Out of the corner of my eye

You know, it’s crazy. I used to work for one of the big investment banks. In fact, I was actually in their Risk IT department - we built the systems they used to evaluate risk on their investments. These banks ploughed a lot of cash into building these kinds of systems, employed some very smart people. So what’s this about?

“They acted as though house prices would just keep going up forever, and they could just keep, you know, going along these lines. They leveraged themselves to the hilt. The investment banks, like Lehman and Bear Stearns, leveraged themselves to a ratio of thirty-to-one. In other words, if they had $10 billion in capital, they had loans on the order of $300 billion. I mean, this was just asking for disaster.
And, you know, again, it did collapse. It was totally predictable it would collapse. You know, I didn’t know when, didn’t know exactly who, but it was totally predictable. And now they’re running to us and asking us for handouts. Think of what we do to welfare people, when they—you know, everything they have to go through to get, you know, a $500-a-month check, and these people want billions, no questions asked. Unbelievable.”

–Dean Baker, transcript from Democracy Now

Absolute insanity. I understand how banks that sell mortgages on the high street got clobbered by the housing market fiasco (c.f. Northern Rock), though you’d think that someone who specialises in mortgages would know better… but investment banks? They specialise in balancing risks with profits. They build massive IT systems, employ the smartest people in the world to build complex derivatives and exotics. It’s like Rolls Royce going out of business because they decided it would be a great idea to build their jet engines out of plastic.

Maybe we should just be cynical and accept that at the end of the day, most people with any real decision making powers working in the City or on Wall St only care about their own bonuses at the end of the day. They’re in it to make money, to make money. Nothing more, nothing less. Then when the shit hits the fan, they nominate themselves for gigantic golden parachutes and fuck off to build another mansion.

Well, hopefully people will be a little less glib when trying to extol the virtues of the free market and globalisation being a force for good, now. We all know the only thing that Capital cares about is Capital, whether on a macro-economics or individual scale.