobile assembly line workers were paid very highly, for who wanted to spend their entire lifetime fitting one particular bolt on a car?

If you look at it, i-banking jobs are no less unattractive. Long hours spent doing endless tweaks on Powerpoint presentations or excel spreadsheets, face time… investment bankers work around 90 hours every week. Think about it, all you envious souls who work 40 hours and go home exactly at 6 pm to play with your dog. So if i-bankers get paid twice what you get paid, it’s still the same (or probably lower) on a per hour basis.

In my years at Columbia, living close to Harlem and even walking through Harlem several times, I rarely felt unsafe. But every summer, there were muggings, and invariably, these were the poor i-banking summer interns returning home at 3 am from work.

Think about the stress one goes through to be able to work 90+ hours a week. There is practically no social life outside work, unless you can sacrifice precious sleep to be able to socialize. If you can manage with four hours sleep every day, yes, you can have the semblance of a life.

If you live in New York City, then 50% of your pay goes in taxes anyway (yes, 50%). If you can spend long hours commuting from Jersey or Connecticut (and sleep on the train), you can probably shave off 4% on the tax rate. But when you work 90 hours a week, it’s best to live close to work. That means atrociously high rents that take away some more of your pay.

If you decide to have kids, then you would need a non-working spouse, or a live-in nanny. Compare with most families in the US, which have both spouses working.

Speaking of marriages, the long hours take their toll on many marriages too. The constant stress takes its toll on relationships and on health.

I could go on and on. I don’t expect you to feel sorry for investment bankers – they have chosen their lifestyle, just as you have chosen yours.

Why are you still envious of them? And if you really like the idea of being an investment banker, why don’t you try and become one of them?

“The guys who lost their jobs were responsible for the whole financial crisis anyway, so why feel sorry for them?”

If we are to start apportioning responsibility for the mortgage crisis, I wouldn’t know where to start. I would certainly not start with Wall Street.

Why not start with Main Street, and how people with $30,000 incomes thought they could buy homes worth $1 million? Why not start with the people who thought they could make a quick buck because housing prices would always appreciate?

Why not start with the financial irresponsibility of people who borrowed again and again against the “home equity” of their homes to buy jewellery, and designer clothing, and stuff on ebay?

Why not start with the banks who lent money to these people, knowing fully well that they (the banks) would not have to bear the risk for all these loans?

You can blame the lack of regulation and oversight, and many people blame Greenspan for presiding over the creation of an asset bubble.

Wall Street definitely shares some of the blame, and even there, why should the bankers in only a few institutions suffer?

***

Let me add a disclaimer – I am not an interested party, I have no vested interest in saying any of this. But my heart does go out to all those on Wall Street who face layoffs.

I feel especially sorry for the ones who have been working less than five years. They have endured the awful side of Wall Street, but most likely haven’t had much chance to reap much of the benefits.

I also feel bad for the Indians (and others on work visas). Being laid off carries a huge price for such people.

At some level, I also pity those misguided gloaters, including some who cannot look beyond the veil of envy and see the real suffering of their own classmates. But I admit, I don’t feel too sorry for them.

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64 thoughts on “In defense of those on the Street

  1. empty vessels make more noise, and cribbers always find the grass greener on the other side.

    lite le lo….

    Lekhni: You are right, but I found those comments too awful to ignore. So I just had to write this πŸ™‚

  2. Lekhni

    I agree with you. In reporting, I find it distressing to note that ‘bankers’ are conflated with ‘investment bankers’. That ignorance naturally then spreads across the readership of such reportage.

    In fact, the working joke in most i-banks is that being an i-banker is a perpetuity of working long hours. First you work long hours to make money and make MD, then you get divorced and lose all the money so you work harder to make even more money, then you get divorced again and on and on it goes.

    It is almost impossible to be an MBA and not know someone who did not lose his job. Almost always ‘his’. The ‘hers’ in such jobs are rarely married while the ‘his’ in these jobs almost always are, with stay-at-home wives holding the fort and the children together. Then poof! The job is gone. It can be as debilitating to them as it is to the holder of relatively lower paid job. Having lived only for their jobs, many of these men have no other life interests. A bit like those retired people who define themselves by their jobs and after retiring, crumble and wait to die… A very Valmiki and dacoity type story in many ways…

    The sheer numbers are staggering in themselves. This recovery will be a long haul, and provoke some serious soul-searching esp regarding regulation.

    Lekhni: I agree. It’s true investment bankers are either men (mostly) or single women, and that’s a whole blog post by itself. It’s also true that for people who have no outside interests apart from their job, and who define themselves by their job, the ax is much harder when it falls 😦

  3. Couldn’t agree more with your post….But I also feel that the folks who ran the place had their chances to shore up their company but refused to face reality…. Hubris at the top causes the pain for the ordinary folks at the bottom…..

    Lekhni: True. The irony is that the guys at the top all have golden parachutes – big, fat severance packages. Even the guys in the middle have nest eggs and contacts. It’s the ones at the bottom who really suffer.

  4. Layoffs are bad… regardless of the industry…. Getting laid off in a country where there is no family support is even worse…

    Thanks to Globalization the phenomenon is worldwide… Bangalore is seeing its share of firings as well…

    Fingers crossed..

    Lekhni: I agree, all layoffs are bad. In a booming economy, layoffs are not as painful because one can turn around and get another job very quickly. These are not such times 😦

    I am worried about the impact on India too..

  5. Lay offs are bad. Period. My company just laid off an entire dvision a couple of weeks ago. People who had worked for 30 years suddenly out on the street. People who are only earning members, with EMI and school kids. Out on the street. And the saddest part in India, is that there is a bit of a taint that sticks to one, so the market value and the ability to get a job depreciates. So whether its wall street or wherever, it still sucks.

    Lekhni: I agree, no-fault layoffs are such a new phenomenon in India, people think you must have been fired – not your future employers so much as your relatives 😦
    And being out on the street in your 50s is awful, I agree. It’s not easy to find another job at that age – it’s actually much easier for a 50 year old Wall Street analyst to find another job than for a 50 yr old in India to find another job..

  6. Bravo, Lekhni, for one of the most thoughtful, articulate and thorough pieces I have read on this topic.
    It’s people like Stan O’ Neal and Chuck Prince who make my blood boil.
    Kamini.

    Lekhni: You can add Dick Fuld to that Hall of Shame. He had so many chances to sell..hubris is exactly the right word. I am still waiting for him to address his employees. Yes, my blood boils too..

  7. Awesome piece of work – I just met a taxi driver on way to Heathrow -Armani watch – latest phone – n a Financial Times newspaper – not for me – but he had just read it n kept it aside – I was curious – but then it was England n he was British – why intrude- we were generally chatting when he explained that he was an equity trader – N as usual the Indian upbringing ; we started talking quite a bit about what happened- it was quite sad – but he was very happy – driving a taxi made him the boss – he could work whenever he wanted n take holidays accordingly – but remember I am back in India – I can’t start driving an auto 😦

    I remember when I started my course people said the IB division would set me for life – Haven’t people heard – High pay , higher risk –
    Why are we always blamed for everything ??!! – Its a few rotten eggs

    Now the situation is so bad – n I have been saying this time n again we fret reading emails – imagine layoffs even before you start work – this has happened , n NO i did not read this anywhere – but this happened to my classmates – we are offered traders jobs with no base salary – where do we freshers go ??!!

    Connecting the dots is the way to go – may be a few years down the line I can blame this situation like we all do – and use it as a valid excuse….

    Lekhni: I understand 😦 It’s not the best time to graduate, it is, in fact, the best time to go back to school 😦 And you are absolutely right – the higher pay comes at a price, and people either don’t understand that, or don’t want to. Good luck and best wishes in your job search !

  8. Very well put! It comes across so good because you know what you are talking about. Unlike others.

    Lekhni: True. I can see there is a lot of misinformation out there that affects people’s perceptions and opinions 😦

  9. Layoff are affecting emotionally , fianancially and mentally. I have witnessed the crude round of lay-offs myself last year. It sent shievering feel thro’ my spine when my team mate got laid off. Aweful !!

    Lekhni: I agree. I hope your team mate has found a good job ! Yes, layoffs do awful things for your confidence and it takes a long time to recover, even if you get another job pretty soon..

  10. you know, i’d be perfectly okay with what you said, if it weren’t for the fact that almost every i-banker i’ve met wasn’t so *arrogant*. and convinced that they were the smartest people in the world. and didn’t measure others by the size of their paychecks, thereby arrogating for themselves the pole positions in their insufferable worldview.

    money isn’t everything / pride comes before a fall / our society really had this coming.

    sorry for the discordant note.

    Lekhni: TR, two things – first, not all “investment bankers” are arrogant. I know plenty of the non-arrogant ones too, so the sample you met is not in any way representative of all i-bankers.

    Second, it takes a certain kind of person to be an i-banker, and that is someone who is willing to put in really long hours at work and place work above all else. This sort of person is willing to make all these sacrifices for economic enrichment. It’s a trade-off, like any other trade-off we make in our lives. They do without the vacation/ family time/ time to read a book/ watch a movie etc. all so that they can get ahead economically. So are you surprised that they judge people by paychecks? That’s the yardstick they apply to themselves as a measure of success..

    Your statement that money isn’t everything is part of your own value system. What you are really doing is judging their value systems. I don’t understand why more money equals pride. I have also met investment bankers who make their money and turn into philanthropists after they retire.

  11. This is an insightful write up. Most of these blame statements come from people who try to compare themselves with others who have more.
    “Oh look, he is got a BMW, Phew, I wish I can afford one! may be I should have done MBA, these MBAs are paid really well”
    Rather than being happy with what they have they try to pinpoint at others and see what they dont have.
    It is certainly possible that the iBankers made some mistakes that might have caused their layoffs, but it is evil to place the blame squarely on the already wounded souls. You are right about people buying stuff that they can’t afford, I have seen it happen myself. It is certainly too much to buy $2000 Handbags, when you didn’t even act as a side actor in a movie.

    Lekhni: You are right, when I hear people gloating about their classmates who prided themselves on joining Lehman and are now out of a job, I wonder how much of it is sheer envy 😦

  12. Pingback: Wall Street Woes « Maduraiveeran’s Blog Marks

  13. Excellent post, Lekhni.

    Can’t we gloat in general (and in abstract) and still show our sympathy in particular (and for the individual)? πŸ™‚

    Lekhni: I have no issue if you want to gloat in particular about the CEOs and the top brass – all I ask is, spare the poor junior employee (< 5 yrs experience, as I said) who is going to be the most affected, even though he/ she is the least at fault πŸ™‚

  14. Very informative post Lekhni. We are on green card as well, so it’s a little worrying when the economy is going down each day. But it’s a gamble we are willing to take and there is nothing to lose. Not a bad idea if eventually we have to leave everything here, and return to India or Malaysia πŸ˜‰ Get a chance to meet our families and friends…

    Lekhni: That’s the spirit πŸ™‚ Though I hope no one has to go through being forced to leave their job/ move if they weren’t planning to..

  15. Lekhni, you say: “If we are to start apportioning responsibility for the mortgage crisis, I wouldn?t know where to start. “

    If a similar thinking were prevalent when WS was doing great – that it’s doing great because so many others have contributed to its success, maybe people would be more sympathetic? But too often, any success is attributed to the brilliance or skills of a single CEO, or to put a shine on “individualism” or to show that “free-market” works and we don’t need regulations. So, bouquets and brickbats both need to be accepted – one can’t accept one and decline the other. πŸ™‚

    I still remember reading an op-ed (hagiography would be more apt) about Jeffrey Skilling in WSJ after the Enron scandal broke and while he was being tried in court, and there was no sense that the writer – or Skilling, for that matter – actually grasped the errors of Skilling’s actions and impact on others. It made me sick to my stomach to read such trash which blithely ignored facts on the ground and was uncaring about the fact that people lost their life savings. While I’m a very irregular reader of WSJ, and it’s possible that they published many articles and op-eds highly critical of Skilling and co. which I missed, but that’s what I took away from my limited reading. It’s no fun to lose a job, but with such hubris and arrogance prevalent and promoted, is it any wonder that you are reading some unsympathetic comments?

    Lekhni: Amit, we are not talking about Skilling or any other CEO, we are not discussing CEO pay here either. I am talking about the regular Joe, junior emloyees with less than 5 yrs experience. I agree with you on the hubris on CEOs (and I’ve already mentioned my opinion of Dick Fuld in my response to Kamini).

    I really like Mango Juice’s response too – I think he amplifies my point on how the average person is not going to remain unscathed if there is trouble on Wall Street..

  16. @Amit- I don’t think Lekhni is sympathetic to either Fuld or Cayne who have oodles of wealth, it is about the regular Joe and Jill in the street, let us separate the issues. We are not talking about the Skillings of the world but the folks in the street who work like a donkey, get abused by their boss, feel under appreciated and over worked, know that they can be restructured away in a heart beat…. you might say they get paid for it, absolutely but that pay always comes at a price. Are there arrogant SOB’s in the street, yes but from my own experience I have seen more normal persons than the typical stereotype of an arrogant alpha male, the know all types…..

    Remember this, Wall Street may be flawed but if we allow these firms to fail you may not get the next student loan or an increase in your credit card line or a mortgage for that matter. If you get it, it will come at a cost 3 to 4% higher than what you pay today, small and medium sized companies will fail as they will not be able to refinance the maturing debt which was funded through Wall Street, this will result in higher job losses and the vicious cycle will continue.

    Today it is money market funds, tomorrow it will be your 401K, can u think what Depression would feel like, 20% + unemployment, life savings destroyed, home prices down 50%… That is what we are talking here.

    Let us pray that we don’t ever come to that situation… every passing day after LEH’s collapse this scenario looks more and more plausible.

  17. Mango Juice, I do understand the issues and what needs to be separated and what not. I’m talking about perceptions that people have and a possible reason for their unsympathetic comments.

    “Remember this, Wall Street may be flawed but if we allow these firms to fail you may not get the next student loan or an increase in your credit card line or a mortgage for that matter.”

    Uh, why does that sound like a ransom note? πŸ˜‰
    If you think that it’s fine to bail out private firms on taxpayers money, then let’s admit that “free-market” doesn’t work. You can’t have your cake and eat it too.

  18. @ Amit

    The ignorance – and shall I say, arse-kissing also – of the mainstream media when reporting on complex matters is eye-watering. There is no mention of the H-word (hedge funds) anywhere in the coverage of all this anywhere in the UK. If you ask a banker, however, you get a starkly different view. The bloodbath has just begun and it is widely believed in London that Morgan Stanley and Goldman Sachs are next because the business model, and I quote a seasoned banker I spoke with y’day, is based on screwing lots of people over in a non-transparent manner for too long and that is fundamentally going to change.

    I do not want to tempt fate by writing this here since I am making money off them but the only people still afloat are one category of my clients, which, no coincidence, are by far the least, if at all, regulated players in this game. The day the news of the Lloyds-HBOS talks was revealed, I was watching breaking news on a TV in the foyer in the building of a company I was meeting in a few moments. The share price went up and down unbelievably and in about 2 minutes gained 8.78%. It was shocking. That is clear evidence of market manipulation. The deal was closed at 232p when the price then was about 186p but one could say that Lloyds paid a premium in return for suspension of all anti-competition enquiries etc. No prizes for guessing where the stock manipulation emerges.

    You are right – in institutions, individuals are given credit too fast (e.g. see Gordon Brown in treasury versus now blaming ‘global conditions’) and external conditions laden with discredit too fast as well.

    Neither prevents the little guys being screwed though… None of my friends can be called a “little guy” but many have kids at home and not always a wife who earns any major sums…

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  20. Couldn’t agree more. Agree with Shefaly too, about the silence over the role of the hedge funds.

    Lekhni: I read your post too, and I agree. But I disagree with Shefaly on blaming hedge funds. What is it exactly that hedge funds are supposed to be doing wrong?

  21. So,true..Just this morning I read an article in the newspaper which said that the bankers deserve it. And they should sell of their villa and stuff.

    There are going to be some very dark days ahead. And its foolish to assume that only bankers are going to be affected!

    Lekhni: You are right, the people who think Wall Street can be affected and Main Street can get away unscathed are day dreaming..

  22. I really liked this post, and I too would have reacted like this if I heard someone say any of the things you mentioned. Such jealousy is pitiable. I hope things get better fast…

    Lekhni: I hope so too..it’s all quite worrying.

  23. I’m going partly with you, and partly with TR on this one.

    I think the general gloating isn’t directed at individuals, but at the system itself. You live in London or NY, and you read about all these extravagant parties and overblown bonuses, and it’s hard not to feel resentful. As TR says, they made it a point to be known because of their job and the money, and that’s what people are focusing on now.

    I also think most people feel that they are in a way responsible for their own downfall. Yes, people were stupid enough to take the mortgages, but then everybody wants to suspend disbelief and believe they are different and things will work out for them. Yes, the banks were greedy and lent out those mortgages. But LB and BS and ML bought the packages, didn’t they? Because they thought they’d make a profit from it.

    That said, this resentment is a generalised feeling. Because if they knew people who had lost their jobs, I think most people would be hard-pressed not to feel some human sympathy.

    Lekhni: So it’s fine if people thought they’d all get million dollar houses even if they could never pay for them, but Lehman and Morgan Stanley and everyone is wrong because they did their job of selling mortgage securities? The greater-fool-theory started all the way from the people who were house flipping, if you ask me.

    I am not defending Wall Street, but I amazed how easily people forget everyone else’s part in this mess.

    What I take away from your comment about bankers is that people are gloating now because they were envious of bankers before… I don’t understand, is it somehow wrong to make money? And how does it matter to us how others choose to spend their money – whether they throw extravagant parties or buy tens of Manolos ?

  24. Mostly with the Prof on this one. The day I happen to go to a dinner where the i-bankers aren’t talking about their bonuses, I will change my mind. Also one more to add to TR’s list – i-bankers tend to be the most boring people one meets. This is mostly because they don’t have a life outside of work but well, they chose it. Yeah, there are exceptions but when you live in London or NY, there are so many of the stereotyped ones that one tends to overlook the exceptions.

    But like ??! says, I don’t think any of us don’t feel sympathy for individuals who have lost their jobs – just that I don’t necessarily feel sorry for the collapse of a system that seems to encourage, demand and worship qualities such as arrogance and aggression. Ya ya, not like the rest of us are much better but there is a huge degree difference, I’d say.

    Lekhni: You know, if you find i-bankers boring and don’t like their conversation, maybe you shouldn’t go out to dinner with them πŸ™‚ And I don’t mean to sound rude, but hey, there are boring people everywhere! Are you saying that i-bankers should be laid off because they are boring and they boast? (That’s the sense I am getting from your comment, correct me if I am wrong).

    I agree with you that they chose their life, just as we did ours. So why is it that we make value judgements about their life, and why is it that we find ourselves devoid of basic human compassion when talking about someone who has just been laid off ?

  25. Let’s suppose veena is right and i-bankers are indeed the most boring people on earth. Why should boring people have to lose their jobs and have others gloat? I don’t get the connection.

    And yes Lekhni, you’re so right. An i-bank comprises of all kinds of people – when it goes down it doesn’t take just the managerial level, but a whole bunch of people who depend on the i-bank for their livelihood. Right from the cleaners to the guy who sells fast food right outside. As for bonuses, not everyone makes bonuses like traders do. There are people in research, in sales who don’t get that much money. Perhaps people should read up a little on i-banking and what it comprises before blaming “boring people”.

    And if people can boast about their kids, their houses, their vacations and what not – why can’t people talk about bonuses. Why is that any reason to not feel any empathy?

    Lekhni: I agree, I didn’t get the connection between being boring and how that justifies being laid off either πŸ™‚

    I also agree that everyone boasts about different things – how is boasting about your kids any better than boasting about your bonuses ?

  26. what a pathetic sob story! It is not gloating or taking pleasure in other people’s misfortunes. It is rather hoping that people will recognise the absurdity and injustice underlying the whole system – the system which distributes risks and privatizes profit (as it happened with the nationalization of troubled firms). The system that deregulates the financial markets and then cuts down on pensions and social securities. system which takes from the poor and gives to the rich. I will suggest you save your tears for some more worthy cause and instead try to read some books and then think. the gloating people were merely hoping that all this will make people rethink but it has rather inspired these pathetic sob stories.

    Neha’s sympathy for “cleaners” and “guys who sell food” is even weirder and stupid in its reactionary sentimentality. If you think like that no change will ever take place. Sentimental nonsense…

    I am sorry for the angry tone but there is no other way I could have said this. I work for one of those I-Banks myself though on a lowly position. I still have my job though.

    Lekhni: Alok, I would have agreed with you if, in all the comments I read, people were talking about what needs to be fixed in the system. They were not. I would have agreed if they were even talking about CEO pay, and the hubris of CEOs, and so on. There have been op-eds on those topics too, but the comments I am referring to are the ones where people gloat about why i-bankers have had it coming to them because they were always boasting about their pay.

  27. Err.. Reactionary sentimentality? Why? What’s wrong with a sentimental response anyway?

    There are large building projects that have been shelved in this city, and on an everyday basis you hear about people having to go back to where they came from. It’s one thing to scream at the lack of regulation, but to somehow imagine this giant homogeneous i-banker as the only one who takes the fall when something fails is absolute drivel.

  28. Pingback: In Defense of those on the Street | DesiPundit

  29. Neha: Thanks so much for showing me the light. The cleaners of Canary Wharf deserve our greatest sympathies. Because obviously that’s who we are talking about when we say i-bankers. Can you please recommend some basic economic texts so that I can read up on i-banking, and the invaluable service provided by janitors and the fast food guys? Maybe you can offer some private tuitions too so that all of us ignorant masses can be enlightened?

    (Lekhni: I apologize for this. Just that I don’t have a lot of patience with reactionary comments that assume that some of us are sitting here gloating over job losses)

  30. Lekhni, as many comments here show, the gloating is not a one-way traffic, and likely, many bankers also gloated regarding their paychecks and bonuses when comparing themselves to others.

    What I’m surprised about is that you focus on that gloating by some misguided folks (what %? what subset of the population?), instead of focusing on the Congress and CEOs who worked in cahoots to change policies which contributed in a major way to the current crisis. Yes, it’s a fact that many people – not just the bankers – will bear the brunt of this crisis. I guess this is a good time to think (for those who still support the war) why exactly are we spending billions of dollars in Iraq ( http://www.crunchweb.net/87billion/ ), how that money could’ve been better spent within USA on unempolyment benefits and healthcare (I guess we’ll need some government agencies for that now), and what happens when a Harvard MBA runs the country for 8 years.

    Oops, there went another $3000000 of our money in Iraq in the time it took to write this message.

    BTW, here are some perspectives on this issue:
    http://news.bbc.co.uk/1/hi/business/7621771.stm

    Lekhni: I still fail to understand why, if some bankers gloated about their bonuses, this crisis is all their fault and they deserved to lose their jobs 😦

  31. Shefaly, I haven’t read up on HBOS-Lloyds yet, and I’m not familiar with the hedge fund issue, so I’ll take your word for it till I read up some more.

  32. another gloating opinion u guys r talking about

    http://gauravsabnis.blogspot.com/
    Monday, September 15, 2008
    A Highly Politically Incorrect Post

    but in gaurav’s defence he does say “And yes, I am one of them. And again, I am not proud of feeling what I feel. But it is a cheap thrill I thought I would never experience.”

    I think if this is regarding the people who eere not paid so well then even I dont feel good for them but most of these big guys wudnt be affected even after this turmoil.. they have already their millions.

    Idris

    Lekhni: I agree with you. The big guys will never be affected anyway 😦 Nor will you see this lead to any reforms on CEO pay 😦

  33. NO matter what the nature of a person … layoffs are never good and it’d be too bad to justify someones layoff.
    On the other hand I hope we all also remember that these corporations (LB ML et al ) are partly responsible for the mess… as are many other factors which have been rightly pointed out in the comments.
    These corps were supposed to be specialists in handling finance and should have foreseen the risks… so while I feel sad for the Jack and Jill who’d lose or have lost their jobs, the corporations probably deserved it.

    Lekhni: I agree, all layoffs are bad. On the foreseeing part, well, at what level in a bank can one foresee and take policy decisions? Definitely not at the <5 yr level 😦

  34. lekhni:
    i’m afraid you misunderstood me. i work 16 hour days as well, and through most weekends. i have done this and continue to do it at severe costs to health and family life. in so doing, i am hopefully honing my skills to a point where they are “better” than those of the next person on the street. however, what i would *never* do is gloat about how much better i am at it. it’s the gloating that offends me most.

    i find the value system offensive as well. i also don’t understand why more money equals pride. but that’s the way it was always communicated to me, and i can think of only one i-banker i know who didn’t fit into that category. despite being the star guy at (ha) lehman three years running, he quit to join theater. but he was the exception, and i’m willing to accept that you have been luckier in your socializing.

    Lekhni: TR, I can see that you have a personal dislike of i-bankers as a class, basically because of the difference (perceived or real) in value systems. I am not asking you to like i-bankers now. But even if all i-bankers are arrogant gloaters, how does that make this entire crisis the i-bankers’ fault, and how is it okay for entire companies to be shut down because of this?

    There are different forms of gloating – some gloat about their kids (how they have them and others don’t, or how their kids are all geniuses), others about their knowledge or their physique. It’s not only i-bankers who are guilty of gloating.

  35. Oh come now Lekhni, surely i-bankers are the last category left on earth who one can actually feel legitimate schadenfreude about without a smidgen of guilt? After all, these are folks who signed on the dotted line fully knowing that high reward = high risk. In good times they got that reward, in bad times they get fucked, well, that’s the nature of the game and they choose to play it. What next – feeling sorry for entrepreneurs?

    A lot of the schadenfreude comes, as TR says, from the arrogance of the i-bankers themselves. Its not a nice emotion, for sure, but its a natural one. As John Malkovich shrugged and deliciously intoned in Dangerous Liaisons “Its beyond my control”. And unfortunately while I am sure there are some lovely i-bankers out there, the stereotype is teh arrogant Master-of-the-Universe and its that stereotype that the malicious joy is directed at, not at particular individuals (unless you are me and ARE thinking of particular assholish individuals).

    Also I don’t think anyone is feeling joy that the janitors and receptionists at Lehman and other banks lhave been laid-off – that would just be a touch too evil even for my liking.

    Finally, I don’t think that the bankers were pure as driven snow in this debacle. They were greedy and careless and stupid and they’re paying for it – that’s capitalism isn’t it and they are the defenders of the faith.

    So I’m not sure I’m going to shed more than a few tears for bankers in the grand scheme of things.

    n!

    Lekhni: You are saying it feels politically correct to gloat on i-bankers, but not on janitors? πŸ˜‰ As for knowing the risk, it’s just the job risk they signed up for, their high rewards are also because of their long hours, stressful job and volatility of bonuses..
    But going by your argument, it would mean that we shouldn’t cry over the death of a single soldier because they all knew the risks when they joined the army 😦

  36. Lekhni,

    1) I think you have done a poor job of explaining how the Investment Banks are necessary in the grand scheme of things – most people I have met assume that I-bankers are parasites who ‘create’ nothing – thus the lack of sympathy for them. It took me doing an MBA to understand what investment banks do, and why they are also necessary. But the layman doesn’t know what Lehman does (pardon the pun πŸ™‚ ), but they do know they are rich – or at least definitely much more highly paid than most other people – again, because it is always in everybody’s face, whether it is through the stereotypical i-banker, or the incompetent media. So, if the general impression is of them being rich parasites, it is natural for people to experience some Schadenfreude in this regard.

    2) There is another angle that you miss – the i-banks and the consulting firms are the rockstars/celebrities during placement time at most campuses (undergrad & grad). And when they come and present, they talk about how they want ‘bright, motivated individuals displaying high academic achievement’. Basically, because they start by filtering out everybody purely on the basis of grades, removing about 80-90% of the applicants, then narrowing in on people based on a few rounds of interviews. You have to wonder if their recruitment process is correct based on the the devastation that some of these ‘bright, motivated’ individuals have caused. And naturally, the many, many smart people that got rejected, simply because their grades weren’t in the top 5% are going feel a small sense of schadenfreude at what has happened to these banks now. You will say that everyone is human, and everyone makes mistakes, even people in the top 5%. Yes, and even the ones below the top 5% made mistakes somewhere (which is why they weren’t in the top 5%), but they weren’t forgiven for it, not even being able to make it to an interview round by Lehman or Goldman, or Bear Sterns or whoever, despite being extremely motivated and hard-working people – so now why should they be forgiving, or sympathetic, when the very people who told you you were no good find themselves on their knees?

    Lekhni: Agreed on your point #1, I didn’t want to go into detail on what investment banks do, and hopefully Mango Juice’s guest post addresses the issue.

    On point # 2, I can see that people are envious of their classmates, and now they find an opportunity to gloat over them. But my point is, these classmates (most with <5 yrs experience in the i-bank) certainly were not the ones calling the shots, they are just casualties of a crisis which goes much beyond them and beyond Wall Street even. Surely the gloaters know this? I cannot see any justification in their gloating.. 😦

  37. Lekhni,
    I am missing the entire point of this post – well can I then say by focussing only on the layoffs and jobloss several other market-level and social-level perspectives get lost. Every story has a human element but then everyone need not analyze or react to an event from an individual employee’s perspective. So one is supposed to feel pity if experience is < 5 years, if one is not a CEO? So can one then generalize that all CEOs are bad.. Every job has long hours its own nature of commitments. Again isn’t this one world view over another? The ‘losing jobs’ has been happening all along trickling down, where were people and their sympathies when several airlines, auto industry or IT and operations employees lost their job in the last few years? No one is celebrating the loss of jobs or missing the point of domino effects. It is about glamorising a certain lifestyle and perceptions about an industry and hoping for a need for change in these perceptions. So as I see it those who moan the jobloss and lives affected are reacting to one aspect while others are reacting from other perspectives. Why the claim of righteousness of one over the other?

    Lekhni: Well, gloating is not righteous, however you look at it. There is no glamor in i-banking, and yes, it’s those wrong perceptions that I was talking about in this post.

  38. Pingback: How the financial crisis affects you and me | The Imagined Universe

  39. The blame starts with greed and ends with misery. Wall street indeed is paying for it’s greed. Casino culture and people working for the same culture face huge gains and loses.

    Wall Street is dictating how the companies should run around the world. In the name of tightening the seat belt even when the companies made profits they had to let go people in the name of lean and mean.

    Financial Institution and all the stock markets are nothing but casinos. It is not the bank that made the mistake in giving the average Joe that unpayable credit. It was institution setting unattainable targets to those banks.

    Jack and Jill will be mashed into chutney in this mess! Wall street will continue to make huge mistakes with the brightest of the minds in play.

    Lekhni: My point is that the greed didn’t start in Wall Street, it started in Main Street with house flipping and no-doc loans.

  40. Sigh, I’m late, I guess. I feel bad for everyone involved in this. I certainly don’t agree with all these people who seem to have turned their comments into a tirade against i-bankers. Its a career choice for some and they don’t complain anymore than what any of us do.

    This is a sad situation in the market, the economy, globally. Does not matter if an i-banker loses his/her job. We are involved in his/her life too. All of us are being affected. This whole attitude of ‘them’ and ‘us’ is what causes this huge difference in opinion and in the way we live. We chose our lives. Are we jealous that we are not i-bankers? Or, is it the other way round?

    Lekhni: I agree. I wonder too, how much of this is just plain jealousy 😦 And that jealousy makes people miss the point on the repercussions of this crisis on them.

  41. Being a laid off banker myself, I think few things could be truer.
    Anyways at such times you realise, the reason for apparent higher pay is the higher volatility, and with the rewards comes the risks attached. I knew about this when I came in, and well have seen the upside (kind of small though) and downside. Still given a chance again I might have made the same decision.

    Lekhni: You are right, but as you said, the upside isn’t all that high as the downside is, atleast during the first few years 😦

  42. I had previously worked on Wall Street and Water Street. I often couldn’t understand those who envy the guys working there or any I-Bank or financial institute for that matter. As you had mentioned I think they just see the money side of it but fail to see the other perspective. Ans that is what your post tries to bring out. It is the same mentality everywhere around the world. People seem to think that if you have sacks of money there aren’t any problems. The sacrifices people make to get that sack is often overlooked.

    Eitherways, my heart goes out to every one who lost their jobs and also to those going into their office with that paranoid feeling which is worse than getting laid-off.

    —-

    50% tax in NYC? It was abt 42-44% if you include medical. 50% seems a bit high even if one is making 200K+ in which case it is 46%.

    Lekhni: I completely agree with very word.

    On the tax rate, did you also include Social Security tax?

  43. Lekhni,

    Thousands of farmers have killed themselves in India, for no reason of theirs. Why are you not crying for them?

    How many I-bankers committed suicide now?

    I am an engineer, who often spends 20 hour days in office. I am 24×7 “available”, with a contract of starting to work on the “issue” in 30 minutes since first contact, and solving it within 24 hours. I get paid 24k Rs per month.

    My neighborhood shop opens at 6.30 in the morning and closes at 11, 6 days a week. On sunday they open at 8. Except for the food breaks, the same person stands there the whole day.

    So – please. May be the problem is that I am living in India, but – in India your story is not going to sell.

    Lekhni: Are you then saying that we should only feel sorry for people after they commit suicide? How does feeling sorry for someone’s problems mean that you do not feel sorry for others? Of course I am also sad about the farmer suicides in India, but how is that relevant in this post?

  44. “So it?s fine if people thought they?d all get million dollar houses even if they could never pay for them, but Lehman and Morgan Stanley and everyone is wrong because they did their job of selling mortgage securities?”
    Of course it’s not! I don’t know how people could think of taking those mortgages when they knew they couldn’t pay them back.

    And think of it – there’s no sympathy for those people is there? There’s just ridicule and disdain for having lost their houses because they took some humongous mortgage. Where’s the sympathy for them? There isn’t – because they were unrealistic (and perhaps, greedy).

    And it’s the same here. The job of i-bankers is to make money. Fine. But this sort of money making should have been identified as being potentially damaging, and they could have stayed away from it. But they CHOSE not to. They chose to take on the ring-fenced securities and try to sell them on. And it’s come back to bite them.

    So, again, while I may sympathise with newcomers to the firms who’re screwed, and people who weren’t involved in it – there really is no sympathy for the guys at the mid- and top-level who were involved in it.

    Lekhni: No sympathy for people who had their homes foreclosed? You are probably reading none of the human interest stories then 😦

    I agree with you in not sympathizing much with the mid and top level guys who actually had decision making power. The gloating I am talking about (and my post specifically) is about the junior guys who couldn’t do much really.

  45. Lekhni:

    “What is it exactly that hedge funds are supposed to be doing wrong?”

    “I am not defending Wall Street, but I amazed how easily people forget everyone else?s part in this mess.”

    ” I would have agreed with you if, in all the comments I read, people were talking about what needs to be fixed in the system.”

    All these lines are from your responses. So I assume they represent various things you believe in.

    Hedge Funds invested a lot of money in short selling the effects of which can be seen if one is watching share price moves like a hawk all the time (or even for the short time I was waiting in the foyer that day for the meeting). Short selling does not take into account any fundamentals but does use the might of enormous sums of money at the hedge funds’ disposal to manipulate the market. Since neither their working is transparent, nor is it clearly governed (indeed governable), it is a tad too generous to dismiss their role or to assume that whatever they are doing is not ‘wrong’. To be fair, I am surprised you asked this question – unless you meant it rhetorically. The short selling of banking shares is now explicitly barred in the UK so fun remains to be seen in other sectors.

    On to the second line, I am not defending or accusing Hedge Funds just pointing out that their part in the mess should also not be ignored. I suppose you will agree since you agree that we should take into account the burden of responsibility that the Ninjas must bear in this crisis.

    On to the third line, I mentioned Hedge Funds because they are a part of what needs fixing in the system. Mea culpa, that I did not carry the argument through to its logical culmination but then I would be writing a post on it, no?

    Actually, I think LaidOffBanker sums up the most vital point about people in the i-banking sector (not janitors, most of whom are not really employed by these firms but by firms that are service providers to these banks). They have a certain risk-reward make-up and the job suits them. Even if they are firing their domestic staff, I have noticed that not one of them is complaining or being depressive. Many are openly mocking having new employers overnight and tolerating considerable leg-pulling.

    Perhaps we are after all having an academic discussion – the true -i-banker is already on to his next deal!

    Lekhni: Yes, I made all those statements and I stand by them.
    Okay, as a non-finance person (?) I don’t expect you to understand too much about hedge funds and short selling. Unfortunately, even the MSM doesn’t, which is why you have people calling for the axe to fall on hedge funds, short sellers and other such bugbears they have no idea about.

    All I will say is this there’s nothing wrong with short selling. Short sellers are necessary for efficient price discovery. Read this Guardian article which explains well why short sellers are needed and why, despite this, the temporary ban was imposed (because of the wholesale panic). Remember, if short selling was bad, the US and UK wouldn’t have imposed a short, temporary ban (in the US, the ban is for 10 days) and that too on just a few financial stocks (799 in US, 32 in UK).

  46. it is a sorry situation indeed. not good for anyone. well written. and i agree.

    we can’t put blame on one single entity … the whole system went kaput. a cycle of greed and want of making a quick buck. truly capitalist as it’s meant to be … but i guess we’re realizing now that governing is required … not excessive like socialism … but ‘smart’ governing.

    Lekhni: I agree.

  47. Lekhni:

    “..Okay, as a non-finance person (?) I don?t expect you to understand too much about hedge funds and short selling…”

    That is at best a presumption on your part πŸ™‚

    Some of London’s leading Hedge Funds are my clients so don’t you think it might be safe to say that I understand just that little bit more than the average Jo what they do on a day to day basis?

    Lekhni: Hey, I did say “as a non-finance person (?)” – yes, I knew I was making an assumption πŸ™‚

  48. “..Okay, as a non-finance person (?) I don?t expect you to understand too much about hedge funds and short selling??
    That is at best a presumption on your part πŸ™‚ ”

    Fightfightfightfight!

    No fight?

  49. ??!

    It is not a question of fighting but of challenging assumptions on the basis of which arguments are made. πŸ™‚ If we are going to discuss something, I assume we can do it without getting presumptuous and arbitrarily personal. You not like?

  50. A few points (although I generally agree that the woes of the financial system disproportionately affect junior employees, and they are deserving of some sympathy).

    Let’s not ignore their political hypocrisy of the average financial industry executive – either top, middle, or lower-rung. Many of these people who are in the higher tax brackets oppose government spending on services for the poor, which includes programs that re-training for blue collar workers who suffer from job losses due to outsourcing. These guys oppose universal health care in America, but don’t balk at taking huge infusions of taxpayer money to save their organizations. These people want to keep their taxes as low as possible as well give unjustified incentives and protections to corporation which do not deserve them. When Main St is in trouble, even the average Joe in the financial industry dismisses it as a consequence of the ‘free market’ by saying that whatever firm is competitive enough should be allowed to fail (I am not against free market capitalism; I just want the gains and pains of market adjustments to be distributed in a way that makes sense). But Wall St itself, guilty at all levels of massive breaches of financial hygiene cannot be allowed to fail. Why does it get to be this way? Their bungling is of such magnitude that it precipitates a daisy-chain of destruction.

    What I want is for the more fortunate in America to realize that reap the benefits of being born to a middle-class family, of going to good public schools in their suburbs and government-aided colleges, and of having a judicial system that protects their private property. They should realize that they too could one day exchange places with the neediest. The laid-off traders of Wall St should realize that America is way behind than other countries in providing necessary services to deserving citizens, and not oppose spending on good welfare plans and government oversight and mandatory disclosures on corporate America.

    Secondly, many people who received approval for sub-prime mortgages and loans were often victims of deceptive marketing practices (See: http://www.ftc.gov/opa/2002/09/associates.shtm, http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm). So these financial industry workers are not entirely blameless. They knowingly targeted low-income, often less educated and minority individuals.

  51. I came to this discussion with an open mind. However, your comment section was illuminating. I ended up being more convinced than ever that I-Bankers do not deserve my sympathy. Yes, people should not be celebrating, but it is unrealistic to expect them to ‘care’ about job losses in Financial sector.

    For all your talk about them working 17 hours a day and being geeky geniuses who deserved all the salary they earned, the fact remains that they bungled, big time. And I am not talking only about the upper management. As far as I know, the mid-level chaps would have been responsible for all the risk modelling with regards to securities they bought and sold.

    As to your entirely valid point regarding blame not being apportioned to sub-prime home buyers, it is also an indictment of the creditors who lent them these loans. Obviously the banks didn’t lend sub-prime borrowers money because they thought that society should share the fruits of wealth. They did lend the money at hefty interest rates to compensate for the risk. They did it because they thought that the ‘brilliant’ idea of bundling their loans together with prime borrowers’ loans would mitigate that risk. Their bonus being linked to short term performance was a big incentive in not worrying about long term risks since these sub-prime loans were provided with an attractive teaser interest rate which they knew the sub-prime borrowers would pay off making their securities more attractive and showing up as good assets on their balance sheets, at least until their next bonus pay.

    So, if you are a finance chap who happens to be paid tons of money and are supposedly amongst the finest minds, you are also in charge of loads of information about the credit worthiness of individuals and debt instruments you are dealing with, and yet, with all this information and long hours you put in, you cannot factor in some basic risks in your calculations? Then why the heck should I not think that you didn’t deserve your high pay and your fat bonus? I am not saying that me or other heartless people who think they deserve no sympathy or for that matter government regulation would have been better at managing the risks than these whiz kids. But, this is the system that these guys have promoted which they call creative destruction. They took the risk and it proved to be more than they could handle. Now its time to bear the consequences. This is what these finance types have been preaching to all and sundry in other industries.

    Farmers are dying in Vidarbha: “Oh, well, farming, like all other professions, is a business and there are risks involved. If the farmers are in so much debt why the heck are they still in farming? They should change their profession and move to cities.”

    Jobs are being lost and companies are being destroyed because of corporate raiders short selling stocks: “They serve an essential function in our economy. One should look at them as signaling mechanisms for the market about businesses that are going down.”

    Jobs will be lost after this meger/acquisition goes through: “Tough luck, we are Investment Bankers. We facilitate these mergers. We don’t factor in the costs for families involved. We just make sure due diligence is done. It is not for us to worry about how many jobs will be lost. Ultimately the economies of scale would be beneficial to consumers.”

    Auto majors are closing their plants and blue collar jobs will be lost: “Government should not bail them out. That will set a bad precedent. A moral hazard, if you will.”

    But when their own jobs are on the line: “BAIL US OUT! It is not only us who will sink but everyone in the economy. Ban short selling of OUR stocks! And while you are at it, pretty please, don’t puncture our golden parachutes”

    So when you are talking about a bunch of folks who didn’t bother about other people’s job losses resulting from their actions, then why is there an expectation that others should bother about their job losses? This is the kind of thinking these guys have favored when it came to other professions. When anyone highlighted these job loss incidents and tried to bring out the other side of the story they spoke about intellectuals ‘manipulating liberal guilt.’ They used their money to fund politicians that favoured their ideology. But when the other side wants to use the same tactic against them, they are crying foul and talking about a witch hunt! They are the ones who, for want of unfettered functioning of their businesses, made a Faustian bargain with the religious conservatives and brought about eight years of stupid policies that bore a hole through the heart of science in this country and depleted the finances in an unnecessary war.

    Yes, all the reasons they gave when justifying their ideology are valid. I am not suggesting that automakers should be bailed out or that mergers and acquisitions should be banned. In fact, I am more sympathetic to their ideology than the other side. But that doesn’t mean that I sympathise with their plight. They didn’t let me sympathise with anyone else’s in similar situation. Given that they promoted this ideology, it isn’t unreasonable for people who had suffered from their actions in the past to feel smug that the wheel has come a full circle.

    Another reason why people are angry at them is because, because of their actions many of them will be losing their jobs without any fault of their own. Many in IT, including me, will lose their jobs as the economy sinks. Not because we weren’t competent, but because these guys weren’t! So why should I shed a tear?

    Anyways, we are the ones who are spending time debating whether or not we should lend a shoulder to cry on. I am certain that being the whiz kids that these guys are, they must have made wise investment of their own money which will see them through the downturn pretty comfortably.

    One other aspect that is being muddled in this debate is individual versus institution. People are cheering the downfall of the institution. I doubt if anyone is really ‘happy’ that their neighbour/relative or someone they know has lost his/her job.

  52. Pingback: A propos… « Dreaming in Suburbia

  53. Just to remind you that the HUGE bonuses that are made on wall street are taxed at the capital gains tax rate of 15% and not 40% or so federal tax rate or definitely not 50% rate that you mention and we all surely know that it’s the bonuses that people in the i-banking field work for not the pay which is usually a pretty small component of the total package!

    Lekhni: How I wish that were true, folks in Wall Street would jump up in joy on hearing this πŸ˜€ Sadly, it’s not. What you are referring to is the concept of “Carried Interest” which is taxed at capital gains tax rate. That is applicable primarily to owners of Private equity and hedge funds – and even there, not to the employees, only the owners. Ordinary Wall Street employees get taxed at the marginal rate for every dime they earn.

  54. great post Lekhni. and i am NOT a finance person so i won’t talk about who gets hurt and how much.

    What I am, is an I-banker’s wife. and a less arrogant person i have yet to come across. there’s a saying in hindi about how the lowest constable wearing shorts at the police station, is the most arrogant of the lot. and i’ve noticed that a lot of the really intelligent, interesting or even moneyed people – are very humble. its usually the newcomers on the block who are cocky – but that usually wears off. i’ve noticed that in all fields. the newest airhostesses are the most arrogant of the lot! πŸ˜€

    my husband’s has i-banker friends too and i’ve yet to come across an arrogant one. most of the time i ignore them of course because they’re talking shop. but they’re some of the most humble, friendly people i know. its a silly sad stereotype and yes, i believe most of the people talking are doing it out of envy and ignorance. schadenfreude is right.

    Lekhni: I agree completely πŸ™‚ Arrogance has nothing to do with one’s profession. I have seen everyone from government clerks to customer service reps being arrogant – even though these people are supposed to be all about helping others πŸ™‚ Pay has nothing to do with arrogance. If we brand everyone in an entire profession as arrogant, it’s not them, it must be us πŸ™‚

  55. Pingback: Schadenfreude « The Brat, the Bean and Bedlam

  56. You said: “My point is that the greed didn?t start in Wall Street, it started in Main Street with house flipping and no-doc loans.”

    This is garbage, plain and simple.

    Who gave thos no-doc loans, and why? Let’s say I’m on Main Street making 30K and go to a bank for a loan for a 1 mil house. Five, ten years ago, they would have laughed in my face and that would have been the end of the story. The greed DID start on Wall Street, with the mortgage guys thinking they could make a quick buck by lending to the poor sod, knowing full well the loan would turn sour down the road, but what did they care: their year-end bonuses would be pegged to how many loans they closed that year, not what happened 2 years later. Can you not see this: if huge bonuses are tied to how much money you make for the bank THIS quarter or this year, people WILL do the sort of nonsense that went on. The quants knew very well what was happening, but they were not considered “team players” if they pointed out the huge risks in these loans. So, yes, the industry at large is fully to blame for what has been going on, individuals working for the system also have to share part of the blame. When you are paid these huge sums in salary and bonuses, it is your responsibility to not screw up. Lots of professional put in as long, if not longer hours as i-bankers: doctors, academics, researchers, but they have infintely more accountability for their work even when they are paid peanuts compared to Wall Street.

    Lekhni: I completely agree with you that the commercial banks who lent those mortgage loans are to blame. Yes, they should never have made those loans.

    Except, commercial banks are not Wall Street. The reason they made those loans – because they don’t bear the risk, it gets passed on – to Wall Street.

    The quants you mention don’t make loans. They are part of Investment banks, which are Wall Street, and who take the loans that commercial banks have already lent, and package them into securities.

  57. You make it sound like Wall Street is completely innocent about these loans that just got “passed” on to them, when the truth is that this whole thing started the other way around: quants devised the mortgage backed securities, which fed the mortgage market and the bad loans, NOT the other way around. Except, the good quants knew how much risk was sustainable, but who listened to them? Look, Wall Street knew exactly where this was headed because they started it: the deregulations that allowed i-banks to carry more risk than before was the main culprit. The whole thing would have been sustainable and stable if everyone along the chain was satisfied with “reasonable” profits instead of exorbitant ones. Bot of course, fat bonuses drive these people, so this is the mess we have now. Don’t expect the common man to feel sorry for Wall Street: not to say gloating over anyone being laid off is good conduct. Just got back from lunch from my favorite Thai place in one of the NY suburbs and the owner was bemoaning the drop-off in business. This is not uncommon: EVERYONE is paying the price for the bonuses that a few got over the last few years that you seem to think were well deserved, beacuse hey, i-bankers put in so many hours.

    Lekhni: No, in fact the exact words in my post are “Wall Street definitely shares some of the blame”.

    All I said in my response to you was that Wall Street did not originate those loans. They were not the ones who lent to borrowers without documents or proof of income. They were also not the ones who borrowed loans they had no idea how they were going to repay.

    Of course everyone is affected, and I and MJ say as much in this post. MJ had a very accurate (and prescient) analysis.

    Wall Street definitely made some bad decisions, but whom do you think is to blame in Wall Street – the CEOs and senior executives who made those decisions, or the people with less than 5 yrs experience whom I am talking about?

  58. i quite appreciate your point of view cause i think it is objective….but be positive..learn from the turmoil…shoulder the responsibility…tomorrow is another day!!!we will definetily get out of it!!

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