Wednesday, June 30, 2010

The Decline of Gentlemanly Banking: An Aide-Memoire

Ignoto invites me to assemble a catalog of reasons why banking has degenerated from croquet to rollerball:
  • Old-fashioned "character lenders" found that their business was boring and unprofitable, and harder work than "originate and distribute."
  • The new logic of diversification/securitization made O&D look respectable.
  • Without intending or planning for it, proprietary traders to their stunned surprise found themselves driving the banking bus.
  • Michael Milken showed us that you don't have to restrict your corporate loans to Episcopalians.
  • Old-fashioned investment bankers, with too much money on their hands, figured out how to go shopping for deals, rather than waiting for deals to shop them.
Have I left out anything important?

[Update: You bet. I forgot about incorporation, i.e., limited liability, i.e., heads I win, tails you lose.]

1 comment:

New York Crank said...

Well yes, you've left out one importanty thing:

Lower tax rates on very high incomes made taking big risks, especially with other peoples' money, vastly more attractive.

If we ever get a 90% bracket, the whole banking/Wall Street insanity syndrome will cease.

Tax the bastards!

Yours very crankily,
The New York Crank