Is the system really that bad?

I am quite new to the industry and have been on a steep learning curve over the last 6-12 months as I look to transition from engineering to finance. As part of this transition I have been getting acquainted with the technical side as well as with the political (call it 'the game').

I knew that the system was full of power players and politicians making up the rules as they went along but what has shocked me is the crossover between academics adopting financial theory which is popular with large banks and policy makers.

This infiltration of the political and financial world seems systemic. Academics are used as pawns giving 'expert' opinion to which they have a significant financial conflict of interest.

Is the industry really this messed up? Or
Are documentaries like "Inside Job" biased, pushing their own agenda?
Pre-crisis did mid-level analysts and investment bankers have any choice but to sell products they knew were no good, like AAA rated CDO's?

I can't see myself doing that...

If one must "Be first. Be smarter. Or cheat." it seems the latter in used in greater proportion to either of the former, or at least when they fail.

 
CaliforniaAnalyst:
it's the same in every industry

I am yet to see engineering fundamentals contorted by industry and taught in academic institutions, nor have I seen science/engineering/medical academics compromise judgement so callously in papers and articles.

I know there have been instances where big pharmaceuticals have had a similar influence on the medical profession but the scale of corruption and influence seems to be leagues apart.

The number of day traders on the Forbes Rich List is…zero
 
lloydmof:
CaliforniaAnalyst:
it's the same in every industry

I am yet to see engineering fundamentals contorted by industry and taught in academic institutions, nor have I seen science/engineering/medical academics compromise judgement so callously in papers and articles.

I know there have been instances where big pharmaceuticals have had a similar influence on the medical profession but the scale of corruption and influence seems to be leagues apart.

Don't listen to him that was a retarded answer. The fact is Wall Street and financial services in general is a very unique case in that they have essentially full control over governments around the world. This is perfectly clear with what happened in terms of the bailouts in 2008 and what is happening now in Europe (Banks are holding countries hostage, not the other way around). What's important to note is that in other industries such as technology, or medicine, the value generation fundamental to the business model is based on actually providing good products and services to your consumers in a way that benefits them. Finance exists solely to allocate and direct capital to those that need it. There is nothing wrong with that in theory, but Wall Street has essentially been given monopoly power over the markets which enables them to make money at the expense of their clients, not as a result of providing any real value. Without government, Wall Street would not be a cartel immune from competitive forces in the market.

 
JeffSkilling:
The fact is Wall Street and financial services in general is a very unique case in that they have essentially full control over governments around the world. This is perfectly clear with what happened in terms of the bailouts in 2008 and what is happening now in Europe (Banks are holding countries hostage, not the other way around).
Agree with the sentiment but I look at it this way: borrow $1,000.00 and the bank owns you. Borrow $1,000,000,000.00 and you own the bank. If owndership is 9/10ths of the law, ask Dick Fuld who the hell was in charge as he grovelled for a buyout. Wall Street has a hugely disproportionate influence, no doubt about it, and they can definitely make a power play when necessary. This is a good thing because we know better than most what the hell is actually going on while the public lives in their illusions. Finance is also highly disciplined compared to many other sectors, and as long as Wall Street is relatively responsible, we deserve many of the privelages granted to us: compare that to the asshole who works 20 hours a week or is on welfare who thinks they are entitled to having a say over larger events, they wouldn't even know what to do.

Some banks, like GS, were only in danger if the larger system failed, but they did manage to use their connections to weasel a good deal out of the crisis. You can debate the merits/downside/utility of all this, but I see an opportunity, plain and simple. For AIG, they were taken over, restructured, and dismantled...the government is fully and clearly in control in the widest possible sense.

Get busy living
 

My MD once told me: "these politicians, they come in and out every few years. Some of them do good things, some of them screw things up, and the people backing them are beyond belief. As for us, we stay and we focus and we do our thing year after year, decade after decade. Never mind all that noise, just do what you're supposed to be doing and things will go your way." (I'm paraphrasing, this was over drinks)

Politics is a never ending stream of crazy people, groups pushing their agenda by any means possible, and REALLY stupid citizenry. Avoid at all costs.

Get busy living
 

Inside job was a great documentary but it had too strong of an anti-Wall Street, anti-Capitalism bias too it. Yes, Wall Street was a major participant in the actions that led to the financial crisis, but their were numerous other actors involved as well, most importantly the Fed. Many people (OWS, Democrats, Academics, Keynesians, retarded college students) think that the system is messed up because capitalism doesn't work and that greed needs to be regulated. The truth is the system is messed up because we no longer have Capitalism. We have strayed a long way from the true, free market Capitalism that made this country the most powerful nation in the history of the world. 2008 financial crisis is a textbook example of this. Had the Federal Reserve not slashed rates to 1% in 03 and held them there for a year, we never would have had a financial crisis. Not to mention Fannie/Freddie.

I'd encourage you to go watch some Peter Schiff videos on youtube if you want to better understand all this. This is a good start:

 
Best Response

@ufoinsider - I was hoping to hear that. I've been scratching my head thinking, it can't REALLY be that bad, can it. I also think that some areas of high finance are worse than others. I am most interested in ER and AM, which seem to be least involved with shady practices.

@jeffskilling - I totally agree. I am an apologizing capitalist. I am all for the free market! Coming from Australia, which is very heavily regulated and whose policies are socialist, borderline communist I am eternally frustrated with government.

Moving to Hong Kong. There's no mucking around there. If you don't work, you don't eat, if you don't eat, you die. People are very motivated to get off their ass then.

The number of day traders on the Forbes Rich List is…zero
 

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