The Masters Of The Universe Aspire To Be The New Lehman

What is really amusing about this NYTimes article is the easy unstated assumption that the financial crisis had nothing at all to do with the Masters of the Universe and now there are "great opportunities" for the up and coming Masters:

There is an air of exodus on Wall Street — and not just among those being fired. As Washington cracks down on compensation and tightens regulation of banks, a brain drain is occurring at some of the biggest ones. They are some of the same banks blamed for setting off the worst downturn since the Depression. This is certainly a concern for the banks losing top talent. . . To deter the people it thinks caused the crisis, the government is clamping down.

(Emphasis supplied.) More . . .

A brain drain is it? It was "the banks," not the people working in them that were the problem you see. To disprove this notion of brain drain, I will quote one of the "comers:"

“We have the opportunity to step into the shoes of a Bear Stearns or a Lehman,” said Lee Fensterstock, the chief executive of Broadpoint . . .

Indeed. The goal is to be Lehman or Bear Stearns? What's that? Bankrupt? A true "brain" would aspire to being the new AIG or Citi - they are the ones getting the free hundred billion dollar handouts. Lehman and Bear Stearns were left for the bankruptcy wolves.

Speaking for me only

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    Nothing new under the sun. (5.00 / 6) (#1)
    by Romberry on Sun Apr 12, 2009 at 08:22:30 AM EST
    "That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the Oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a whole group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they had nothing to do with the misfortunes that overtook the country . . . that they were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob..." - Ferdinand Percora of the Pecora Commission from his 1939 memoir, Wall Street Under Oath.  

    Great quote (none / 0) (#2)
    by Big Tent Democrat on Sun Apr 12, 2009 at 08:28:16 AM EST
    I have to use that later.

    Interesting story (5.00 / 1) (#4)
    by gyrfalcon on Sun Apr 12, 2009 at 09:06:31 AM EST
    Remember when we were all certain AIG had no need to pay retention bonuses because those people would be unemployed if it weren't for the government bail-out?

    This is one reason why we need to go back to the "confiscatory" marginal tax rates of the '50s, '60s and '70s, IMHO.

    On a slightly more hopeful note, the article also says this:


    "This is certainly a concern for the banks losing top talent. But other financial experts believe it is the beginning of a broader and necessary reshaping of Wall Street, too long dominated by a handful of major players that helped to fuel the financial crisis. The country may be better off if the banking industry is less concentrated, they say.

    "If the risk-taking spreads out to these smaller institutions, it is no longer a systemic threat," said Matthew Richardson, professor of finance at the Stern School of Business at New York University. "And innovation is spreading out too. This is a good thing."


    Oh, joy.  More "innovation" in finding ways to make money off of money.

    Maybe it's just me (none / 0) (#13)
    by sj on Sun Apr 12, 2009 at 03:58:25 PM EST
    but this makes no sense:

    "If the risk-taking spreads out to these smaller institutions, it is no longer a systemic threat,"

    That sounds to me like it is spreading the infection, not providing an antidote.


    It's worded badly (none / 0) (#16)
    by gyrfalcon on Sun Apr 12, 2009 at 11:00:23 PM EST
    You're right, it doesn't make a lot of sense as stated.  I think he's assuming there's a limited pool of competent super-risk-takers, and if BoA (or whoever) only has 50 of them instead of its current 100, it will not indulge in super-risk-taking quite so broadly.  I honestly don't have a clue whether the bad behavior is that personnel-dependent or not.

    Love the wording... (5.00 / 1) (#6)
    by Ethan Brown on Sun Apr 12, 2009 at 10:37:39 AM EST
    "To deter, the people it thinks caused the crisis..."

    Is there really any question as to who caused the crisis?

    Actually.... (5.00 / 1) (#9)
    by Romberry on Sun Apr 12, 2009 at 11:47:32 AM EST
    ...there kind of is a question. Or more accurately, the answer to the question is complex.

    Certainly the 'Masters of the Universe' from Wall Street bear a large portion of the blame, but so do people like Summers, Rubin, Levitt and Greenspan (who acted in concert to shoot down Brooksley Born), government gutting of regulation in general and also government policies/programs/favored tax treatment that made home ownership a goal unto itself because home ownership was (often wrongly) thought to be an innately good thing. Then there are the brokers and the banks that essentially stopped underwriting since they no longer expected to hold these debts on their books, the quants who gave us CDS instruments and the laws that prevented regulation of those instruments to the point that you could buy "insurance" against an asset you didn't own or otherwise have any insurable interest in.

    Bottom line? This fiasco is the result of a number of actions that cross both party lines and the threshold between government (which is supposed to be for the people) and corporations (which are supposed to be for profit.)

    It's a mess. We need someone (like Elizabeth Warren for example) who is willing to stand up and tell the truth. So far, Obama/Rubin/Geithner/Kashkari/Paulson et. al. have failed miserably in this regard.


    Was I Asleep? (5.00 / 7) (#7)
    by pluege on Sun Apr 12, 2009 at 11:15:49 AM EST
    a brain drain is occurring at some of the biggest ones.

    When did snakeoil salesman, liars, thieves, and incompetents being caught and fleeing town as a result start being referred to as a "brain drain"?  

    Couldn't agree more (none / 0) (#14)
    by Claw on Sun Apr 12, 2009 at 05:56:13 PM EST
    I have a friend who does exactly what these "top talent" people do.  In fact, he's moving to NY to take advantage of the "brain drain."  He's already secured a top tier, soul crushing (he admits it) job.
    What "talent" really means in 99% of these hirings is "Ivy league," or well-connected.  The legal profession is guilty of this as well, but not to the same outrageous extent.  

    Yes, whatever shall we do (5.00 / 2) (#8)
    by ruffian on Sun Apr 12, 2009 at 11:35:02 AM EST
    without those brilliant minds? That's hysterical.

    No really, I'm hysterical.

    Don't know if the Guilty Parties... (5.00 / 2) (#10)
    by Ethan Brown on Sun Apr 12, 2009 at 01:16:50 PM EST
    are all that difficult to figure out: Greenspan, the big banks, legislators in DC pushing for deregulation. The complex part of all this seems to be TARP which is a sprawling mess with little or no transparency and no real guiding principles as I think Warren herself has pointed out...

    Warren today: (5.00 / 2) (#11)
    by Ethan Brown on Sun Apr 12, 2009 at 01:32:34 PM EST
    www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/04/12/keeping_tabs_on_the_bailout?mo de=PF

    Q: Do you have a clear sense of what the overall TARP plan at this point is supposed to do? Are you capable of summarizing what it's supposed to be doing?

    A: No. And neither is Treasury. Treasury has given us multiple contradictory explanations for what it's trying to accomplish.

    Wow she's an amazing voice (5.00 / 2) (#12)
    by Militarytracy on Sun Apr 12, 2009 at 02:40:47 PM EST
    Nobody is sharing with her exactly what the stress tests are.....she gets NO phone call back explaining any of the stress tests to her, just promises that someday she'll get one.  Paulson lied about how much asset the American people were getting for their TARP I dollar and now we know that +30 cents of every TARP I dollar was nothing more than corporate welfare.  This is a great read and in her opinion the banks exist to serve the American people and you can't save banking without saving American families.  She also states that the only power she has is granted to her through the voice of the American people so KEEP ON VOICING.  Sorry Obama cheerleaders, it's probably going to be a long time before I STFU.  Her conclusions about a priviledged Wall Street completely out of touch with reality and having their out of this world reality being catered to seems in line with everything that BTD has written about the Wall Street culture problem too.  She is reporting from the trenches though.

    There are hopeful signs (none / 0) (#3)
    by Politalkix on Sun Apr 12, 2009 at 08:37:55 AM EST
    for the future [link]. If more of the best and brightest among the young go into science and engineering and government and community organizing and participate in our politics, we can build from the bottom up.

    But if the best and brightest.... (5.00 / 6) (#5)
    by kdog on Sun Apr 12, 2009 at 10:08:14 AM EST
    that formerly got into the finance racket and nearly bankrupted that entire sector of the economy go into science or engineering, they may well set back those fields for a generation as well.

    Come to think of it, the finance sector was never the home for the best and brightest, only the most ruthless and cunning.  You're more likely to find the best and brightest performing surgery or arguing before the Supreme Court...not chasing every penny that rolled down the gutter of Wall St.

    The ruthless and cunning invading the science and engineering fields doesn't sound like good news.


    Wrong analysis (none / 0) (#15)
    by FreakyBeaky on Sun Apr 12, 2009 at 07:56:10 PM EST
    The best and brightest most certainly did go to Wall Street, and they learned to be ruthless and cunning because that's what was rewarded.

    If the best and brightest go into fields that require one to be grounded in reality (you can't make gravity disappear) and where one is judged on the quality of one's work, they'll adapt to those values too.  Otherwise, they won't be around too long.  Hard science and engineering, unlike finance, is really really really hard to fake.

    They may or may not continue to be ruthless and cunning ... think Watson and Crick.