The Wall Street Sewer

Sunday, February 25, 2007
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Here is a comment that comes from someone on a private email list (blogged with permission), but I cannot attach his name because his day job is too close for comfort. The comment came in response to this blog post from George Reisman. I wanted to re-print this comment here because I think the commenter – who is a financial guru – is dead-nuts on target. This is well worth your time to read it in its entirety, including Prof. Reisman’s blog post. I too champion Reisman – a wicked genius – but I think he missed the underlying problems on this issue.

Much as I hold the NYT snivellers in contempt, too, I do find it investment bank chiefs’ boodle a little hard to swallow – a position I assuredly do NOT hold out of some lefty politics of envy.

Be aware that these modern Croesuses are NOT worthy entrepreneurs earning money by serving consumers better than their peers, but sharp political operators and the prime beneficiaries of the horrendous inflation they themselves do so much to induce.

Nor do these managerial oligarchs run true entrepreneurial risks personally – - failure usually entails no danger to their accumulated swag, and often is accompanied by yet another multi-million severance pay-off (and often the prospect of a convenient and kudos-drenched sinecure in politics, or as a ‘consultant’ afterwards) while ‘success’ only comes at the expense of others, since investment banks neither promote the useful disbursement of scarce capital at the corporate level, nor act as the honest stewards of the humble man’s savings, while the twisted ingenuity of their ‘financial engineering’ minions are to be found behind nearly every significant act of executive misfeasance which is perpetrated.

As and when the current boom ends and the madness of hedge funds, private equity, ‘infrastructure’ deals, and derivative overkill are revealed in all their true horror – all of which are driven by and greatly enrich the investment bankers and their Overlords – it would not be unprecedented for the so-called ‘profits’ on which these Titans’ invidious bonuses are calculated to be revealed as yet another accounting fiction, while the damage done to a wider world overburdened with debt and riddled with arcane and highly dangerous financial instruments is hardly to be countenanced.

Mssrs Mack and Blankfein and their ilk may well be fine, upstanding men of high personal honour and doubtless they have infringed no rule, nor broken any law, but the scale of their enrichement is nonethless an irrefutable proof of the financially and morally corrupt system under which we – and all true entrepreneurs must labour.

I’m all for ‘defending the indefensible’ and I usually cheer Prof. Reisman’s excoriations of the shallow Collectivism of the etsablishment press, but I think this is one cause better left unchampioned!

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