Bugs and Features

Robert Waldmann

Everyone is commenting on how, according to the New York Times, critics of the health care public option claim that it will provide the same health insuranceas private plans at lower cost to consumers and that this is a problem “unfair competition”. (simple rule when they say “unfair competition” they mean “competition”).

As part of the very successful, The Onion challenging, NY Times effort at humor LOUISE STORY and ERIC DASH explain what would be wrong with restricting compensation in the financial services sector.

“The industry has already adapted to the political and economic realities,” said Scott E. Talbott, the chief lobbyist for the Financial Services Roundtable, an industry group made up of the nation’s biggest banks and insurance companies. “If they are draconian, they could put the financial services industry at a distinct disadvantage in attracting and retaining top personnel.”

Wouldn’t that be a shame ? Don’t we all want our smartest fellow citizens to go into the financial services industry frenetic clusterstock ? Why hardly a day goes by when I don’t hear someone complain about Harvard graduates deciding to become poets, because of draconian restrictions on compensation in the financial services industry.

Now Mr Talbot may imagine that I claim that the extremely smart and hard working people who go into financial services are contributing nothing of value to society. Hah. Maybe their mothers think that, but I think they’ve contributed a few trillion less than nothing.

No I want reasonably smart but not brilliant bankers who are lazy (not as lazy as I am but lazy). I want financial services sector to be like the food sector. You want bonds, go to the financial services sector, you want beets go to a supermarket. No full time salesmen trying to convince people what to buy. Trading volume like it was the day I was born (Nov 9 1960 a Wednesday).

The article contains an interesting error since the full horror of the financial services sector is, apparently, incomprehensible to Story and Dash.

“The banking industry had been lobbying the Obama administration to exclude traders and other highflying salespeople” from the restrictions.

Ooops. Traders are not “salespeople” they decide what the bank wants to own on its own account, what is underpriced so the bank wants to buy it or overpriced so the bank wants to sell it. The really key people for profits are the salespeople who convince suckers to buy the stuff banks want to sell and sell the stuff banks want to buy. This is the core competence of an investment bank. Traders can set up hedge funds, but then need investment banks to trick the rubes for them.

Note that Story and Dash really can’t believe that salespeople are among the immensley paid “When the economy was riding high, bonuses for top Wall Street executives and traders soared to tens of millions of dollars.” Hmm where are the salespeople ? Their compensation is *still* a dirty dark secret.