Wall St. Doesn't have to be in NYC
After watching the dominoes commercial where the "hedgefund guy" gets his pizza taken, I'm concerned about the effects of this populist rage. Will the public realize that they don't do much to contribute to income or corporate tax revenue? If the public decides to put angry taxes on "the evil bankers" and more money moves overseas how bad will our country crumble?
The big problem is that politicians will attempt to capitalize on populist rage rather than take responsible actions to calm it. I see a lot more taxes, income caps & restrictions. WHo's going to step up and say, "Functioning capital markets are essential to our way of life. Punishing Wall Street now just punishes the worker 18 months from now."
WIll Obama do it? I hope.
it really scares me...all of this populist rage. they are making wall street the scapegoat for the whole mess; they're putting 100% of the blame on wall street. however, i am hopeful that this outrage runs its course and finishes soon. hopefully, the public realizes that bonuses and rewards for performance are the epitome of capitalism and america.
I love capitalism and Wall Street, but if you've worked there for a little while you know that Wall Street bonuses are too tied to short-term performance, which often encourages unwise risk-taking. This is no secret, it's the "trader's option" in various forms. So, is the populist rage sometimes crazy? yes. But are they (the population) on to something about WS employees and management using their positions to enrich themselves, the long-term-health-of-the-firm-, wealth-of-the-shareholders-, and health-of-the-financial-system be damned? Of course they are.
In any case, I think the bailout and stimulus process has been insanely sloppy, but in no sense has WS been left out of the handouts (Lehman excepted, what else?). So I respect your concerns, but I think it's an overreaction to a process that has been on the whole very wall-street friendly.
First off, you're right - some things regarding corprate and wall street (interests of shareholder and management not properly alligned) procedure should change. I just fear an extreme over-reaction.
Yes, the procees hasn't been awful for the business world. I just have a sense that things are heading in the wrong direction.
A lot of people are frothing at the mouth. I can't blame them, but many "hard working americans" are out for blood.
Don't you love it how 'hard working americans' cannot include hedge fund managers...
Guys, don't worry, this tide will pass - in the meantime, if people ask you about why finance people are ruining the country, just say that it was a bunch of rich pricks from London who made the mess (cuz it was....kind of) - its always been easy to switch people's anger to Europe after all.
Anyways, for what its worth, Obama says he does not support the stupid "tax the finance people ROFL!" bill, and I doubt it even makes it past the senate.
Out of curiosity, if finance where to leave New York for greener pastures, where do you guys think that would be?
The way it's looking, Washington, DC.
Trading is huge in Chicago already and there's quite a lot of finance as it is in the city. I don't think it will ever be anything like Wall Street, but I could see a bit of a transition.
You're kidding, right? Do you realize how fucked NYC would be if "Wall Street" disappeared?
http://scienceblogs.com/cortex/2009/03/aig_and_inequality.php
AIG and inequality
Posted on: March 18, 2009 1:51 PM, by Jonah Lehrer
I know, I know: everybody is sick of hearing about those AIG bonuses. But bear with me for one more blog post, because I think the swell of populist anger can actually illuminate something interesting about the human response to inequality.
Consider the ultimatum game, that simple economic task where one person (the proposer) is given ten dollars and told to share it with another person (the responder). The proposer can divide the money however they like, but if the responder rejects the offer then both players end up with nothing.
Classical economic theory makes two predictions about the outcome of the ultimatum game: the offers will always be unfair, and the unfair offers will always be accepted. Since both players are rational, they understand that a small amount of money is still better than no money at all. Reason and greed should trump ethical notions of fairness.
But that isn't what happens. Experiment after experiment has demonstrated that most proposers offer about $4, which is rather fair and utterly irrational. Why do proposers engage in such generosity? Because they are able to imagine how the responder will feel if they make an unfair offer. Proposers know that a lowball proposal will make the responder angry, which will lead them to reject the offer, which will leave everybody with nothing. So the proposers suppress their greed, and equitably split the ten dollars. They understand that maintaining the appearance of fairness is better for everybody.
However, there's one easy way to change the behavior of people during the ultimatum game. When people are given a test before the money is distributed - and it doesn't matter what the test is - and then the "high scorers" are given the $10 to distribute, responders are willing to accept unfair offers. In other words, people are willing to tolerate inequality when they think it's deserved. This is why people weren't outraged when Wall Street handed out obscene bonuses last year - they assumed the executives deserved the payout. But now we know better.
When this sense of fairness breaks down, bad things start to happen. One of the more powerful examples of this behavior comes from Franz de Waals and Sarah Brosnan, who trained brown capuchin monkeys to give them pebbles in exchange for cucumbers. Almost overnight, a capuchin economy developed, with hungry monkeys harvesting small stones. But the marketplace was disrupted when the scientists got mischievous: instead of giving every monkey a cucumber in exchange for pebbles, they started giving some monkeys a tasty grape instead. (Monkeys prefer grapes to cucumbers.) After witnessing this injustice, the monkeys earning cucumbers went on strike. Some started throwing their cucumbers at the scientists; the vast majority just stopped collecting pebbles. The capuchin economy ground to a halt. The monkeys were willing to forfeit cheap food simply to register their anger at the arbitrary pay scale.
This labor unrest among monkeys illuminates our innate sense of fairness. It's not that the primates demanded equality - some capuchins collected many more pebbles than others, and that never created a problem - it's that they couldn't stand when the inequality was a result of injustice. Humans act the same way. When proposers do something to deserve their riches, nobody complains. But when they get rewarded for no reason and then refuse to fairly distribute their reward, people get furious. They begin doubting the integrity of the system, and become more sensitive to perceived inequalities. They reject the very premise of the game.
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