We often joke about how incompetent the regulators are, and how if they actually knew what was going on they'd be working for a bank. Unfortunately, former regulator Guy Lawson confirms as much in his new book Octopus: Sam Israel, the Secret Market, and Wall Street's Wildest Con. He also confirms something I've been telling you guys all along: Wall Street is full of decent, incredibly hard working people at the lower levels, but the guys at the top are filthy. It's just something I hope you keep in mind when you're calling the shots on Wall Street 25 years from now.
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InterestIng statement about how Wall Street is filled with honest, hardworking people on the lower rungs and seething with corruption at the top. After spending nine years in the military (and an additional four years before that at a Service Academy) I can tell you that the environment in the service is identical.
Is there anywhere that this is not true? Does advancement require corruption and dishonesty?
The top end of every organization is a quagmire of brutal competition, political maneuvering, and conflicting agendas, but some people take advantage of this (Madoff) and others just do what they're supposed to do (Pandit). Guys still in that interesting gray area...Fuld, Dimon...well, I don't know what to say about them. Personally, the day I can't look at myself in the mirror I'm out of here, working in NYC opens up doors so this isn't necessarily a bad thing.
The guys at the top have to come from somewhere, right? If you have to sleaze your way up, then institutional corruption is going to be the norm. I don't buy the simple, yet comforting, narrative that there are all the nice pleasant people at the bottom-rungs, grinding day-in-and-day-out, being oppressed by a separate and entirely unrelated class of Overlords- and everything would be sunshine and lollipops if only we could get those good, honest, hardworking people to be in power.
yeah, i don't buy it either. I think with power comes a greater sense of "i know what's right" syndrome and other layers of rationalization that can quickly lead you down a corrupt path if you're not careful.
I think power can lead a formerly good person to lose their way. That being said, there are also plenty of sociopaths that don't get caught until later in their careers....
If true it kind of leads to the question; does power corrupt or do the corrupt become powerful?
That HPM, is the right question.
I think cutting corners makes it easier to get ahead. I think aggressive hunger/ambition almost always leads to corruption.
I'd like to add one other thing: the average person is corrupt as hell, it just doesn't affect anyone else and therefore doesn't matter. I bartended for a decade and got to see how pretty much everyone in my town acts when they think no one is looking, or when they've had enough to drink and just don't care. Seeing very wealthy people or politicians' personal shortcomings on display was shocking at first, and then I realized they're just human...but their vices DO affect other people and therefore become relevant.
Definitely gonna check that book out, Thanks.
It's an interesting dichotomy: do people become corrupt, or is everyone corrupt at their core and lower level people just don't have the power to make their base corruption worth anything?
I was no saint; I regularly fucked people over. The way I justified it to myself, I suppose, is that I was always very picky about whom I fucked over. For example: I wouldn't fuck a customer, but I wouldn't hesitate to fuck a fellow trader. And I went out of my way to fuck cross-town rival traders. I always believed that it was my customers who I really worked for, and that made everyone else fair game (including, on occasion, my own firm). Now I wonder if my approach was as noble as I allowed myself to believe, or if I was just as sleazy as everyone else.
I think the common thread amongst people in senior positions who are corrupt / incompetent / selfish assholes are that they are baby boomers. The boomers are an incredibly selfish generation. They took the world that was given to them by the Greatest Generation, sucked it dry for all its worth, and are now leaving the following generations with a pile of shit to wallow in.
I agree with your general sentiment -- the Locust Generation has been very bad for the US. But make no mistake, there are plenty of selfish asshole Gen Xers in finance. Most of them haven't reached the level where they can truly blow things up (yet) because the locusts are still in the way, but their time will come. There are plenty of assholes in every generation.
Agree to a large extent. Though, I think that's due in part to the lessons taught by the boomers. That said, there are always bad apples.
A lot of excellent responses on this thread, and I want to add something else and see what people think. When it comes to corruption or "fucking people over" (which are not necessarily the same thing) have you ever seen people of different backgrounds more willing or more desparate to do something that might cause others to "not be able to look themselves in the mirror?"
Quick anecdote......
During my time in the military I served with some officers who very closely mirror the kinds of people who would be competitive for jobs on Wall Street, or top Law Schools, or Medical School, or have the potential and motivation to go on and be successful starting their own company. The kind of people who have the intelligence, personality, and (most importantly) work ethic to be successful in anything that they do. These people have been leaving the service in droves. Why wouldn't they? Service Academy graduates with 6-7 years on active duty and a low-600s gmat score regularly get into top MBA programs. Where is the incentive to stick around?
Then there were other "officers" who basically were given opportunities to attend OCS and gain commissions because the various services had nobody else to admit. They graduated from marginal universities with marginal degrees and simply apply for an officer position in the military because it offers stable employment at a decent wage with guaranteed benefits for them and their family. Now, how are these people's incentives structured?
The distinction between these two groups is so stark. Much of the "fucking over" and corruption that I saw over a decade in uniform has been from this second group. Honestly, I had the luxury of knowing that I could change careers and be successful and would never have to stoop to the desperation of some of my "peers."
So, can situations themselves cause people to lose their way and do things they might not otherwise do? Can circumstances force people to believe they have no other choices? What say you.....?
I don't know what the full nature of your role was, but pretty much everyone in my family has served in infantry, this is the first generation where people are going to college and walking away from jobs (or leaving jobs) to become officers. The stories of what people in the last generation had to do to survive aren't pretty. Also, bartending is a rough business...dealing with the dregs of society puts a lot of options on the table that I didn't even know existed, or did and preferred not to think about: the nice people aren't there at 1AM on a Sunday. Now, having enough money and opportunities, I can't possibly subscribe to the mentality that "let the poor battle it out" is acceptable. Lack of motivation pales in comparison to lack of legitimate opportunity or the option to be decent....push comes to shove, people get nasty.
Some dude at the top screws everyone over...hang 'em high. They do well, pay them $$$^ridiculous. Not sure why people see it differently.
IF Wall Street is still there in 25 years
Wall Street (in some form) will always be there. You have to provide financial services somehow.....
I'd say maybe the exception to the "corruption at the top" rule is people who own their business and have done so for a long time (i.e. they aren't just trying to be the next instagram). I've found these people care intensely about the quality of their product / service, and generally do right by their customers and employees.
People that manage things for others on the other hand (corporate executives, fund managers, etc.)...that's where you find all the sharks and corruption.
Unrelated aside, Eddie, when will we have the privilege of reading your rant about the ills of European life?
Well said about those who own their own business. Those people are the ones who should be looked up to. They take calculated risks and strive so hard to do the best they can for their customers. It's something we should all strive for.
+1 SB for you...
I might get it out next week. Just a bit of foreshadowing, though: a long-term American expat friend of mine told me that if Paris fixed all the things I wanted it to fix, it would be Newark. She was right.
I love how people think Wall Street is optional. Do you even know what happens on Wall Street? It is an incredibly large place. Are you suggesting we go back to a cash economy? Should we just stop credit altogether? Should all investing activities cease? Should corporations not be allowed to sell to other corporations? Should starts up no longer receive funding? Should companies only be able to grow their businesses through organic cash flow (no longer being allowed to issue debt or equity)?
Come on let's not be retarded here. There is no economy without Wall Street. It is not some kind of optional, parasitic entity that exists because the government isn't smart enough to shut it down. There are A LOT of problems on Wall Street, but in general, the financial community provides essential services to the country. The fact that the US has the best capital markets in the world is one of the prime reasons we are the global super power today.
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