I’m not quite sure that this is GD worthy, but today the WSJ reported that Wall Street Firms are set to pay out record salaries this year.
I’m actually speachless. I don’t know what else to say other than if there was any remaining doubt that captialism in the United States was badly broken, surely it must be gone now.
Remember how people used to hate industrialists? At least industrialist *made *something.
They laugh at us. They have set up a system that allows them to loot at will They own the politicians and dare them to try something. They know we have no power over them. They had their workers, the politicians, pass laws making grand theft legal. Kind of like Big Ernie McCracken in Kingpin.
" I can buy my way out of anything. Big Ern is above the law"
The bankers make that victory speech everyday.
Hey, wall-street traders make something … six figure salaries + bonuses.
I don’t see the debate here - market traders serve a necessary purpose in a capitalist economy, but they are an overhead. I don’t understand why they should be rewarded based on the risk (to others) they’re willing to take.
The WSJ’s readers are more likely to take this as proof that American capitalism is thriving. (And would they be wrong?)
I like to read the comments to the WSJ articles, if for no other reason than to try and understand a perspective other than my own. However, in this case, even the WSJ commenters are outraged. When people’s conduct is so brazen that it offends even those who reflectively defend the most rapicious aspects of the capitalist system, you know that a line has really been crossed.
The old rule of the wealthy was that you only lived off the interest. You never dipped into the principle.
The current crop of capitalists seem to have missed that lesson. Their plan seems to be that they should consume the principle as quickly as possible because their failure to manage it wisely is going to destroy it anyway.
They’re taking a risk with taxpayer money. If they lose, the taxpayer pays. If they win, they get to keep the profits. They were implicitly doing that pre-meltdown and now they’re explicitly doing it, using bailout money to make risky bets, using the exponential increase in liquidity that the Fed has pumped into the financial system and zero interest rates to make huge profits. The increase in the Dow and equties ingeneral is all on the back of this new government-created liquidity bubble, they’re literally gambling with your money with future profits to be privatised and future losses to be socialised.
I’m a trader at a smaller firm, not a bank. I’m guaranteed the yearly salary of an entry level non-profit worker. Anything I make above that is based on a profit split. If I make good decisions I eat steak. If I make bad decisions I eat bologna sandwiches. I own all of the risk I take on. Most of the smaller firms and independent groups in Chicago and New York that no one has ever heard of operate on a similar structure. The thought of a trader being rewarded for losing money baffles me - actually, more pisses me off.
What necessary purpose?
Price discovery, risk transference, and liquidity.
Not particularly. These days the American people rarely stay angry for long. People get outraged for a few days or weeks, but politicians have figured out that if you just wait long enough, people get bored and forget about it. Then the politicians can repeat or expand the outrage as often as they wish. Just think about the military contractors who get paid tens of billions of dollars to produce ships, planes, and artillery that the military doesn’t want and can’t use. Back in the 90’s, there was some outrage about it. Nowadays, nobody cares any more. The idea that “a line has been crossed” … what line would that be? The line between ridiculous greed and absurd greed? It looks more like business as usual to me.
Trom, I can’t say I’m in favor of this system. Profit/Loss isn’t the only criteria that should be used to judge workers, particularly when different parts of the firm will have varying impact on profit and loss. Further, it isn’t a true risk balance unless you stand to actually lose money if the firm loses money.
This isn’t anything against you personally - I think the system actually exploits workers like yourself rather than rewarding them disproportionately - I just don’t think it’s a great system.
I would not normally nitpick a homonym error. But in this case there’s an important point to be learned from the wordplay.
The sum on which the interest is calculated is the principal – the use other than “chief teacher” where the -al ending is used on the substantive.
But ironically you are correct that the ‘current crop of capitalists’ are consuming the principle, as well as the principal. The social function of capitalism is to provide a means of balancing security and the profit motive by capping individual liability to the amount invested – and the entire edifice of stock-trading is built on making such limited-liability investments fungible.
When rapacious traders benefit their own wealth at the expense of those on whom they prey (and yes, that was intentionally slanted as hell, for a reason), then the common citizen, who can accept the principle of limited liability and aspire to someday have some stock himself, starts taking a radical view that a system that subject to abuse should not be allowed to stand.
So yes, they are consuming, not merely the principal, but the principle as well.
Still, at least it’s good news for the New York State budget. Mmm. Delicious tax money.
I would agree with your first statement for most businesses, but not necessarily in my case. In trading, the only thing that matters is if a trader makes or loses money. (Please keep in mind I’m referring to the type of trading firm that has to actually, you know, make money in order to stay in business - unlike taxpayer backed gambling dens…err, “banks”…) When operating in a structure where each trader is responsible for his/her own PnL, it doesn’t matter if a worker plays well with others - only that they are profitable. Being a nice guy or total asshole has no bearing on maintaining employment.
As far as having a stake in whether or not the firm goes under, I do. A portion of my earnings are held by the firm for a year and half, on a rolling basis - aka “golden handcuffs”. If something catastrophic were to happen and the firm go under, I would forfeit my held pay. This is not a personally insignificant amount of money. In order to prevent this from happening, the firm employs multiple levels of risk management personnel to monitor individual traders’ market exposure. If a trader is taking too much risk, his capital allocation will be cut back or positions liquidated.
I thought traders made money on the number of transactions, not on the profit/loss of the trade. Are you saying that your firm’s business is to speculate? In that case, if you make a profit on a regular basis, why not do it with your own money and keep all the profit?
Got that “risk transference” part nailed down, but good!
You’re thinking of brokers. Brokers function to introduce and serve as a gateway to markets while making money on the transaction fee. I don’t deal with clients.
Why I don’t do it on my own… technology/software, support staff, like mindedand more experienced coworkers to share ideas, and access to capital.
I was referring to the act of risk transference amongst the various classes of market participants vis a vis market microstructure.
Your comment is cute, but totally off topic.