Is there a place for morality on Wall Street any more? Niall Ferguson doesn't think so, at least since Siegmund Warburg died in 1982. Ferguson believes that regulation won't clean up the Street but that bankers need to be taught morals. For those who don't know, Siegmund Warburg founded investment bank S.G. Warburg & Co. after WWII and ran the firm through the 1970's. The firm was eventually sold to UBS in the mid-90's, and Warburg was famous for "relationship banking".
Right now, Wall Street seems pretty far away from Warburg's ideal of high moral standards and ethics. Bank CEO's openly joke about the culture of greed, with Blankfein's "doing God's work" comment and John Mack's admission that, "We cannot control ourselves." These are the guys at the top. What I'm curious about is where morality fits into the lower levels of banking. Is it possible to work in the culture of greed and still consider yourself a "moral" person?
I'll go first. I will be the first to admit that when I got started, all I thought about was the money. Well, that's not exactly true. I also fancied myself something of a market wizard, so I pictured myself shepherding huge sums of money and capriciously micromanaging every aspect of my unfortunate underlings' lives. So there was a burgeoning God complex to go with my greed.
I certainly wouldn't say I was a "moral" person, but neither was I "immoral". It would be more accurate to say that I was "amoral". I didn't go out of my way to screw anybody (with a few notable exceptions), but I did make a number of client-related decisions based on how much money I would make. That said, we had an advantage back then over bankers and traders today: we actually made more money when our clients made money. It enabled us to harness our greed for moral purposes, if you will.
Today, with the structure of management fees, 2 & 20, and the various other fee-generating machinations of the banks, clients no longer have to make money for bankers to reap huge bonuses. Back in the day, if your clients lost their collective asses you had a terrible year, and maybe even got fired. Today, hedge funds can drop by 50% in a year and even close up shop, but the manager is still going to rake 2% (or more in a lot of cases) of the AUM.
Banks today routinely short the same assets they're recommending their clients purchase, they front-run their clients' orders, and they blatantly (and proudly) mislead ratings agencies and long-term customers just to make a buck. As Ferguson says, the guiding principle is no longer "Are we doing the right thing?" but "Can we get away with this?"
So I'm curious about how you guys square it with yourselves. Do you tell yourself that you're just a tiny cog in a giant machine, that you're just following orders? Or are you more like I was and just don't really think about it, trying to maximize your personal return? Is morality even a consideration in finance? And how do you feel about the characterization of bankers as sleazy lowlifes? Has any of this made any of you consider another career?