{"id":2040,"date":"2008-12-19T12:18:08","date_gmt":"2008-12-19T16:18:08","guid":{"rendered":"https:\/\/blacknell.net\/dynamic\/?p=2040"},"modified":"2008-12-19T12:49:59","modified_gmt":"2008-12-19T16:49:59","slug":"madoffwall-street","status":"publish","type":"post","link":"https:\/\/blacknell.net\/dynamic\/2008\/12\/19\/madoffwall-street\/","title":{"rendered":"Madoff=Wall Street"},"content":{"rendered":"

Paul Krugman is dead on<\/a>, here:<\/p>\n

Yet surely I\u00e2\u20ac\u2122m not the only person to ask the obvious question: How different, really, is Mr. Madoff\u00e2\u20ac\u2122s tale from the story of the investment industry as a whole?<\/p>\n

The financial services industry has claimed an ever-growing share of the nation\u00e2\u20ac\u2122s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it\u00e2\u20ac\u2122s not just a matter of money: the vast riches achieved by those who managed other people\u00e2\u20ac\u2122s money have had a corrupting effect on our society as a whole.<\/p>\n

[ . . . ]<\/p>\n

But surely those financial superstars must have been earning their millions, right? No, not necessarily. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.<\/p>\n

Consider the hypothetical example of a money manager who leverages up his clients\u00e2\u20ac\u2122 money with lots of debt, then invests the bulked-up total in high-yielding but risky assets, such as dubious mortgage-backed securities. For a while \u00e2\u20ac\u201d say, as long as a housing bubble continues to inflate \u00e2\u20ac\u201d he (it\u00e2\u20ac\u2122s almost always a he) will make big profits and receive big bonuses. Then, when the bubble bursts and his investments turn into toxic waste, his investors will lose big \u00e2\u20ac\u201d but he\u00e2\u20ac\u2122ll keep those bonuses.<\/p>\n

O.K., maybe my example wasn\u00e2\u20ac\u2122t hypothetical after all.<\/p><\/blockquote>\n

It’s worth a couple of minutes to read the whole thing (especially the part about the bipartisan corruption).<\/p>\n

Update:<\/strong> Naturally, the Madoff investors want a bailout<\/a>, too.<\/p>\n","protected":false},"excerpt":{"rendered":"

Paul Krugman is dead on, here: Yet surely I\u00e2\u20ac\u2122m not the only person to ask the obvious question: How different, really, is Mr. Madoff\u00e2\u20ac\u2122s tale from the story of the investment industry as a whole? The financial services industry has claimed an ever-growing share of the nation\u00e2\u20ac\u2122s income over the past generation, making the people […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"ngg_post_thumbnail":0,"activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"","footnotes":""},"categories":[6,3],"tags":[],"class_list":["post-2040","post","type-post","status-publish","format-standard","hentry","category-policy","category-society"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t