I wouldn't underestimate Wall Street. And I certainly wouldn't discount the propensity of Americans to borrow and borrow and borrow.

My thoughts on the interview: Why does HE look like he just pulled 3 straight all-nighters?

lol. So true.

These guys seem to be excited about the downturn as it affects Wall Street. Class envy and class warfare seems to be rampant in this country. Very sad.

First off, I find it emasculating to look at, much less read, New York Magazine. Second, who the fuck watches Yahoo! News? And third, while everything in this is true, I wouldn't say WS as a whole got boned in compensation. I think compensation shifted. Lots of Hedge Funds, VC firms, PE firms, and prop trading firms have popped up the past 4 years that recruited talent from WS and their salaries are as big as they've been the last 8-10 years, sans some firms losing money (and in some cases, even firms losing money has partners and EDs bringing home big paychecks).

Increase in regulation on public institutions will always affect employment numbers and salary/bonus figures at those institutions. Nothing new here.

I think the Volcker rule is going to be the biggest choke point on the industry. I started my career in late 2007, when the when the financial orgy was still rocking. Being in the trading, I remember being absolutely blown away by the revenues generated by many prop desks. The majority of the record profits were being produced by a very small number of guys. Fuck, I knew a top MBS sales guy that was clearing $6MM a year. Pretty young too. Now banks can only engage in a market making capacity or ring-fence their trading ops. Profitabilty is definitely going to be constrained.

I thought her attitude was somewhat overly counter to the OP's article. She was right on the money as far as Europe being a risk but she assumed that nullifies the other author's concern about Dodd-Frank. Her quotes need to be taken with a grain of salt because those executives, due to the business they're in, are obviously upset about Dodd-Frank whether or not they tell her that. That doesn't mean that Dodd-Frank is ruthless to Wall St necessarily, but rather that its ending some very, very good years for these firms and they have every right to be upset about that.

With that said, I'm tired of the argument that wall street is overpaid. Who gives a fuck? So is Paris Hilton and she sits around making sex tapes. If you want to make more money, get off your ass and do it. Don't complain that other people aren't working hard enough for theirs.

You're right, let's deregulate some more and let Wall Street run wild doing anything they want, regardless of the consequences, just to make sure that we have a nice tax base during the boom times.

So let me understand your point. Regulations can only be effective when the government starts trying to influence or dictate pay packages?

People don't care about proper regulation. They only care about making their straw man feel pain. Unfortunately, they do not realize that these "egregious" pay packages funded the city and national coffers.

Bah, finance is not a meritocracy, it never was and it never will be. Kevin Durant and the Kardashians don't get to blow up the world economy and then get tax payer funded bonuses for doing it.

Remember that banks were the ones pushing and accepting liar loans. Without Wall Street there would have been no such thing as mortgage backed securities.

How dumb can you be to not understand paragraphs and sentence structure?

Quit drinking the Kool-Aid, bitch.

I cannot watch this interview. I can only listen to it. The way that guy looks would scare little children.

i still think its too early to say---

with the volcker rule still very much up for discussion, i think it's critical to see what shapes out from this---
even if Obama gets reelected (if they push back the deadline for Volcker and republicans get control of the senate) then it really could drastically change --- the comments have been quite interesting to watch

see this article ---

http://dealbook.nytimes.com/2012/02/15/the-volcker-rules-unusual-critics/

TraderDaily:

First of all: no one is talking about government mandated pay restrictions.

Second: Something tells me that you don't truly understand the causes of the financial crisis.

--The insane lending by mortgage houses like WaMu and New Century was made possible because they could pass on the loans to the big banks who then securitized them

--The securities created by the big banks supposedly "removed risk" from the equation by chopping everything up into smaller and smaller pieces. In reality, it just took risk and spread it throughout the system, setting us up for disaster

--Rating Agencies, in a bid to grow their revenue and profitability, threw rating standards out the window and put investment grade ratings on just about any MBS or CDO or CDO^2 that came through their door

--Additionally, AIG wrote CDS protection for virtually every security created, knowing that it could never in a billion years cover them in the event of a catastrophic failure (i.e. what happened)

--Therefore, these securities were rated as highly safe, sometimes AAA, instruments which were gobbled up by major institutional investors who are required to hold securities of a certain investment grade. And, why buy treasuries when you can buy higher yielding CDO products of the same investment grade?

--Therefore, an immense demand was created for more and more of these mortgage-based products. Mortgage originators at the bottom of the market saw how much money and margin could be made on them and felt relatively safe because they could pass them on to the banks (and then onto investors.) Therefore they did anythign and everything to give everyone they could a low grade mortgage. They lent to anyone under the sun, even when fraud was apparent. Blowing up the housing bubble to heights unheard of.

--All of this led to our inevitable collapse. In mid-2007, the Ratings Agencies did something unprecedented, over the course of two separate days they issued mass downgrades of (at least) dozens of mortgage-backed securities, shutting down the market for these products overnight. Now, mortgage lenders, banks, AND institutional investors were stuck holding paper that had become completely worthless virtually overnight (in reality, it had been worthless for years, but the financial casino that Wall Street had become failed to do its job.)

--Suddenly, banks began to fail and AIG was called to cover positions it could not possibly have ever covered in a million years. yadda yadda yadda, we got TARP and literally trillions of secret loans from the Fed to banks and other international corporations in the US and internationally.

--In the end, mortgage houses, banks, and AIG made catastrophically bad decisions, and we paid for it. We might see a fair bit of TARP itself paid back, but not the backdoor bailout to AIG, and lord knows the effect of the trillions of secret loans the Fed gave away at near-zero % interest.

You can blame "irresponsible borrowers" all you want. But, at the end of the day, it's a fuck-ton more complicated than that. If it were just a bunch of shitty borrowers, we wouldn't have had 1/1,000,000th the level of systemic risk we had. If the banks did their fiduciary duties, we wouldn't have had shitty borrowers on any kind of scale in the first place. If the ratings agencies did their jobs, pension funds and others wouldn't have demanded the MBS and CDO products. If AIG had any control whatsoever, we wouldn't have had to bail them out to the tune of billions and billions of dollars.

I highly recommend you read the front section (at least) of the Levin - Coburn Report on the Financial Crisis. You can find it here: http://www.levin.senate.gov/newsroom/press/release/us-senate-investigati...

And before you say "that's a bunch of liberal crap," note that Tom Coburn is one of the most conservative dudes in the Senate (and one of the best.)

In conclusion: stop spouting off at the mouth just because you want to work on Wall Street. Our inability to self-reflect as a society will be our downfall.

Eddie,

A bit random but all this CDO talk got me thinking. How's the LendersClub WSO CDO doing? Any updates?

King, first let me say that I completely agree with and appreciate your layout of events in the above post. However, I have one big problem with the quoted passage above. The insane lending required a market of lenders AND buyers, and what others are saying is that had these borrowers had some common sense and borrowed within their means, WaMu and New Century wouldn't have had any market to sell to.

AIG's infamous CDSs, the scum of the earth that we call Credit Ratings Agencies (seriously, who the FUCK thought that private businesses, who were paid to rate financial instruments, couldn't become corrupt?!), and CDOs all made the problem infinitely more damaging to the economy. But those instruments in and of themselves were not the core problem, they were just compounding it. The initial problem was that homeowners were still taking out loans they couldn't afford.

No loans = no bundling, no rating, and no insuring. And we'd all be in a better place if people would man up to their actions when they tried to live the baller lifestyle on a towel boy's salary.

I'm not going to take a partisan side in this by making the ridiculous argument that bankers are not at fault for ruining the economy. They most definitely are. But homeowners and the quote/unquote 99% who act as though banks are the SOLE reason we're in this mess are nothing short of ignorant fools. Irresponsible entitled attitudes in this country are just as much at fault.

To the people in this thread blaming poor people for accepting loans they couldn't afford, get real. They were sold the idea that home ownership is the path to prosperity, a sure shot at upward mobility. People in a position of power, those with significant amounts of money, education, and influence (read: the financial services industry), essentially used the under class to jack up their own bank accounts.

This is akin to selling crack to kids.

I 100% agree with you. See, you cannot blame people with low IQ's for making bad decisions. You also cannot allow them to make decisions. Freedom is only for intelligent people. If you are going to allow morons to be free, you have to allow them to suffer the consequences.

If you want to punish banks, you also need to punish people who cannot make intelligent decisions on their own. Make decisions for them.

Oh wait, that is the secret core of the liberal agenda.

consulting never looked so good to be in....YES

I think it's unfair to be throwing Wells Fargo and J.P. Morgan into this group, IMO. The others, sure

All of these accusations are missing the key reason and facilitator behind all of the events leading up to the financial crisis:

The government

Subsidizing loans through artificially low interest rates, the Bush administration actively encouraging banks to lend to borrowers who weren't credit worthy, endowing ratings agency with a monopoly on ratings thereby indirectly allowing institutional investors to get lazy with (or forego altogether) their diligence, among a host of other things.

Yes banks played a role, but ultimately they were just a vehicle for government's policies. When you think about it, it's crazy that banks have been demonized while the U.S. government has been able to skirt criticism to a large degree.

If anyone needs regulating, it's the US government.

How can you blame banks, but give free citizens a pass? Seems pretty biased to me. Either you require personal liability or you restrict decisions based on intelligence.

And no, I will not shut up. PS. I wish most people would consider themselves fiscally conservative and socially liberal. Unfortunately most people think the government is in place to provide for them as a second parent. This is what makes a country broke in the long run. It is also a mantra repeatedly parroted by liberals.

I usually avoid the whole politics/ideology of the bailout discussion as I'm not American, but participate in your markets... I feel compelled to comment this time though.

Ant,

Financial markets don't work without proper regulation/rules (Yes. Greenspan & his Ayn Rand religion were/are wrong). You can't overcome asymmetries of information and the inherent conflicts of interest in securitisation without proper regulation/rules and you can't have market discipline unless you are willing to allow all of the losers (the big banks, GS, MS, JPM, ML, Citi, etc...) to fail/be restructured as there is no doubt that they would have. I can't see how you can rationalise a safety net for the guys running a ponzi scheme (that's what the CMBS markets had turned into this by 2006/2007) and complain that the guys the banks screwed were at fault, especially when we all know the asymmetries in information involved. It's disingenuous or you don't know what the issues are/how that market functions. Anyone who has actually been involved in these financial markets knows that that is a recipe for disaster.

The regulatory environment that allowed for transforming a wonderful and potentially socially useful financial technology (Securitisation) into a ponzi scheme didn't come about by accident or by some Trotskyite government interventionism, rather by explicit lobbying by the banks and their Ayn Rand following apologists (Greenspan, etc...) to ensure that the rules were inadequate... the CFTC episode that TraderDaily posted about above is an excellent example of this... the view that the banks were just a vehicle for government policy just doesn't jive with the history of how these markets came about and the banks proven ability to influence the rules of the game.

You seem so hostile and disturbed about people not blaming borrowers (they guys who are actually suffering for their mistakes & for abuses from others in many cases), but don't show any form of disdain for the guys who have actually screwed you over as a taxpayer/citizen. Its quite amazing to me. I don't understand the inconsistency. Is it because the banks are corporations, so you can't feel anger towards them? This is probably the point I'm most curious about.

I don't see anyone giving regular citizens a free pass... Last I heard the US government wasn't making people whole on their underwater mortgages... they reserve that kind of socialism for bank bondholders and equity holders.

Very true statement. But like others on this site-highly ,misleading. Proponents of your theory, point to the community reinvestment act and ACORN policies, and also point to the roles fannie and freddie played in securitization, as well as the fed policies. But you forget the part where most of the loans made were not by firms under that regulation. Furthermore those who accepted the loans where old they could refinance. and when they went to do so, the banks simply said no. Thats straight up deception.

As far as the interest rate issue, you forget here that the banks have complete control over the fed(not written on paper, but thats the truth). They own stock in the fed, and jamie dimon is on the board. back then it was sandy weill. To say they didn't advise bernanke/greenspan to purposely keep rates low so they can trick people into falling for the Refinancing deception would be foolish/ignorant.

You think ts 50/50 main street/wall street its more like 80/20 wall/main respectively.

there is no reason why these banks should continue to operate. They fucked the american economy, they fucked he geek economy, and then get bailed out 100 cents. while everyone else gets .1-1 cent. its quite disgusting actually.

you wanna fix the problem, end all regulation (fdic, etc) and knock out the fed. problem solved.

Once again, glad the bankers aren't making shit, and are getting laid off. hopefully it continues this way in IBD. And i think it will, because the people have simply had enough. The riots/protests all over show it. Add this to rising food prices, created by the fed, (so that goldman collects a fee everytime he buys a bond) and you've got a recipe for disaster.

Do you want to have an intelligent discussion about this? Why don't you start by defining "work fine"... What do you mean by it... Price discovery? Efficient allocation of resources?

You need rules / regulations to stop market manipulations, tendencies towards monopolies, etc.... All of these things are horrible for price discovery, efficiency in allocating resources and other measures of markets "working fine".

We can argue about the role of government, the independence of regulators and how these may lead to distortions and such, but to say that markets work fine without regulation is to not understand the nature of markets. They are social constructs and are based on rules whether it is social norms in a Turkish bazar or those of an electronic exchange.

A Relinquis vs. canyonman battle is an exciting proposition. Not sure about either of your educations on the matter, but hopefully they're halfway quality so this debate is somewhat informational.