What do Wall Street Banks do for society?

What do Wall Street Banks do for society? According to a New Yorker article called "What Good is Wall Street?," not much. Many people assume that most of the money made by Wall Street banks is associated with raising capital for fledgling businesses. Not true:

Wall Street’s role in financing new businesses is a small portion of what it does. The market for initial public offerings (I.P.O.s) of stock by U.S. companies never fully recovered from the tech bust. During the third quarter of 2010, just thirty-three U.S. companies went public, and they raised a paltry five billion dollars. Most people on Wall Street aren’t finding the next Apple or promoting a green rival to Exxon. They are buying and selling securities that are tied to existing firms and capital projects, or to something less concrete, such as the price of a stock or the level of an exchange rate. During the past two decades, trading volumes have risen exponentially across many markets: stocks, bonds, currencies, commodities, and all manner of derivative securities. In the first nine months of this year, sales and trading accounted for thirty-six per cent of Morgan Stanley’s revenues and a much higher proportion of profits. Traditional investment banking—the business of raising money for companies and advising them on deals—contributed less than fifteen per cent of the firm’s revenue. Goldman Sachs is even more reliant on trading. Between July and September of this year, trading accounted for sixty-three per cent of its revenue, and corporate finance just thirteen per cent. In effect, many of the big banks have turned themselves from businesses whose profits rose and fell with the capital-raising needs of their clients into immense trading houses whose fortunes depend on their ability to exploit day-to-day movements in the markets . . . Other regulators have gone further. Lord Adair Turner, the chairman of Britain’s top financial watchdog, the Financial Services Authority, has described much of what happens on Wall Street and in other financial centers as “socially useless activity”—a comment that suggests it could be eliminated without doing any damage to the economy. . . “Why on earth should finance be the biggest and most highly paid industry when it’s just a utility, like sewage or gas?” Woolley said to me when I met with him in London. “It is like a cancer that is growing to infinite size, until it takes over the entire body.”
Yet Wall Street is where great amounts of money exist, and that is why many of America's best and brightest are flocking there to engage in careers of . . . well . . . making money. A starting point for this article is that financial markets are grossly inefficient, and that instead of directing money into productive projects, Wall Street financiers follow trends and "surf bubbles."
These activities shift capital into projects that have little or no long-term value, such as speculative real-estate developments in the swamps of Florida. Rather than acting in their customers’ best interests, financial institutions may peddle opaque investment products, like collateralized debt obligations. Privy to superior information, banks can charge hefty fees and drive up their own profits at the expense of clients who are induced to take on risks they don’t fully understand—a form of rent seeking.

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That psychopath in the mirror

In the September/October 2010 edition of Scientific American Mind, I recently read an article titled "Inside the Mind of a Psychopath," by Kent Kiehl and Joshua W Buckholtz. Who are psychopaths? The authors claim that psychopaths are people whose brains have "gone wrong." They claim that psychopaths make up .5 to 1% of the general population, adding up to 250,000 psychopaths living freely in the United States. They offer a list of criteria for determining whether a person is a psychopath, mentioning that "everyone falls somewhere on the psychopathic continuum." What are the basic symptoms?

One of the most striking peculiarities of psychopaths is that they lack empathy; they are able to shake off as mere tinsel the most universal social obligations. They lie and manipulate yet feel no compunction or regrets-in fact, they don't feel particularly deeply about anything at all. So much for the way regular people make sense of the world is through emotion. It informs our gut decisions, our connections to people and places, our sense of belonging and purpose. It is almost impossible to imagine life without findings-until you meet a psychopath. But psychopaths often cover up their deficiencies with a ready and engaging charm, so it can take time to realize what you are dealing with.
Fair enough, but I'd like to focus on that idea that all of us fall along this continuum. [More . . .]

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The Pope speaks. Richard Dawkins replies.

Only a few weeks ago, the Pope arrived at Edinburgh to blame people like me (I don't belong to a religion) for the Nazi holocaust. These outrageous claims constitute the kind of abject bigotry that can lead to ostracism and violence against those of us who, sincerely and after careful consideration of the evidence, do not believe in supernatural beings. As reported by The U.K. Guardian:

Benedict XVI used the first papal state visit to Britain to launch a blistering attack on "atheist extremism" and "aggressive secularism", and to rue the damage that "the exclusion of God, religion and virtue from public life" had done in the last century. The leader of the Roman Catholic church concluded a speech, made before the Queen and assembled dignitaries at the Palace of Holyroodhouse in Edinburgh, with the argument that the Nazi desire to eradicate God had led to the Holocaust and a plea for 21st-century Britain to respect its Christian foundations.
Incredibly, he described pedophilia as an 'illness' whose sufferers had "lost their free will." The Guardian article is well worth a read. It offers a fascinating look into the corrupted soul of the Vatican. Richard Dawkins had more than a few pointed things to say about the Pope and his church. In fact, his speech took the form of an sharp indictment. I couldn't agree more with Dawkins, even though it somewhat pains me to say this. You see, I was raised Catholic and I have many friends who are still practicing Catholics who are generous, kind and thoughtful. It's a pity that their spiritual leader would rather blame secularists and allow millions of people to die by depriving them of condoms, than to own up to the mass-rape perpetrated and covered up by many of the "leaders" of his Church. On top of that, consider the Catholic Church's systemic disparagment of women. Such horrifically screwed up priorities. For many years, the Vatican has annoyed me with its pomposity and hypocrisy, exacerbated by the way the mass media fawns over so many things that Popes utter, rarely pointing out the vagueness or the absurdities. I'm afraid that I've now reached a tipping point. It's time to completely disregard the fact that the Pope is revered by so many others. Despite the fact that the Pope dresses up in expensive clothes and that he works extremely hard to obscure his absurdities with impenetrable language allegedly based on ancient books, he plainly stands before us as a man whose head is filled with numerous terrible ideas. Here's what Dawkins had to say:

Continue ReadingThe Pope speaks. Richard Dawkins replies.

God is good

Prologue: This post does not apply to Christians who conclude that "God" was evil to the extent that "He" killed babies. Nor does it apply to Christians who don't believe that the Old Testament is literally true, and further conclude that "God" never actually killed babies as described in the Old Testament. In short, this post applies only to those who believe that A) God really killed numerous little babies, and B) that God is nonetheless "good." Whenever I hear believers proclaim that “God” is “good” I am puzzled. How could it possibly be that an all-knowing and omnipotent being could engage in the many atrocities attributed to “God” in the bible? For example, how can killing little babies ever be considered to be good? Here are 1,199 more examples of cruelty from the Bible. Anyone but “God” who engaged in such behavior would be universally proclaimed to be evil, not good. There’s no way to avoid this conundrum for believers, especially for Bible literalists. The God they repeatedly praise purportedly killed many thousands of innocent people, including countless numbers of babies. Consider also, that other Bible passages show little regard for the lives of infants and fetuses. The above passages cause me to consider this question: Do believers sincerely believe their claims that “God” is “good,” or are they merely being practical in the face of the threat of hell? To what extent is it that it is the perceived threat of hell causes it to seem “true” that a baby-killing God is “good”? Sam Harris raises a similar issue at page 33 of his new book, The Moral Landscape (2010):

What if a more powerful God would punish us for eternity for following Yahweh’s law? Would it then make sense to follow Yahweh’s law “for its own sake”? The inescapable fact is that religious people are as eager to find happiness and to avoid misery as anyone else: many of them just happen to believe that the most important changes in conscious experience occur after death (i.e., in heaven or in hell).

Indeed, what if a bigger stronger god named Kyle came along and smote Yahweh, showing all the world Yahweh’s lifeless supernatural “corpse” while declaring “God is Dead!” (Were this ever to happen, it would likely make atheist Friederick Nietzsche jostle in his grave). Wouldn’t believers quickly modify their existing hymnals, scratching out “God” and inserting “Kyle”? What might they do to the traditional hymn, “God is so Good”? Something like this? [More . . . ]

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A terrifyingly wonderful gift

At TED Stacy Kramer tells a three-minute story about an unwanted gift that thoroughly enriched her life. In an earlier wordier post, I explored this same idea, but perhaps it's now time to add Stacy's type of gift to my list of "bad" things. Bad things often open good doors--I'm certain of this. Obstacles often provoke us to pick better solutions that we otherwise would have--perhaps this idea is sometimes captured by the term exaptation. Thus, in our wild and wacky world, down can sometimes be up, and it often has nothing to do with George Orwell. In many cases, it's part of the natural order that unveils itself only piece by piece to short-sighted human animals like you and me.

Continue ReadingA terrifyingly wonderful gift