Fancy derivatives are mostly gone. Prop trading is gone. There’s less leverage everywhere. Mortgages are back to old-fashioned conservative mortgages—which is a good thing.”

February 6, 2012 5:18 PM

The End of Wall Street As They Knew It
After surprisingly successful financial reform, public vilification, and politics that have turned against them, the Masters of the Universe are masters no longer.
posted by clearly (73 comments total)

“Wall Street is a meritocracy, for the most part,” as a senior Citigroup executive put it to me recently. “If someone has a bonus, it’s because they created value for their institution.”

Right, which is why no one got a bonus in the year of the crash.
posted by Sticherbeast at 5:22 PM on February 6, 2012 [20 favorites]

“If someone has a bonus, it’s because they created value for their institution.”

Right, which is why no one got a bonus in the year of the crash.

Nobody said anything about creating value for the country, dear.
posted by gauche at 5:24 PM on February 6, 2012 [18 favorites]

I just hope all this is true. And also that the regulatory framework is now strong enough to keep the financial industry from doing it again.
posted by bearwife at 5:28 PM on February 6, 2012

“If you’re really unhappy, just leave,” Morgan Stanley CEO James Gorman bluntly told Bloomberg TV a few days after his bank announced its meager bonus numbers.

This put a smile on my face.

"when it is finally written,/all of the white people _i-bankers_ will be Indians _janitors_ and all of the Indians _janitors_ will be ghosts."
posted by gauche at 5:29 PM on February 6, 2012 [1 favorite]

A couple weekends ago I went to my friendly neighborhood credit union and opened an account. It was a 2 hour wait and they had every teller open and half the mortgage unit subbing in just to handle new checking and/or savings accounts. It definitely feels like people are fed up.
posted by 2bucksplus at 5:32 PM on February 6, 2012 [8 favorites]

The pictures of the stock broker clutching his balls in agony were kind of nice.

Then I remembered that no, that's not really a stock broker, that's a male model.

...then I decided it was still kind of nice.
posted by scaryblackdeath at 5:38 PM on February 6, 2012 [2 favorites]

this seems like a good thing, right?

So why am I just now hearing about it?
posted by rebent at 5:39 PM on February 6, 2012

I have been with a credit union for the past 50 years. Why would anyone consider anything else?
posted by jim in austin at 5:39 PM on February 6, 2012 [3 favorites]

I have been with a credit union for the past 50 years. Why would anyone consider anything else?

If all the banking I do consists of direct-depositing my salary into a free checking account, why would I switch?
posted by Nomyte at 5:43 PM on February 6, 2012 [3 favorites]

$125,000 cash bonus (plus whatever the stocks are worth) sounds like the kind of existential crisis I would love to have.
posted by vidur at 5:45 PM on February 6, 2012 [8 favorites]

You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

Ahh yes, the brogrammer.
posted by Ad hominem at 5:49 PM on February 6, 2012 [3 favorites]

I have been with a credit union for the past 50 years. Why would anyone consider anything else?

Because in Canada, at least, it's the equivalent of doing banking with Smurf Village.
posted by KokuRyu at 5:50 PM on February 6, 2012 [4 favorites]

Because in Canada, at least, it's the equivalent of doing banking with Smurf Village.

We're a lot closer to a berry-based economy than you think. Plus, if noted quantjock/alchemist Gargamel is right, there's gold in them there Smurfs. Literally.
posted by KingEdRa at 5:54 PM on February 6, 2012 [11 favorites]

KokuRyu: Howso?
posted by Cosine at 5:55 PM on February 6, 2012

Credit unions aren't in the businesses this article is about. It's a derail.

Still hard to muster any sympathy and all that...
posted by JPD at 5:59 PM on February 6, 2012

The last two paragraphs:

Also, it should be remembered that anytime Wall Street has been faced with new regulatory obstacles, it has fairly quickly found ways around them. Many of Dodd-Frank’s rules are still being argued in Washington, and Republicans seem bent on reversing a lot of them.

But for now, the strictures that are holding the banks back now are tighter than any since the thirties. And those laws kept banking reliably risk-free and dull until the deregulation mania of the eighties and nineties unleashed finance. The system is being designed so that Wall Street grows only as fast as Main Street. “The bubble can’t happen again,” Jack Bogle told me. “The underlying reason is, corporations make money. We do things that make society better. But they grow, and this won’t surprise anyone, at rate of GDP.” On Wall Street, recent history was the exception. “Reversion to the mean is the rule of the financial market.

I find it really hard to believe Wall Street has been tightly reigned in. I hope I'm wrong, but find it really hard to believe. Oh, and this stuff:

“It’s been three years, and people have to readjust their spending habits,” a former Lehman executive told me. “People have been in different stages of denial.”

is gag-worthy.
posted by mediareport at 6:00 PM on February 6, 2012 [3 favorites]

This article contradicts a lot of what I've heard about Dodd-Frank, but it seems plausible. But then again, the criticism of Dodd-Frank I've read seemed plausible, too. So, I don't know. Maybe it really is an effective bill. Maybe it's all sizzle and no steak. I have no idea.

The longer this financial shake up goes on, the more convinced I am that economists are blind men and the economy is a gigantic elephant, and every economist is feeling a different part of it and trying to guess what the health of whole beast is without even really understanding what the beast is. And I, for one, will be glad when this little game has progressed to the point where I don't feel like I have to keep playing, because I keep having the sneaking suspicion that I'm being tricked into giving some sort of weird prostate exam I don't want to give to an animal that I don't want to be around. But for now I guess I'll keep reading stuff like this, because I'd hate to feel uninformed about stuff I don't really comprehend.
posted by Kiablokirk at 6:02 PM on February 6, 2012 [6 favorites]

This is why I keep my fortune in a Mason Jar under my mattress.
posted by caddis at 6:03 PM on February 6, 2012 [1 favorite]

Ah KokuRyu, if only you had Desjardins out west. I dropped BMO in about two seconds for a credit union in a small town where noone spoke a language I knew. Noone at this credit union spoke my language, and I didn't speak theirs. And it was still about a 10,000% more pleasant experience than dealing with BMO.

I still have an account, foolishly, with those lying liars. They told me they'd stop charging me $5.50/month for the pleasure of doing nothing with my account and having a few hundred dollars in it.

Then, when I wasn't looking, they started charging me $2.00/month on an account that I basically never use.

Fucking BMO.
posted by Yowser at 6:03 PM on February 6, 2012

Oh, fuck that 'meritocracy' bullshit. In BOTH ears, at once, with drill-penises.

I worked for Citigroup. I received a bonus ONCE. Because they didn't think their IT people 'created value' despite the fact we were there for hours on end, fixing things.

Despite the fact that the moment there was the smallest and slightest of errors related to their computers, the traders and the executives would start screaming at the top of their lungs, berating their support people, until it was tuned to 'top precision' (no, I have no idea where that idea came from), we provided no value.

Despite the people screaming when they couldn't get their mail at any time, when RIM fucked up their Blackberry servers who got the blame?

Fuck that meritocracy shit. It was 100% fucking who brings in the money. IT, researchers, office staff, the people that let them do it? Nothing - no bonuses, no respect, and the lowest level raises they could get away with.

(am I bitter? Hell fuck yes.)
posted by mephron at 6:03 PM on February 6, 2012 [36 favorites]

Coming in 2012 from the New York Philharmonic, "The Six Figure Wall Street Bonus", scored entirely to a range of the world's tiniest violins, violas, cellos, and double basses.

Any bets as to how long before we see hagiographic articles on the "new geniuses of hedge"?

Article needs to engage more on other conditions that might be causing a slowdown of business. Maybe the theory of the crises of the household balance sheet explains some of it too.
posted by kithrater at 6:04 PM on February 6, 2012 [6 favorites]

“Wall Street is a meritocracy, for the most part,” as a senior Citigroup executive put it to me recently.

As somebody working on wall street, I can confidently assure you that this is pure bullshit. Everyone on Wall St. got there because they knew somebody, or were related to somebody. They tell themselves it's a meritocracy and that they're the best of the best to justify to themselves why they get paid so much money for doing truly awful shit. Bonuses are meted out based partially on how much money they make for the firm (read: how hard they screw other people at the end of the deal), and partially on how well they please their superiors (and when your superior is a coke-addled sociopath, it's pretty much bullshit).

Or, on preview, what mephron said, but with more drill-penises.
posted by Jon_Evil at 6:11 PM on February 6, 2012 [17 favorites]

'top precision'

Ok, I gotta ask, what the fuck is that?
posted by Ad hominem at 6:13 PM on February 6, 2012

A phrase coked out traders use?
posted by roboton666 at 6:20 PM on February 6, 2012 [3 favorites]

Maybe the theory of the crises of the household balance sheet explains some of it too.

Surely it does, and many Americans have felt the impact of their own short sighted financial decisions through foreclosures, layoffs, and calls from creditors. The difference here is that they weren't handed a blank check to tide them over until the whole mess was sorted out. Households instantly felt the effects and had to make sacrifices and more prudent financial decisions. It sounds like Dodd-Frank is ensuring that a similar scenario is playing out on Wall Street.
posted by clearly at 6:22 PM on February 6, 2012 [1 favorite]

“We’ve made a decision as a nation to shrink the growth of the financial system under the theory that it won’t impact the growth of the nation’s economy.”

Well, pursuit of the almighty dollar via 'restructuring,' offshoring, 'right-sizing' and foreign adventurism have certainly impacted that nation's economy, so what's one more?
posted by the man of twists and turns at 6:28 PM on February 6, 2012

This is why I keep my fortune in a Mason Jar under my mattress.

And after the urine ages, you can use it to fertilise plants.
posted by rough ashlar at 6:29 PM on February 6, 2012 [3 favorites]

About halfway through the article, I have to say it seems a bit optimistic. As others (and the author, later on, apparently) points out, it's just the dip before they find new loopholes and ways to multiply money. A temporary lull. Not that it's a bad thing - and public awareness of the shittiness of the system is at an all-time high, which isn't saying much, but is worth a little. Dismantling a machine of this size is a big job.
posted by BlackLeotardFront at 6:31 PM on February 6, 2012 [2 favorites]

with drill-penises.

Hey, where can one go buy these?
posted by rough ashlar at 6:32 PM on February 6, 2012

You need to mix your urine with compost to make it useful on your plants.
posted by humanfont at 6:32 PM on February 6, 2012

Let's ask Brer Dimon whether the regulatory environment is too difficult for finance or not....
posted by ennui.bz at 6:33 PM on February 6, 2012 [1 favorite]

You need to mix your urine with compost to make it useful on your plants.

I figured you'd only need to cut it with water. I hear Birmingham, Alabama has a fine water works because of the efforts of wall street.
posted by rough ashlar at 6:37 PM on February 6, 2012 [2 favorites]

Ad hominem: as far as I can tell, he wanted the Bloomberg and other data feeds practically the second it came out, no delay or lag at all.

Also, drugs, booze and pure rage may be part of it.
posted by mephron at 6:40 PM on February 6, 2012 [1 favorite]

ohhh.. ok.. yeah.hahah he wanted something like NASDAQ QMX for his desktop.

Sorry I asked.
posted by Ad hominem at 6:46 PM on February 6, 2012

The Dodd-Frank financial-­reform act, much maligned, has already begun to change the shape of the financial system—even before a number of its major provisions are proposed to go into full effect this coming July. Banks are working hard to interpret Dodd-Frank’s provisions in a way most favorable to them—and repealing Dodd-Frank is a key piece of Mitt Romney’s campaign platform.

Money speaks for money
The Devil for its own.
But who comes to speak
For the skin and the bone?
posted by Benny Andajetz at 6:49 PM on February 6, 2012 [9 favorites]

No the nitrogen needs to be mixed with decomposing organic matter to be effective. Kind of like shorting the junk bonds you dump on your unsuspecting customers.
posted by humanfont at 6:50 PM on February 6, 2012

I don't mean QMX, I mean the service where you colo in the NASDAQ datacenter.

Forget I even brought it up.
posted by Ad hominem at 6:51 PM on February 6, 2012

The Awl has a savage, sneering take on Gabriel Sherman's article.
posted by mediareport at 7:01 PM on February 6, 2012 [11 favorites]

In other words: To your crying towels, bankers! Correspondent Sherman is on the scene, and no howling distortion of recent financial history you care to offer is too outlandish for him to faithfully record! After duly huddling with a couple of dozen financial titans, our reporter has arrived at a chilling verdict: “what emerged is a picture of an industry afflicted by a crisis it would not be flip to call existential.”

Perhaps not—but what is exceedingly flip is brother Sherman’s account of the origins of the crisis.

Sure, there was that awkward business that sent the global finance sector to the brink of ruin, plus a devastating tsunami in Japan and whatnot—but the true culprit sending Wall Street titans back into their bedrooms to listen to Interpol on auto-repeat and cut themselves is of course the specter of government regulation. The Dodd-Frank financial reform act, a largely toothless measure lousy with loopholes and lobbying dosh, becomes in the alternate universe of Adam Moss’s New York magazine a rash bid to expropriate the expropriators. Even though the full provisions of the already anemic bill don’t go into effect until 2016, the very thought of a somewhat straitened financial playing field so terrifies Wall Street’s stout corridor of wealth creators that, well, they’re bidding farewell to the most valuable commodity of all—their big swinging dicks.

Seriously, the Awl piece is worth a read.
posted by mediareport at 7:05 PM on February 6, 2012 [6 favorites]

I call it a good start, if it's really happening.
posted by Ghostride The Whip at 7:12 PM on February 6, 2012

Is The End Of Wall Street Night? by The Reformed Broker, at the CS Monitor.
posted by the man of twists and turns at 7:16 PM on February 6, 2012 [1 favorite]

Everyone on Wall St. got there because they knew somebody, or were related to somebody. They tell themselves it's a meritocracy and that they're the best of the best to justify to themselves why they get paid so much money for doing truly awful shit.

I think you just defined the bulk of the 1%.
posted by Peevish at 7:52 PM on February 6, 2012 [4 favorites]

Try, The Beginning of Wall Street as You Don't Understand It.
posted by wallstreet1929 at 8:31 PM on February 6, 2012

'top precision'

Ok, I gotta ask, what the fuck is that?

Going from context, I'm guessing it means "I have some serious entitlement issues, but I don't even understand half the shit I feel entitled to."

(What's weird is, right now this thread is the only Google hit for "tuned to top precision." So it's not like they even misappropriated it from a context where it makes sense. It's apparently really just not a thing that people say.)
posted by nebulawindphone at 8:33 PM on February 6, 2012 [2 favorites]

Seriously, the Awl piece is worth a read.

I'm not seeing the rub here, perhaps because I read the original article with a sense of schadenfreude rather than sympathy.

Both articles acknowledge that Wall Street speculation and unregulated growth has been curtailed in the midst of a rebounding overall economy and in the face of recent and forthcoming regulations.

This seems like A Damned Good Thing™.
posted by clearly at 8:35 PM on February 6, 2012

Oh hai thar. I too did a long stint at the big C before departing for pastures hedgy quant.


"I worked for Citigroup. I received a bonus ONCE. Because they didn't think their IT people 'created value' despite the fact we were there for hours on end, fixing things..Fuck that meritocracy shit. It was 100% fucking who brings in the money. IT, researchers, office staff, the people that let them do it? Nothing - no bonuses, no respect, and the lowest level raises they could get away with."


Yes. Yes. Yes. Because business is about bringing in the money. You don't go the zoo because its got efficient administration you go to see the animals. When you're hiring a brain surgeon you'll pay top dollar, you're not so concerned about the elegant code which runs his secretaries filing system. A bank is simply a machine for making money for shareholders as any business is. Paying non profit generating parts any more than is needed to keep them ticking over is quite simply giving money away needlessly. The name of the game is pay enough to prevent you from leaving. The reason ibankers get paid ridiculous amounts of money is that its a fabulous return on investment for the bank. For the cost of some flights, a few suits, a desk and a phone even the crappiest banker can potentially generate huge fees. The same resources given to the IT dept won't. Bankers are some of the stupidest people I've met but they do deals. Deals bring in money.

Traders however are basically Excel macros in human form. Their continued existence baffles me.
posted by Damienmce at 8:39 PM on February 6, 2012 [3 favorites]

KokuRyu: Howso?

Well, I haven't had any experience with VanCity, but I've banked with the other large credit union in British Columbia for 25 years, and, well, they make mistakes. All sorts of mistakes. Very bush league.
posted by KokuRyu at 8:54 PM on February 6, 2012

Needs way more pitch forking.
posted by bonobothegreat at 8:56 PM on February 6, 2012 [2 favorites]

This article made me happy and hopeful.

Hope it's not BS.
posted by Defenestrator at 9:12 PM on February 6, 2012

I'm investing in guillotines!
posted by scody at 9:20 PM on February 6, 2012

Hey, I was quoting the guy. (The term stuck in my head, for reasons you can understand.) He also did the 'do you know how much money I am losing for the company' thing.

Dunno, man.

Also, Damienmce: *post citigroup survivors support group fistbump*
posted by mephron at 10:06 PM on February 6, 2012

"I worked for Citigroup. I received a bonus ONCE. Because they didn't think their IT people 'created value' despite the fact we were there for hours on end, fixing things..Fuck that meritocracy shit. It was 100% fucking who brings in the money. IT, researchers, office staff, the people that let them do it? Nothing - no bonuses, no respect, and the lowest level raises they could get away with."

I work in network engineering. Our management has managed to get us injected into the process for turning up new customers, despite the fact that our task is entirely redundant and useless, because it 'generates revenue' and justifies our jobs.

Even though we're the ones that keep the fucking network running and it would fall apart in a week without us.
posted by empath at 10:38 PM on February 6, 2012 [5 favorites]

Traders however are basically Excel macros in human form. Their continued existence baffles me.

Dim trader
posted by benzenedream at 10:55 PM on February 6, 2012 [2 favorites]

clearly: "Both articles acknowledge that Wall Street speculation and unregulated growth has been curtailed in the midst of a rebounding overall economy and in the face of recent and forthcoming regulations. "

Well, it is true their profits are no longer rising relative to GDP, but they have been steady at around 5% of GDP for the last couple of years. Before the crash, it was around 4%.
posted by wierdo at 10:56 PM on February 6, 2012

As someone who grew up in Murrary Hill in the 70s and 80s, I don't recognize this NYC anymore.

It is true what they say about not being able to go back home. My New York is only a figment of my imagination.
posted by gen at 11:53 PM on February 6, 2012 [1 favorite]

I got to the phrase "Bush boom" and could not continue reading.
posted by speicus at 12:16 AM on February 7, 2012

drill-penis
posted by AElfwine Evenstar at 12:21 AM on February 7, 2012

“If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

"Things are getting so bad, smart people are starting to think about doing something that might be beneficial to society instead," says an unbelievable dicksplash.
posted by dudekiller at 1:20 AM on February 7, 2012 [19 favorites]

unbelievable dicksplash

Wow.
posted by Aizkolari at 4:48 AM on February 7, 2012 [1 favorite]

A "high precision" computer is used by a guy who learned a (very) few technical terms from his high end audio salesman. As I recall transferring a high precision signal is what those gold plated connectors do. It's a pretty weird concept for digital computing where everything is either a one or a zero.

Most of the physical science types I know think of binary arithmetic as more like "no precision required".
posted by bukvich at 5:28 AM on February 7, 2012 [3 favorites]

Bullshit.

This article is supposed to make me feel good because maybe somewhere some trader or exec had his bonus diminished? And the new regulation will make that stick? Don't make me laugh. As long as our economic model continues to agree that paying the executives in a corporation 100-500 times the average salary in that same corporation is a good idea then nothing will change. This is just a feel good article to appease those who read it.
posted by Vindaloo at 5:35 AM on February 7, 2012 [3 favorites]

the guy who is choosing a SV startup over a job on a quant desk isn't doing it because he thinks one creates value for society and the other does not, he's doing it because he think the odds of getting stupid rich are higher with one than the other. That calculus will change again once the current Web cycle runs it course. Of course, that doesn't mean they'll be back doing Finance stuff, could be something else.
posted by JPD at 6:02 AM on February 7, 2012 [2 favorites]

Undoubtedly, but I'd still be much happier living in a society that rewards the guy at the Silicon Valley startup better than the guy twiddling high frequency trading algorithms.
posted by dudekiller at 8:22 AM on February 7, 2012 [1 favorite]

Dimon: "“The net worth of the world is going to double in the next decade.."

So the next new thing is going to be LITERAL futures trading, i.e. speculating on the 4th dimensional "net worth" of the physical planet? What, pray tell, is the current "net worth" of the world, thou seer of inherently-impossible-to-quantify values?
posted by obscurator at 8:41 AM on February 7, 2012 [1 favorite]

I'd think that Wall Street is still a much surer path to riches than Silicon Valley (where riches = $300,000-plus a year, not counting bonuses)

Zuckerbergs are lottery winners, realistically they don't count, same as how Micheal Jordan's money doesn't count as a realistic reason to get into basketball.
$300k-plus a year on the other hand - common on Wall Street, Uncommon in silicon Valley.

This is article is the minion lying that the monster isn't home, trying to disperse the peasants-with-pitchforks before they overrun the castle.
posted by -harlequin- at 9:00 AM on February 7, 2012 [2 favorites]

(And I wouldn't begrudge anyone a nice $300k plus enormous bonuses, if it's from using their talents to create wealth, like Silicon Valley does. Wall Street when working correctly can definitely enable wealth creators, but Wall Street as it's actually working happily destroyed (and is destroying) such a vast chunk of the economy that they're clearly not earning what they take. So that's a problem.)
posted by -harlequin- at 9:19 AM on February 7, 2012

The Awl has a savage, sneering take on Gabriel Sherman's article.

Well, it's certainly savage and sneering--but it seems (like a few comments in this thread) to have more or less stopped reading at the quotation about Wall St. being a "meritocracy." Or, at least, to have taken that line as if it is the thesis-statement of the article. Even in the immediate context of the passage, however, the author makes it clear that the "merit" of this "meritocracy" is incredibly narrowly defined (and that it does not represent "total social good" in any way, shape or form).

The article in the FPP is not claiming that the Dodd-Frank restrictions on Wall St. are a terrible disaster that have broken a once-perfect system. In fact he pretty clearly signals his own sense of schadenfreude at the bankers' complaints (e.g. "sentiments like that, accompanied by a full orchestra of the world’s tiniest violins"). He is simply claiming that Dodd-Frank has had far more impact (and will have even more) than most originally predicted.

Is he right? I don't know. It's a complex issue and difficult for anyone to summarize easily. Still, for those who say that Dodd-Frank is completely meaningless and that Obama is just as much in the pocket of Wall St. as any of the Republican candidates will be, it's worth asking why all the Republican candidates are promising to repeal the act as soon as they get into office and why Wall St. is massively favoring Romney over Obama in their donations.
posted by yoink at 10:34 AM on February 7, 2012 [3 favorites]

Let's elaborate this angle:

Human rights (as in food, shelter, medicine, etc) are a legal fiction and you are not entitled to it, you lowly needy winy scum!

But corporate legal personhood and limited responsability, which are supreme pieces of legal fiction, so far removed from any connection to reality, are a God Given Right and all the hell would break loose if anyone dares challenged it!

Why is the former fiction more of a fiction than the latter?

If human rights are nonsense, because it's a legal fiction, how is corporate personhood and limited responsability NOT a nonsense, while it too is a legal fiction?
posted by elpapacito at 4:34 PM on February 7, 2012

Dimon: "“The net worth of the world is going to double in the next decade.."

Henri Lefebvre: "The victory of abstract signs is announced over the rubble of concrete referentials, and most insistently through the floating signs of finance capital."

wise man say: you can't eat money.
posted by mek at 5:28 PM on February 7, 2012

Well, it's certainly savage and sneering--but it seems...to have more or less stopped reading at the quotation about Wall St. being a "meritocracy." Or, at least, to have taken that line as if it is the thesis-statement of the article.

Huh. I don't think that's true at all, but is certainly not a fair reading. Lehman offers examples of what he sees as contradictory elements in the quotes Sherman uses, missed evidence in his conclusions related to banks' financial results, and a lot more beyond the "meritocracy" thing. I'm having trouble understanding how you could not see that if you read the piece.

[Sherman] is simply claiming that Dodd-Frank has had far more impact (and will have even more) than most originally predicted.

I think he's claiming a lot more than that, in his relatively uncritical acceptance of some of the premises his sources are putting forward. There seems to be some history here, as well, but even just looking at this piece, it seems muddled and far too congenial, given the facts.
posted by mediareport at 6:40 AM on February 8, 2012

Lehman offers examples of what he sees as contradictory elements in the quotes Sherman uses, missed evidence in his conclusions related to banks' financial results, and a lot more beyond the "meritocracy" thing.

Lehmann offers a refutation in the form of a snipped quote from an ambiguously bullish Goldman Sachs' press release:

From a financial markets perspective, the environment looks quite friendly. The combination of better growth news and easier monetary policy is always welcome. In addition, we recently argued that corporate profit margins may still have room for further gains, despite the fact that they already stand at record levels from both a bottom-up and top-down perspective.

While sneering at Sherman for taking quotes at face value, Lehmann cites a press release from one of the most entrenched powerful financial institutions in the world, an institution which needs to raise capital to function, and an institution facing pressure from the populous and legislative regulators.

Sherman says that the upcoming Volcker Rule has led to the closing of banks proprietary trading desks, and that a "hedge fund shakeout" is occurring caused by slimmer margins and an influx of talent from the closing of the desks at large investment banks. He cites numerous examples of hedge funds bleeding money in not only investments, but capital. Lehmann counters:

But Sherman nonetheless frets on behalf of hedge managers that “the easy obvious plays are oversubscribed, which shrinks margins.... Many have predicted a hedge-fund shakeout, and it seems to have started. Over 1,000 funds have closed in the last year and a half.” It’s evidently a taken-for-granted, second-nature kind of axiom in today’s American economy that an “industry” made up entirely of “easy obvious plays” is integral to our very survival.

Lehmann has a bone to pick here, whether it is directly with Sherman, with "lazy, overclass-osculating, dick-obsessed magazine journalism", or with his own predisposed assumptions, I am not entirely sure.
posted by clearly at 2:55 PM on February 8, 2012 [2 favorites]

If you think Lehman "has a bone to pick here," I can't wait to see what you think about what Matt Taibbi had to say:

Why Wall Street Should Stop Whining

When I read things like this I’m simultaneously amazed by two things. The first is the unbelievable tone-deafness of people who would complain out loud, during a time when millions of people around the country are literally losing their homes, that their bonuses – not their total compensation, mind you, but just their cash bonuses, paid in addition to their salaries and their stock packages – are barely enough to cover the mortgage payments for their new condos, the taxis they take when walking is too burdensome, and their girlfriends with expensive tastes.

The second thing that amazes me is that Sherman is buying all this. I don’t know this reporter at all, and I’m happy to concede that he probably hangs out with more Wall Street people than I do. But I’m still in touch with plenty of people in the business, and I have yet to have any investment bankers crying on my shoulder about how the Dodd-Frank bill is forcing them into generic breakfast cereals.

Now, I’m sure if you put it to them the right way – "Hey, Mr. Habitually Overpaid Banker, do you think Barack Obama and the Dodd-Frank bill are ruining your bonus season?" – you’ll get a good percentage of people who’ll take that cheese and cough out the desired quote.

But in reality? Please. Wall Street people complain a lot, but in the last six months, the grave impact of Dodd-Frank on bonuses hasn’t even been within ten miles of the things these people are really panicked about. The comments I’ve heard have been more like, "My asshole has been puckered completely shut for four months in a row over this Europe business," or, "If the ECB doesn’t come up with a Greek bailout package, I’m going to have to sell my children for dog food."

Bonuses are indeed down this year, especially when compared with the bonuses of recent years, but let’s be clear about why. It has nothing to do with Dodd-Frank.

He points to tons of evidence that the trouble in Europe is almost certainly to blame. I'm the first to admit this kind of economics is generally outside my comfort zone, so I look forward to your response.
posted by mediareport at 10:05 PM on February 8, 2012 [1 favorite]

I found this part particularly interesting:

Looking at the question from the point of view of an ordinary human being, however, Sherman’s thesis is even more nuts. He’s written a sort of investment-banking version of Jimmy Carter’s "malaise" speech, complaining about a lost era of easy money, when in fact there are two damning realities he’s ignored:

1. He’s wrong. See the above argument about Europe, QE, etc.
2. Even if he wasn’t wrong, which he is, his reaction to the "news" that Wall Street’s outsized bonuses are dropping is all wrong. If it were true, it would be good news, not bad news.

Since 2008, the rest of America has suffered a severe economic correction. Ordinary people everywhere long ago had to learn to cope with the equivalent of a lower bonus season. When the crash hit, regular people could not make up the difference through bailouts or zero-interest loans from the Fed or leveraged-up synthetic derivative schemes. They just had to deal with the fact that the economy sucked – and they adjusted.

This ought to have been true also on Wall Street, but in a curious development that is somehow not addressed in Sherman's piece, the denizens of the financial services industry managed to maintain their extravagant lifestyle standards in the middle of a historic global economic crash that, incidentally, they themselves caused.

After suffering one truly bad year – 2008, in which the securities industry collectively lost over $42 billion – Wall Street immediately rebounded to post record revenues in 2009, despite the fact that the economy at large did nothing of the sort. The numbers were so huge on Wall Street compared to the rest of the world that Goldman slashed its 4th-quarter bonuses, just so that the final bonus/comp number ($16.2 billion, down from what would have been $21 billion) didn’t look so garish to the rest of broke America.

What Sherman now argues is that Dodd-Frank has so completely hindered Wall Street’s ability to magically invent profits through borrowing and gambling that, unlike those wonderful days in 2009, its fortunes are now reduced to rising and falling – heaven forbid – along with the rest of the economy.
posted by mediareport at 10:15 PM on February 8, 2012