As one of those poindexters who actually likes to watch Book TV on C-SPAN-2, I blundered into an interview of Naomi Prins. The host was Senator Bernie Sanders (I-VT). Prins is presently a Senior Fellow at Demos and has had careers at Goldman Sachs and Bear Stearns.
Prins has a good deal of interesting insight into how securities are engineered from subprime loans and stamped with ratings. What stands out is how artificial securities are as an asset. It’s like putting a step ladder on a canoe. The view is good, but evenually you’re going to get wet.
Securities are synthesized from dung and straw, drenched in investment sauce, and then nestled in decorative tins by white gloved MBA castrati to afford a “product”. Naturally, banks and ratings agencies assure us that the rating on the security is meaningful. After all, who is more sober and conservative than a banker?
Perhaps investment banking as it is now practiced should be regarded as a pathological condition- a form of predatory, sociopathic behavior worthy of a psychiatric profile? Investment banking is a profession dedicated to the proposition that the mere repackaging and skimming of the wealth of others is the desired outcome. It is a bubble industry specializing in puffery and deception.
My libertarian friends assure me that the free market place is the most natural and efficient form of economic intercourse. Of course, the problem is that there isn’t a substantially free market anywhere. We have regulated markets because some people invariably game the system at the expense of others, resulting in a convulsive discharge of legislation.
One could take a Darwinistic view and say that the victims of investment shenanigans are to blame for being greedy and uninformed. There is truth in caveat emptor, but one of the reasons we have civilization is to buffer out the harshness of life. How do you protect the greedy and uninformed from the greedy and deceitful? It is the eternal problem.
The most despicable part of the 2008-9 financial collapse is the lack of accountability on the part of the skunks who invented and promulgated the unstable investment devices. Their heads should be impaled on sticks and planted in the financial districts for all to see. Figuratively, I suppose.
Lamentations on Chemistry 
I am very surprised by the amount of aggression from the general public on the bankers. Greed is an essential component of the free market. If you take a raise, you are greedy. If you want a house, you are greedy. If you even want to know more, you are greedy for knowledge. Like fire, greed can be destructive and an excellent source of energy.
Bankers wanna make money, but if the government just hands them money (Sallie Mae, Fannie Mae, Freddie Mac, Dept. Ed., etc) people tend to act irresponsibly because it’s not their money, and the gov. takes the bill in the end. If people were forced to play with money that doesn’t have a gov. guarantee, they are naturally more careful. Lest people lose faith in their bad handling of it.
Like you said here: “Of course, the problem is that there isn’t a substantially free market anywhere. We have regulated markets because some people invariably game the system at the expense of others, resulting in a convulsive discharge of legislation.”
The few bad eggs generally force us to pay a huge price with gov. regs. A good example is the news. Its constant reporting of murders, makes those things seem like a real risk to people, so we try to enact gun control laws, which we have to pay for. Despite a person is more likely to commit suicide with their own gun, lol. Not to mention murders are even more brazen since they know people won’t have guns!
We must have more faith in the free market. The more we try to regulate it, the more taxes corporations (and us “wealthy” chemists) must pay. They must get richer to pay for all those taxes (regs + social welfare) or they will be forced to move somewhere else. The free market can trample greedy morons and let greedy assholes prevail, but most people are good and pragmatic, we need more faith in it. Don’t let a few murders in the news keep you from feeling safe at the park either.
I am libertarian though, lol.
You make several good points. I was indulging in a bit of hyperbole just for the fun of it.
What should make every libertarian cringe is the protected status of the big banks. While they are lowering the boom on their customers who are slow to pay or default, or are hammering some customers with high interest rates, they managed to protect themselves from their own bad practices through lobbying with congress.
What always amazes me are the people who are not wealthy themselves, but can find rationale to justify the predatory or just selfish behavior of large businesses or the wealthy. Even when it is against their own best interests. They do this because it is more important to them to have greater loyalty to doctrine than to people.
Libertarianism is yet one more utopian social philosophy. Civilization is not part of economics, it’s the other way around. Libertarianism is a construct that justifies our most base impulse to acquire wealth at whatever mode of exploitation is available. It is a license to ignore social justice. A purely market driven society will trend towards aristocracy, not democracy.
I fail to understand how libertarians who have read the history of labor in the 19th century or the rise of industrialism in the US and Europe can can say that absolutely free markets are the most desirable. Free markets are as prone to corruption and exploitation as any other social activity. In all cases, those with control of the resources- gov’t or businesses- need accountability.
Bernie Madoff remained undetected because he did nothing to be detected. His error was not buying protection against political theatre for doing business as usual. Chicago Alderman or US Congressman, there is a user fee on life for the little people.
Thursday’s Los Angeles Times, front page, above the fold, to the right, boasted about the latest $trillion swindle. Federal mortgage guarantees, typically 3% of let mortgages, are up past 38% in San Bernadino, CA and running more than 30% overall. These are people who explicitly, absolutely cannot maintain payments. The housing “recovery” is an improvised implosive device. The inevitable financial chaos will be “bad luck.” Nobody will be responsible.
“Their heads should be impaled on sticks and planted in the financial districts for all to see”
We own the sticks and we are also aware our servants are too lazy to do much about anything (lovely thing high fructose corn syrup.)
If the public had any gumption it would be on the other side of the table with us!
Rant on mouse man.