Making the Economy Work for The Many and Not the Few

Grand Potentate

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I doubt many of you have been following this collaboration with Robert Reich and MoveOn.org, but its been an interesting series of videos. I look forward to your discussion about them.

#1: RAISE THE MINIMUM WAGE TO $15

 
I got no time for videos, so I'll go by titles.

#1: RAISE THE MINIMUM WAGE TO $15
Nope, eliminate the minimum wage altogether. Market forces will work it out. Unless the government interferes.

#2. MAKE WORK FAMILY FRIENDLY
Oh fuck you and your war on the family. This is subsidizing working women at the expense of men. How about allowing women to fulfill their destiny of raising their own children instead of paying strangers $2/hr less than they make to do it in an inferior manner?

#3. Expand Social Security
And continue to emcourage personal reliance on government, and remove incentive for saving. NO!

#4. Bust Up Wall Street
No argument here.

#5. Reinvent Education
He might be onto something, but keep it local and private.

#6. End Corporate Welfare
Sure.

#7. STRENGTHEN UNIONS
1. Public employee unions need to die immediately.
2. Unions can strengthen themselves, unless they are lazy idiots lacking solidarity. Is he suggesting that we all be forced to pay union dues to an organization that just funnels money off to political campaigns?

#8 RAISE THE ESTATE TAX ON THE VERY RICH
Pfft, raise it on everybody. Elderly, pass your money on before you die. Stagnant hoarded funds do not help anyone but the elderly rich, who don't need help. The earth belongs to the living.

#9. MAKE POLLUTERS PAY US
What an anti-business free money scam! How about you lock up real polluters, and leave the irrelevent ones alone? This is a scam, pure and simple. Die.

#10: End Mass Incarceration, Now
Yes.
 
Wait, the still talks of bargaining power. If you're all in, you have zero bargaining power. You're captive, you have no alternative. You need to be able to walk away to bargain.
 
Wait, the still talks of bargaining power. If you're all in, you have zero bargaining power. You're captive, you have no alternative. You need to be able to walk away to bargain.
Are you high right now? You're seriously attempting to question the fundamental bargaining power of the United States government?
 
#4. Bust Up Wall Street



He massively oversimplifies stuff. I can make a vid on how to get world peace in 2:30 as well, but I'll leave out some of the major problems.

His financial transactions tax idea is incredibly stupid. They've tried it before in Sweden, and it doesn't work. Pension funds, mutual funds, trackers and even insurance funds have to rebalance their portfolios on a quarterly, monthly or sometimes even weekly basis. These are all things that benefit the average person.

Adding even a small tax will make a major difference in returns. So, seeing as companies will not just take the hit, they'll charge you for it, which means your pension/savings/investment will be much less, and your insurance premiums will go up.

I'm in favour of splitting commercial and investment banking, and partly for breaking up too big to fail banks as well.

The major problem is that shareholders demand yearly profit growth no matter what, and because the people working for the bank do not own the bank, they don't mind taking excessive risks in order to satisfy shareholders. If you end up making a big profit you gain massively, but if you make a big loss all you'll lose is your job, and you can find another one at a slightly worse ranked bank.

Back in the 1980s all major investment banks were partnerships. This means that the bank is owned by bankers themselves. If the bankers make a profit, the partners will profit, but if the bankers make a loss, the partners will have to take that loss as well. It has been proven that loss aversion is much higher than the satisfaction of making a profit, which means that the partners will watch the risk that's put on like a hawk. They don't want to lose their own money. Hence, excessive risk taking is avoided and banking becomes a healthier business.

The only people that really know how to improve investment banking are investment bankers themselves. Not the CEOs, because they have too much to lose, but everyone below them. However, when you vilify and demonise all bankers in the media, no one will listen to them. Which means you get polticians that know very little about the intricacies of finance deciding on financial law.

The U.S. has handled this slightly better than Europe, where it's been a massive shitshow. All kinds of recent regulations have backfired and caused unintended side effects, making the whole economy worse off.
 
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Are you high right now? You're seriously attempting to question the fundamental bargaining power of the United States government?
You're talking about against the taxpayer, I think. See, there the taxpayer is the captive market with little ability to leave.
I'm talking about the government bargaining for us. Wasn't ACA supposed to do that, but oops Big Pharma pays better than the taxes. Please cite an example of the government bullying out a bargain on our behalf.
His financial transactions tax idea is incredibly stupid.
What is wrong with a teeny-weeny tax to discourage the utterly meritless high-speed trading? 0.2% per transaction or the like?
 
You're talking about against the taxpayer, I think. See, there the taxpayer is the captive market with little ability to leave.
I'm talking about the government bargaining for us. Wasn't ACA supposed to do that, but oops Big Pharma pays better than the taxes. Please cite an example of the government bullying out a bargain on our behalf.

What is wrong with a teeny-weeny tax to discourage the utterly meritless high-speed trading? 0.2% per transaction or the like?

Because it adds up and multiplies through the economy on multiple levels. 0.2% is not teeny weeny, it's massive. Those billions in tax revenue are coming out of your pocket, not the company's pocket. Moreover, a 0.1% tax would cause a drop in GDP of 1.76%, which means less tax is paid to the government in general, which means having a financial transactions tax would actually lose the government money.

"This result is not unexpected. When the Institute for Fiscal Studies looked at the impacts of the UK’s own FTT, Stamp Duty upon shares2, they found much the same result – from the same cause too. Such a transactions tax upon securities lowers securities prices. This then makes the issuance of new securities more expensive for those wishing to raise capital. More expensive capital leads, inexorably, to less of it being used and thus less growth in the economy.

Please note that this is not some strange application of the Laffer Curve argument. It is not to say that lowering all taxes, or any tax, leads to such extra growth that revenues increase. Rather, it is derived from Diamond and Mirrlees (1971)3 that transactions taxes multiply then cascade through the economy. They are therefore best avoided if another method of achieving the same end is available. Indeed, they point out that taxation of intermediate inputs is to be avoided if possible – better by far to tax final consumption or some other final result of the economy. This very point is acknowledged in the way VAT is structured. Rather than a series of sales taxes which accumulate as one company sells to another along the production chain, there is a value added tax which amounts to one single rate at the point of final consumption."

And that's why politicians should not be able to make financial, or any kind of specialised law these days. They're pandering to their voter base who know nothing about the specialised topic except for what the media has fed them.
 
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Doesn't that alone signify that there is an excess of trading, and that it is some undesirable manipulation that causes instability for an incredibly meager return rate? I was off a decimal. Italy does it at 0.02% in what everyone calls the first HST tax.
Also, the government getting money was the one downside...
 
Doesn't that alone signify that there is an excess of trading, and that it is some undesirable manipulation that causes instability for an incredibly meager return rate? I was off a decimal. Italy does it at 0.02% in what everyone calls the first HST tax.
Also, the government getting money was the one downside...

Why would portfolio rebalancing be a trading excess? It's normal course of business, and doesn't manipulate anything. It only makes for a more efficient allocation of capital, which benefits the end user, which is you.

High frequency trading by algos, which is something entirely different than regular trading, can be helpful for providing liquidity and price discovery. It doesn't really hurt anyone, and mostly makes the market more efficient, except for when one of the algos runs amok, which has happened a couple of times, but usually the market recovers in 10 minutes.

There are laws against market manipulation already, so if you think HFT algos are pumping and dumping for example, the regulator could fine them or ban them from trading.

If you really were to think the current HFT is excessive, and you have good arguments for that, you could simply have order limits on exchanges. No need for a tax at all. Some exchanges will have order limits, some might not, which means everyone is free to choose whether they want to trade on an exchange that has HFTs.

Why does the first answer to everything always have to be more tax and more government interference? Government interference has pretty much destroyed market liquidity already.

Anyways, a tangent point to this is that people should not talk about subjects they don't know anything about. Why is it necessary for everyone to have an opinion on everything? Recognise that you're not well informed and say you do not have an opinion, or get educated and then form an opinion.

That dude in the vid is saying that transaction tax revenues will go to better schools, while he should know that there will not be an increase of overall tax revenue, and quite possibly a decrease. Moreover, even if there were an increase in revenue, that money could also go the NSA to spy on you, or police forces to buy more military equipment. Anyways, either that guy is lying to you, or he's not well informed but decided to express his opinion anyways.
 
High frequency trading by algos, which is something entirely different than regular trading, can be helpful for providing liquidity and price discovery.
bis-chart-big.jpg

High Frequency Trading And The Threat Of A Currency Flash Crash - Business Insider
 
Why would portfolio rebalancing be a trading excess? It's normal course of business, and doesn't manipulate anything. It only makes for a more efficient allocation of capital, which benefits the end user, which is you.

High frequency trading by algos, which is something entirely different than regular trading, can be helpful for providing liquidity and price discovery. It doesn't really hurt anyone, and mostly makes the market more efficient, except for when one of the algos runs amok, which has happened a couple of times, but usually the market recovers in 10 minutes.

There are laws against market manipulation already, so if you think HFT algos are pumping and dumping for example, the regulator could fine them or ban them from trading.

If you really were to think the current HFT is excessive, and you have good arguments for that, you could simply have order limits on exchanges. No need for a tax at all. Some exchanges will have order limits, some might not, which means everyone is free to choose whether they want to trade on an exchange that has HFTs.

Why does the first answer to everything always have to be more tax and more government interference? Government interference has pretty much destroyed market liquidity already.

Anyways, a tangent point to this is that people should not talk about subjects they don't know anything about. Why is it necessary for everyone to have an opinion on everything? Recognise that you're not well informed and say you do not have an opinion, or get educated and then form an opinion.

That dude in the vid is saying that transaction tax revenues will go to better schools, while he should know that there will not be an increase of overall tax revenue, and quite possibly a decrease. Moreover, even if there were an increase in revenue, that money could also go the NSA to spy on you, or police forces to buy more military equipment. Anyways, either that guy is lying to you, or he's not well informed but decided to express his opinion anyways.

Oh lord, do we have another market liquidity pundit shilling for HFT? Looks like it.

you're fundamentally uninformed about HFT. Doesn't hurt anyone? It hurts everyone.

HFT is also fundamentally illegal in most of it's forms.

The tax argument aside, you really should understand what you're talking about when you suggest other get educated. And it sounds like you work in some form of finance, so don't let your industry hookwind you into believing the corpo-elite line. High frequency trading steals money out of every one of our pockets every single day.
 
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Oh lord, do we have another market liquidity pundit shilling for HFT? Looks like it.

you're fundamentally uninformed about HFT. Doesn't hurt anyone? It hurts everyone.

HFT is also fundamentally illegal in most of it's forms.

The tax argument aside, you really should understand what you're talking about when you suggest other get educated. And it sounds like you work in some form of finance, so don't let your industry hookwind you into believing the corpo-elite line. High frequency trading steals money out of every one of our pockets every single day.

Most HFTs do simple arbitrage. If you put in a massive order, then the HFT will buy your order a split second before you from many market participants and sell it you as a whole, making the bid-ask. Now this might be a fraction of a cent, but when you add it up per order it's not bad money. Without HFTs, however, massive orders would not be filled immediately, and instead the client will have to accept partial fills until the whole order is filled. Most clients will not accept this anymore, as they don't like the risk that partial fills cause. Hence, HFTs perform a service, and clients actually like it.

Now, you have HFT hedge funds that do more than simple arbitrage, and some of them put in 1000s of orders a second and then cancel them again, and all kinds of other shady tactics in order to make a profit. Now if you want to ban that, you could simply put a limit on the amount of orders and cancellations one can put in the exchange per second. Do this and instantly many shady HFTs will be unable to trade, and the problem has been solved. No need for a tax.

Just to make it clear, I don't like many forms of HFT, and I can witness the way they manipulate some markets live every day. HFTs in dark pools are also a bit of a shady business. The problem with the financial transaction tax is that it would hit everyone, and not just HFTs, while an order limit combined with a strict enforcement by the SEC and FCA would be a much better solution. Hell, it's preposterous that they're blaming the flash crash on a dude working from his home in London, while many hedge funds were doing exactly the same thing and in bigger size. It's even worse that the ECB gave market sensitive news to hedge funds a full day before they released it to other market participants.
 
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Most HFTs do simple arbitrage. If you put in a massive order, then the HFT will buy your order a split second before you from many market participants and sell it you as a whole, making the bid-ask. Now this might be a fraction of a cent, but when you add it up per order it's not bad money. Without HFTs, however, massive orders would not be filled immediately, and instead the client will have to accept partial fills until the whole order is filled. Most clients will not accept this anymore, as they don't like the risk that partial fills cause. Hence, HFTs perform a service, and clients actually like it.

Now, you have HFT hedge funds that do more than simple arbitrage, and some of them put in 1000s of orders a second and then cancel them again, and all kinds of other shady tactics in order to make a profit. Now if you want to ban that, you could simply put a limit on the amount of orders and cancellations one can put in the exchange per second. Do this and instantly many shady HFTs will be unable to trade, and the problem has been solved. No need for a tax.

Just to make it clear, I don't like many forms of HFT, and I can witness the way they manipulate some markets live every day. HFTs in dark pools are also a bit of a shady business. The problem with the financial transaction tax is that it would hit everyone, and not just HFTs, while an order limit combined with a strict enforcement by the SEC and FCA would be a much better solution. Hell, it's preposterous that they're blaming the flash crash on a dude working from his home in London, while many hedge funds were doing exactly the same thing and in bigger size. It's even worse that the ECB gave market sensitive news to hedge funds a full day before they released it to other market participants.

The laws in place would deal with HFT, no need for a tax. But unfortunately you have fuckers like Chuck Schumer, so they are not enforced. I consider it the largest single scam going in the world today.

Around liquidity, you're mixing apples and oranges because you're comparing infrastructure and trading algorithms.

On the one hand you have market making to fill orders, and markets are basically completely automated now, so this is just the plumbing making things function.

On the other is HFT, which is not infrastructure. The line is drawn at "do I need this to execute my trade" and the answer is no. HFT is focused on skimming based on trading speed in any combination of algorithms, co-location, manipulation of price data posting at different exchanges, cutting in line at the exchanges, paid early access to market data, and creating flurries of buy sell orders with no hope or intent of fill to disguise an intended trade.

One has virtually nothing to do with the other so calling them all HFT muddies the water on what is happening that is clearly illegal. In fact, a tax would be counter productive because that cost would just be passed on to consumers. It's a testament to Wall St power that you have to tax illegal behavior to actually stop it rather than enforce the law.

Edit: my advice on this topic is to ALWAYS place your trades as limit orders, never market orders. Most of the scamming takes place within the bounds of market orders. It's another reason I never buy mutual funds, as they are usually the ones that get the brunt of HFT skimming.
 
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The laws in place would deal with HFT, no need for a tax. But unfortunately you have fuckers like Chuck Schumer, so they are not enforced. I consider it the largest single scam going in the world today.

You're mixing apples and oranges because you're comparing infrastructure and trading algorithms.

On the one hand you have market making to fill orders on the other, and markets are basically completely automated now, so this is just the plumbing making things function.

On the other is HFT, which is not infrastructure. The line is drawn at "do I need this to execute my trade" and the answer is no. HFT is focused on skimming based on trading speed in any combination of algorithms, co-location, manipulation of price data posting at different exchanges, cutting in line at the exchanges, paid early access to market data, and creating flurries of buy sell orders with no hope or intent of fill to disguise an intended trade.

One has virtually nothing to do with the other so calling them all HFT muddies the water on what is happening that is clearly illegal. In fact, a tax would be counter productive because that cost would just be passed on to consumers. It's a testament to Wall St power that you have to tax illegal behavior to actually stop it rather than enforce the law.

The thing is, when the general public and politicians talk about HFT they also talk about market making, as that also happens in a high frequency. Besides, not all algos are bad either. There are loads of very predictable algos that do exactly what they're meant to do at a normal frequency without using any manipulative tactics. It's algos that trade with a high frequency and use stuff like spoofing and layering in order to make a profit that are harmful.

So, going by the definition of HFT which excludes market makers and normal algos, I largely agree with you. Slapping the whole market with a tax just to ban those HFTs is stupid. The regular needs to enforce it rules, and exchanges should be able to ban any participant that uses manipulative tactics for a certain period of time or simply instate an order limit.

Anyways, it's funny how you guys all focus so much on HFTs, while no one commented about my point of going back to smaller partnerships instead of big shareholder owned investment banks.
 
The laws in place would deal with HFT, no need for a tax. But unfortunately you have fuckers like Chuck Schumer, so they are not enforced.
I still haven't watched the video, but if Reich thinks this would be a revenue raiser, he's a boob...which I already thought anyway. If Wall Street was effectively policing itself, or being policed at all really, this frivolous tax would not be brought up. However, the one way to get the government interested is to pile some cash on it.
 
The thing is, when the general public and politicians talk about HFT they also talk about market making, as that also happens in a high frequency. Besides, not all algos are bad either. There are loads of very predictable algos that do exactly what they're meant to do at a normal frequency without using any manipulative tactics. It's algos that trade with a high frequency and use stuff like spoofing and layering in order to make a profit that are harmful.

So, going by the definition of HFT which excludes market makers and normal algos, I largely agree with you. Slapping the whole market with a tax just to ban those HFTs is stupid. The regular needs to enforce it rules, and exchanges should be able to ban any participant that uses manipulative tactics for a certain period of time or simply instate an order limit.

Anyways, it's funny how you guys all focus so much on HFTs, while no one commented about my point of going back to smaller partnerships instead of big shareholder owned investment banks.

Yes, some automated platforms are benign. We're talking about the ones that are not, which I agree we agree on.

At the same time, it's unbelievable and perfectly normal that nothing is done.

I wanted to address HFT specifically, but yes, deregulation has created a monstrosity in the banking industry with this cringworthy phrase "too big to fail". While I'm a shareholder of most large banks, I do believe they should be split apart, I really don't see how small partnerships solves a problem, so help me understand what you think would actually change? To me it seems you'd just have the same characters with their hands in all of them, just distributed.
 
I still haven't watched the video, but if Reich thinks this would be a revenue raiser, he's a boob...which I already thought anyway. If Wall Street was effectively policing itself, or being policed at all really, this frivolous tax would not be brought up. However, the one way to get the government interested is to pile some cash on it.

He says it'll raise lots of money which would all go to making better schools.
 
Yes, some automated platforms are benign. We're talking about the ones that are not, which I agree we agree on.

At the same time, it's unbelievable and perfectly normal that nothing is done.

I wanted to address HFT specifically, but yes, deregulation has created a monstrosity in the banking industry with this cringworthy phrase "too big to fail". While I'm a shareholder of most large banks, I do believe they should be split apart, I really don't see how small partnerships solves a problem, so help me understand what you think would actually change? To me it seems you'd just have the same characters with their hands in all of them, just distributed.

First of all, small partnerships would take away the massive size, meaning it's easier to oversee things and manage risk.

Secondly, right now bankers have no skin in the game whatsoever. The ones who run the day to day business, the Managing Directors, are all on comfortable £1,000,000 base salaries, some much higher than that, with the chance of a bonus that's multiples of that. If the bank loses money, the MD does not lose money, only part of his bonus, but if the bank makes a profit, the MD profits as well. This skews the risk/reward of risk taking in favour of taking massive risks.

With a partnership, the MDs are partners as well, which means they own part of the business. If the bank loses money, the partner loses as well, if the bank makes a profit, the partner profits too. Hence, partners will be incentivised to manage their risk, as they risk losing their own money, not the shareholders' money.

Third, because the ones who manage the risk do not own the company, they do not feel any responsibility or loyalty towards the company's long term future. The culture at investment banks is extremely toxic, and is based on fear. You could lose your job any day for any reason. Banks over hire and over fire massively. It's hard to imagine, but people are always afraid of losing their job. It's always in the back of your mind. Some banks fire the bottom 5% every year, but on top of that there are layoffs throughout the year. I see rounds at least every quarter, and there have been weeks where every week people are escorted out of the building by security. The 'front office' trading floors of big banks exist out of maybe 500 people, who have to make enough money to pay for the 10,000 or so support staff, the systems they use, their own salaries and the shareholders. Because it's such a small group, you'll likely know everyone that's let go and it does affect you personally.

So, if the bank is not loyal to its employees, the employees will not be loyal to the bank either. Hence, the MDs feel no responsibilty towards the bank, which means their planning is very, very short term. You'll have to look hard to find any manager that thinks further ahead than a year. This means that if the MD sees a way to make lots of money in the short term, but with massive risks of losing many multiples of that in the long run, he will always go for that short term gain. Who cares what happens in the future? He'll probably be let go by then, or he might've left for another bank. Moreover, a lot of MDs have annual budgets/PnL of their own. This means if they don't make this personal trading/sales PnL, they'll get fired. This doesn't leave much time for managing and overseeing the risk. On top of that, the best performers get promoted to MD, but they're not necessarily the best managers. A lot of traders are unfit to manage, but because they make a massive PnL they get put in charge.

With a partnership, a partner is forced to think long term, as he's actually an owner of the business that cannot be fired at the drop of a hat.

So, a partnership takes away the incentives for irresponsible, short term risk taking, and should make an investment bank a much healthier business and more pleasant environment to work in. Before the 1980s every bank was a partnership, and instead of 10 big banks there were 100s of smaller partnerships. Going public has caused the incentives of the bank and its employees to be misaligned, which has partly caused a lot of the crises over the past 3 decades.

Bankers shouldn't be demonised in the media, they're not evil people. Many of them are a bit nerdy people, often with a STEM background that went into banking because they're good with numbers. There should be an open discussion about what makes them behave the way they do, which is the misaligned incentives. Only then will we able to look at the problem as a whole and solve it. Painting them as subhuman enemies that should be hanged is not helpful for the discussion, yet that's what the media is doing. I'm not saying they should be absolved from personal responsibility, but if you don't want history to repeat itself you'll have to look at the environment that causes it, because 99% of the people that start off in banking are not evil psychopaths that are only out for themselves. They're normal people, like you and me.
 
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First of all, small partnerships would take away the massive size, meaning it's easier to oversee things and manage risk.

Secondly, right now bankers have no skin in the game whatsoever. The ones who run the day to day business, the Managing Directors, are all on comfortable £1,000,000 base salaries, some much higher than that, with the chance of a bonus that's multiples of that. If the bank loses money, the MD does not lose money, only part of his bonus, but if the bank makes a profit, the MD profits as well. This skews the risk/reward of risk taking in favour of taking massive risks.

With a partnership, the MDs are partners as well, which means they own part of the business. If the bank loses money, the partner loses as well, if the bank makes a profit, the partner profits too. Hence, partners will be incentivised to manage their risk, as they risk losing their own money, not the shareholders' money.

Third, because the ones who manage the risk do not own the company, they do not feel any responsibility or loyalty towards the company's long term future. The culture at investment banks is extremely toxic, and is based on fear. You could lose your job any day for any reason. Banks over hire and over fire massively. It's hard to imagine, but people are always afraid of losing their job. It's always in the back of your mind. Some banks fire the bottom 5% every year, but on top of that there are layoffs throughout the year. I see rounds at least every quarter, and there have been weeks where every week people are escorted out of the building by security. The 'front office' trading floors of big banks exist out of maybe 500 people, who have to make enough money to pay for the 10,000 or so support staff, the systems they use, their own salaries and the shareholders. Because it's such a small group, you'll likely know everyone that's let go and it does affect you personally.

So, if the bank is not loyal to its employees, the employees will not be loyal to the bank either. Hence, the MDs feel no responsibilty towards the bank, which means their planning is very, very short term. You'll have to look hard to find any manager that thinks further ahead than a year. This means that if the MD sees a way to make lots of money in the short term, but with massive risks of losing many multiples of that in the long run, he will always go for that short term gain. Who cares what happens in the future? He'll probably be let go by then, or he might've left for another bank. Moreover, a lot of MDs have annual budgets/PnL of their own. This means if they don't make this personal trading/sales PnL, they'll get fired. This doesn't leave much time for managing and overseeing the risk. On top of that, the best performers get promoted to MD, but they're not necessarily the best managers. A lot of traders are unfit to manage, but because they make a massive PnL they get put in charge.

With a partnership, a partner is forced to think long term, as he's actually an owner of the business that cannot be fired at the drop of a hat.

So, a partnership takes away the incentives for irresponsible, short term risk taking, and should make an investment bank a much healthier business and more pleasant environment to work in. Before the 1980s every bank was a partnership, and instead of 10 big banks there were 100s of smaller partnerships. Going public has caused the incentives of the bank and its employees to be misaligned, which has partly caused a lot of the crises over the past 3 decades.

Bankers shouldn't be demonised in the media, they're not evil people. Many of them are a bit nerdy people, often with a STEM background that went into banking because they're good with numbers. There should be an open discussion about what makes them behave the way they do, which is the misaligned incentives. Only then will we able to look at the problem as a whole and solve it. Painting them as subhuman enemies that should be hanged is not helpful for the discussion, yet that's what the media is doing. I'm not saying they should be absolved from personal responsibility, but if you don't want history to repeat itself you'll have to look at the environment that causes it, because 99% of the people that start off in banking are not evil psychopaths that are only out for themselves. They're normal people, like you and me.

In your partnership model you also consolidate power in an oligarchical fashion, and exclude the population from any inlet to the massive wealth banks generate by being shareholders, yes?

In the current system, I can own pieces of banks. Unless I'm misunderstanding, you are talking about mass privatization, yes? If so, then you are basically advocating going back to the days of Rothschild and JP Morgan. We're swapping the model of too big to fail into too elite to be part of. Somehow this strikes me as the opposite evil.

To understand the banking system, one need only to look at how impossible it is for an average person/group of people to start a bank. There was a documentary a few years back about it, rather light-hearted mind you, but nevertheless an interesting window into the most protected club on the planet.

Seems like solving for vested interest just switches the ownership structure of the same elite from shareholder to partner. I understand your reasonable points, but most executives and "C" levels are significant shareholders already.

Lastly, the whole culture of banking is, as you call it, misaligned incentives, or what I call financial rape. Guys like Blankfein and Dimon won't disappear, they'll just be able to operate more privately, and some might suggest more viciously in the process. One only need watch this for a small window into the trashcan:

 
Go back to the investment banks of max 1000 people. We'll have 100s of little banks, and it'll be good for competition.

If you have a better solution for changing the incentives I'm happy to hear it, but right now the incentives are for short term risk taking. People are not going to change their behaviour if the incentives aren't changed. I suppose if you made job security higher you could solve a lot of the problems.
 
Go back to the investment banks of max 1000 people. We'll have 100s of little banks, and it'll be good for competition.

If you have a better solution for changing the incentives I'm happy to hear it, but right now the incentives are for short term risk taking. People are not going to change their behaviour if the incentives aren't changed. I suppose if you made job security higher you could solve a lot of the problems.

Among others, one significant change is to re-separate the banking/S & L from the investment side of the house. The deregulation from Regan era changes has caused a host of problems and conflicts of interest, and more germane to your point, induced short term risk taking.

If it wasn't for the packaged mortgage products, the mortgage bubble probably would never have existed.
 
"Get money out of politics" has to be the stupidest line ever and anyone saying it should be sent to a Siberian gulag. Money doesn't exist without a political structure. A political structure without money is impossible.
 
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Among others, one significant change is to re-separate the banking/S & L from the investment side of the house. The deregulation from Regan era changes has caused a host of problems and conflicts of interest, and more germane to your point, induced short term risk taking.

If it wasn't for the packaged mortgage products, the mortgage bubble probably would never have existed.

That last sentence is true, but commercial banks that weren't part of an investment bank also sold mortgages to investment banks to be packaged, so while separating commercial and investment banking is a good thing in itself (something that many non C-suite bankers want as well), it would not actually change the incentives.

Besides, I'm not just talking about mortgages. The incentives for short term risk taking are there for every kind of product and asset class, and for the majority of those you don't need a commercial bank at all.

Case in point: lots of current investment banks do not have a commercial side whatsoever, but they still have the capability to cause a crisis due to their size and misaligned incentives.

Aside from this, another interesting development is that Hedge Funds are starting to make markets now, seeing as they're not under as stringent regulations as banks are. This is something that I had predicted over a year ago. I'm not sure whether it's good for the market as whole, especially because there can be a conflict of interest, but when banks cannot even provide enough liquidity to keep US 10s easily tradeable it is kind of scary.
 
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"Get money out of politics" has to be the stupidest line ever and anyone saying it should be sent to a Siberian gulag. Money doesn't exist with a political structure. A political structure without money is impossible.

It's a trite statement, but influence should be about the best ideas, not the most money. I think this is the intent behind saying it. I find "the American people ___(add lie here)___" to be the stupidest.

I believe the only way the country can actually survive is to get corporations out of government, basically having "government of the people, by the people, for the people" be true. It won't happen in democracy V1.0, as this is a government overwhelmed by corporations.
 
That last sentence is true, but commercial banks that weren't part of an investment bank also sold mortgages to investment banks to be packaged, so while separating commercial and investment banking is a good thing in itself (something that many non C-suite bankers want as well), it would not actually change the incentives.

Besides, I'm not just talking about mortgages. The incentives for short term risk taking are there for every kind of product and asset class, and for the majority of those you don't need a commercial bank at all.

Case in point: lots of current investment banks do not have a commercial side whatsoever, but they still have the capability to cause a crisis due to their size and misaligned incentives.

This is true of the corporate world as a whole, there is a pervasive quarter to quarter mentality in place focused on making the numbers and not the long term health of the business.
 

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