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This seems more or less like a straw man of people who might loosely call themselves "anti-finance". I think most people support and understand the "idea" of f

This seems more or less like a straw man of people who might loosely call themselves "anti-finance". I think most people support and understand the "idea" of finance but not the implementation. One weak point of this article is that it repeats the common pro-finance position that financiers deserve to be wealthy because they take on "risk". However, in this day and age we hardly ever let large companies suffer the consequences of a bad investment (or brazen illegal activity). So, if we think bailouts and the like are necessary to prevent society from collapsing, recognizing the finance industry as a crucial component of our economy, what's the reason for allowing financiers to keep skimming off the top when they're allowed to burden taxpayers with all the risk? Finance is important, and sure, moving money around is hard. But so is making things. I'd like to see people who make things and people who move money to earn income on about the same order of magnitude. I'd also like to see companies held accountable when they commit crimes. (also--dismissing viewpoints you disagree with for being too "meta-contrarian" is bad form imo. Anyone who has criticisms of the way things are is just doing it to be cool? I'm going to call this way of arguing "meta-meta-contrarian")

kaymanb 6y ago
I also found this to be one of these articles weak points. The author (rightfully) argues that what bankers do is difficult, and so it makes sense that they are compensated for it. But they also use this as an excuse for the finance industries short-comings: pricing mortgage backed securities is hard, coordinating bailouts is hard, so are bankers really to blame if they don't get it perfectly right? I don't think you can have it both ways.
SpicyLemonZest 6y ago
I think you're misunderstanding what "risk" means here. It's not that they have a moral right to be wealthy because their companies are at risk of catastrophic failure; it's that they perform the valuable service of making risky investments that other people can't. Mortgages are the canonical example; they allow lots of people to buy homes who wouldn't otherwise be able, and they could never work if some individual person had to take the risk that the borrower might default.
- A12-B 6y ago
  This still begs the question. Risk is about unexpected loss of investment, which means at its core it's about the moral and physical consequences of losing money. If the consequences of risk are not actually felt, materially, by financiers, but are felt, materially, by people who partake in the deal, why aren't those ordinary people hedged accordingly? If you want to argue economics, it's clear all this does is allow banks to take on riskier and riskier deals at no consequence. The student loan crisis is an example of that.
  - SpicyLemonZest 6y ago
    Again, it really has nothing to do with morality or just deserts. Risk management is just a valuable thing that banks produce. They take risky deals, and manage those deals to try and make sure that nobody has to materially feel the risk. Sometimes they fail, and they're rightly criticized for that, but more often they succeed. The student loan crisis is a good example of where people's misunderstandings of finance lead them astray. There's a pervasive idea that the crisis is related to banks making it irresponsibly easy to get a loan. But since 2010, the vast majority of new student loans have come directly from the Department of Education, generally with lower prices than private lenders offer.
    - A12-B 6y ago
      Who said anything about 'morality'? The evidence of disaster of letting people with excess wealth make loans they don't suffer consequences for is everywhere. To be a reductionist and say 'risk management is just x, what's the problem?' is lazy. Oh, and I was talking about the government, not banks. They caused the student loan crisis. It doesn't matter though, since my point is about any entity with excess wealth. I don't care about banks in particular.
- ameister14 6y ago
  I actually think it's you that has misunderstood. when you say this: "they perform the valuable service of making risky investments that other people can't" What do you mean by risky investments? If you mean the bank risks losing money on them, that's countered by the point the person you are responding to made here: "in this day and age we hardly ever let large companies suffer the consequences of a bad investment " What that means is, if you loan money and the business or person you loan to fails to repay, and the government bails you out by paying you the amount you were owed, did you actually risk anything at all? Mortgages are indeed the canonical example - it's why the bank bailout that paid the banks that took the risks and failed is a perfect example of just this kind of risk mitigation. It's worse, though, because on an individual level the banker has extremely minimal risk with their investments and loans. JP Morgan may or may not be at risk if they invest tons of money foolishly, but Jack the banker at JP Morgan has risked exactly $0 of their personal capital on the same bet. If the bet succeeds, Jack makes a million dollars. If the bet fails, MAYBE Jack gets fired. More often, he gets another crack at it because things don't always go well and the company has an appetite for this kind of risk.

kaymanb 6y ago

I also found this to be one of these articles weak points. The author (rightfully) argues that what bankers do is difficult, and so it makes sense that they are compensated for it. But they also use this as an excuse for the finance industries short-comings: pricing mortgage backed securities is hard, coordinating bailouts is hard, so are bankers really to blame if they don't get it perfectly right? I don't think you can have it both ways.

SpicyLemonZest 6y ago

I think you're misunderstanding what "risk" means here. It's not that they have a moral right to be wealthy because their companies are at risk of catastrophic failure; it's that they perform the valuable service of making risky investments that other people can't. Mortgages are the canonical example; they allow lots of people to buy homes who wouldn't otherwise be able, and they could never work if some individual person had to take the risk that the borrower might default.

A12-B 6y ago
This still begs the question. Risk is about unexpected loss of investment, which means at its core it's about the moral and physical consequences of losing money. If the consequences of risk are not actually felt, materially, by financiers, but are felt, materially, by people who partake in the deal, why aren't those ordinary people hedged accordingly? If you want to argue economics, it's clear all this does is allow banks to take on riskier and riskier deals at no consequence. The student loan crisis is an example of that.
- SpicyLemonZest 6y ago
  Again, it really has nothing to do with morality or just deserts. Risk management is just a valuable thing that banks produce. They take risky deals, and manage those deals to try and make sure that nobody has to materially feel the risk. Sometimes they fail, and they're rightly criticized for that, but more often they succeed. The student loan crisis is a good example of where people's misunderstandings of finance lead them astray. There's a pervasive idea that the crisis is related to banks making it irresponsibly easy to get a loan. But since 2010, the vast majority of new student loans have come directly from the Department of Education, generally with lower prices than private lenders offer.
  - A12-B 6y ago
    Who said anything about 'morality'? The evidence of disaster of letting people with excess wealth make loans they don't suffer consequences for is everywhere. To be a reductionist and say 'risk management is just x, what's the problem?' is lazy. Oh, and I was talking about the government, not banks. They caused the student loan crisis. It doesn't matter though, since my point is about any entity with excess wealth. I don't care about banks in particular.
ameister14 6y ago
I actually think it's you that has misunderstood. when you say this: "they perform the valuable service of making risky investments that other people can't" What do you mean by risky investments? If you mean the bank risks losing money on them, that's countered by the point the person you are responding to made here: "in this day and age we hardly ever let large companies suffer the consequences of a bad investment " What that means is, if you loan money and the business or person you loan to fails to repay, and the government bails you out by paying you the amount you were owed, did you actually risk anything at all? Mortgages are indeed the canonical example - it's why the bank bailout that paid the banks that took the risks and failed is a perfect example of just this kind of risk mitigation. It's worse, though, because on an individual level the banker has extremely minimal risk with their investments and loans. JP Morgan may or may not be at risk if they invest tons of money foolishly, but Jack the banker at JP Morgan has risked exactly $0 of their personal capital on the same bet. If the bet succeeds, Jack makes a million dollars. If the bet fails, MAYBE Jack gets fired. More often, he gets another crack at it because things don't always go well and the company has an appetite for this kind of risk.