Heard on the street: changing attitudes towards finance

September 24, 2008

The proposed Treasury bailout plan has generated a lot of conversations. Even among my colleagues in the finance department there is considerable resistance to the plan. “In two months, you’ll see Goldman give out $150m in bonuses,” said yesterday a very orthodox and neoclassic colleague of mine.

However, some of the reactions I’m hearing rely on a highly-charged revolutionary rhetoric that is simply unbelievable. Consider, for instance, the email I received yesterday from a research unit at The Graduate Center (read and enjoy):

This week the White House is going to try to push through the biggest robbery in world history with nary a stitch of public debate to bail out the Wall Street bastards who created this economic apocalypse in the first place. As with the Patriot Act, the bailout capitalizes on public shock to force through their “therapy.”

Think about it: They said providing healthcare for 9 million children, perhaps costing $6 billion a year, was too expensive, but there’s evidently no sum of money large enough to sate the Wall Street pigs. If this passes, forget about any money for environmental protection, to counter global warming, for education, for national healthcare, to rebuild our decaying infrastructure, for alternative energy.

This is a historic moment. We need to make our presence felt to influence the debate they would deny us. Join the demonstration this Thursday at 4pm in Wall Street (details below).

With Bear Stearns, Fannie and Freddie, AIG, the money markets and now this omnibus bailout, well in excess of $1 trillion will be funneled away from the poor, workers and middle class to the scum floating on top. The Feds are propping up stock prices, directing buyouts, subsidizing crooks and swindlers who already made a killing off the mortgage bubble. Even before any details have been hashed out, the New York Times admits, “Wall Street began looking for ways to profit from it.” NYT’s chief financial correspondent writes that the Bush administration wants “Congress to give them a blank check to do whatever they want, whatever the cost, with no one able to watch them closely.” It’s pseudo-socialism for the rich and dog-eat-dog capitalism for the rest of us.

By demonstrating later in the day we can show these thieves, as they leave work, we’re not their suckers. Anyone who can’t get off work can still join us downtown as soon as they are able. This crime is without precedence and we cannot afford to be silent.

When: 4pm – ? Thursday, September 25.
Where: Southern end of Bowling Green Park, in the plaza area (at the southern end of Bowling Green Park, which is the small triangular park that has the Wall Street bull at the northern tip)
Why: To say we won’t pay for the Wall Street bailout
Who: Everyone!

Pigs. Bastards. Crooks. Although colorful, I find this violence in the language very distasteful. I am automatically distanced from this. But more importantly, the email woke me up to the fact that the financial industry may be living through a change greater than its own economic fortunes: a shift in the public perception of its importance and legitimacy. I wonder what this means for the proposed bailout, as well as for the policies and regulations of the next administration.

Maybe I’ll show up at the demonstration. Just to see what they shout about.

10 Responses to “Heard on the street: changing attitudes towards finance”

  1. typewritten Says:

    Bah, you make it sound as if these were the Khmer Rouge marching in Phnom Penh in 1975… Come on, pigs are very nice animals. And there is nothing wrong with bastardy unless you are a reactionary. And a crook is someone legally convicted for a crime (a precipitous, but not so wild hypothesis in this case).

  2. Peter Says:

    a shift in the public perception of its importance and legitimacy.

    When the emerging markets of the CBOT had to justify themselves to the ‘public good’ in the late 19th c., they did so. In the face of public charges about gambling, immorality, and fraud, the CBOT made a case to courts and legislatures about the value of national markets and the importance of futures.

    And then economics/finance came along and wrapped up the justification in ‘risk transfer’ and efficiency, and suddenly those became justifications in their own right. So there hasn’t really been a need to justify financial innovation on behalf of the public – only to justify it on behalf of ‘reduced vol’ or increased efficiency, or distributed risks. I’m happy to take away that part of the justification and ask GS, Morgan, as well as the larger financial community to make a case for why we should care if they exist or go.

    Again, I actually think there are good answers to these questions, but mark me as glad financial institutions are forced to make them.

    And I’m not anti-financial innovation! 🙂

  3. danielbeunza Says:

    Peter, I agree. Now is the time to dust off the old studies and go back to the big picture. As the President of my university once asked me, what is quantitative finance good for?

  4. typewritten Says:

    Gentlemen, quantitative finance is good for making money. Nobody will disagree on that. Is making money good or is it bad? Well, it depends. It depends, in part, on who is it good for and who is it who is making it.

  5. typewritten Says:

    It’s really a very nice surprise that the word “socialism” is now common in the pages of the WSJ or the FT, thanks to financiers themselves. It is them that should be thanked for having paved the way to a bizarre way of socialized finance. What we all should need now is some great deal of (sociological?) imagination to avoid both the bailout-as-usual-and-then-back-to-business American tradition and the theory-of-pigs-bastards-crooks Maoist heritage. Is an imaginative combination of financial innovation and socialist allocation possible? Well, yes. I wonder what could happen if Wall Street financiers started digging into the Mondragon Cooperative economic model (a bet: they could actually like it).

  6. danielbeunza Says:

    agreed with the mid half of your last comment. this is indeed a time for fresh thinking. but lets really go for fresh. socialism, cooperative movements and the like are solutions to industrial era problems. we live in a time of financial capitalism. what does mondragon have to do with CDOs?

  7. typewritten Says:

    Well, Mondragon is a bank, among other things!


  8. danielbeunza Says:

    Ok. So you are recommending that the American financial system take inspiration in a local cooperative in Northern Spain that has a bank in it. On the face of it the idea sounds crazy, misguided… and intriguing. Let me suggest — for the benefit of others and myself… could you explain? Perhaps you can share your thoughts in a full post as a guest blogger.

  9. typewritten Says:

    I’m not really recommending that… Rather recommending sociological imagination with an open mind (and perhaps with a twist against anti-socialist prejudices).

    The critique of both shareholder value and crazy bonuses is not a radical oddity but a motto that is being heard on high and middle-range financial circles. The roaring “multitude”, curiously enough, is here composed of the workers of finance too. The principle of the cooperative (and Mondragon is not a model but an example) is quite of use, at least for the sake of imagining creative and peaceful paths towards the socialization of finance. One path, of course, is nationalization (shareholder value moves to stakeholder / taxpayer / citizenship value in the ideal scenario, rarely attained as the case of France shows, since the point is selling everything back to Sarkozy’s friends as soon as you can). Another is the cooperative model: all workers of a financial firm become owners / managers, vote for a sound allocation of profits and endorse risks with their own employment. This, on a very tiny scale, may look familiar to hedge fund managers. This to be considered independently of being listed or not (financially wise actors, such as Bloomberg, are not listed, check that out). Ideally, financial cooperatives can also include a political commitment (which is already the case in socially-oriented banks acting in domestic savings markets). Imagine a world in which you could secure your job and a decent pay at Morgan Stanley through your power to prevent your bank from dealing with toxic financial products. Many would buy into this (without the need to get themselves a Che sticker).

    Thanks for the blogging invitation! But I have to say there was already a call at testsociety.wordpress.com for all social students of finance to join efforts to set the path to proposals towards a glorious and harmonious socialization of finance… and nobody followed! The other thing is that I’m lazy, blog-wise.

  10. danielbeunza Says:

    Got it.


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