Ali’s blog

Mostly quant stuff with occasional digressions

More socialism for the rich

Posted by alifinmath on March 24, 2008

Also in the Telegraph:

Anyone who has travelled on New York’s subway at rush hour will probably have noticed that the locals are not that receptive to impromptu plays on their generosity from down-on-their-luck strangers.

Beggars invariably roll on to a carriage, get everyone’s attention, trot out the most affecting tale of hardship and perseverance, and roll off three stops later with absolutely nothing to show for their efforts.

Now a fresh group of New Yorkers is hoping for handouts. You could list the same reasons for saying no to Wall Street bankers as you do for turning down the homeless, and add a few more besides. But Americans have been asked to treat them differently.

Absolutely. The withdrawal symptoms induced by the absence of great wealth can be horrifyingly painful. Taking away a banker’s yacht or Porsche is barbarity. A society needs certain minimal standards. Hungry, homeless Americans can starve and freeze on American streets but the line has to be drawn with regard to investment bankers: if a society is to call itself civilised it cannot deny these deserving people their jets and mansions.

People may be losing their homes and moving into tents without a cent of help, but analysts have spent the week stressing that, for the common good, the taxpayer might have to bail out more investment banks.

It’s a bitter pill to swallow for a country whose economic philosophy is rooted in the idea that you reap what you sow, and I am surprised at how resigned to it most people seem.

In Britain, the occasion of a bunch of rich bankers coming a major cropper through reckless greed would be a moment for profound national Schadenfreude. Either New Yorkers have a more mature understanding that the woes of their richest citizens are ultimately the woes of them all or they just can’t shake off their ingrained admiration for people who earn big bucks.

Admittedly, the Bear Stearns case was complicated – its ordinary workers are shareholders and it wasn’t a total government bail-out. And I accept I am as instinctively chippy as the next Brit about people who earn a lot more than me.

However, what with all the frightening business page stories about New York’s economic dependence on Wall Street taxes, I was expecting a little more indignation. Instead, the strongest emotion I encountered was from a pair of women my wife met at dinner, who admitted they had been reduced to tears after reading about the plight of Bear Stearns bankers.

On New York’s public radio station, a phone-in for jobless Wall Streeters was prefaced by the presenter gently warning listeners that people in finance often felt the humiliation of redundancy more acutely than most. At the end, he solemnly promised them that “we will continue to serve you”. One city united in adversity. It’s the sort of stuff you hear from the man shaking his empty tin on the A-train.

I just don’t understand Americans. They should be drinking and dancing in the streets in riotous delight that all these rich, parasitical bastards are finally getting their comeuppance. Not mourning for the scum of the earth.

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4 Responses to “More socialism for the rich”

  1. Chris Prouty said

    I don’t think it’s so ridiculous that there is a general outpouring of support for those folks on Wall Street who have lost their jobs. The bottom line is that the beggar on the train *isn’t even trying*. The other day I saw a man by a freeway exit with a sign that said “displaced by hurricane Katrina.” Really? Three years later and you still haven’t gotten your act together? I realize the odds of him actually being displaced by Katrina are low, but it is a ridiculous premise for charity. I don’t mean to be cruel, but I have no sympathy.

    Your characterization of Wall Street types as evil, blood-sucking, predatory beasts, dreaming up new ways to shaft innocent hard-working Americans is laughably lopsided and serves only to invalidate any legitimate points you may make. What about those people who took out loans on homes they could never afford, choosing *not to read the paperwork they signed* and then acting surprised when things blew up? Isn’t that the same brand of visionless greed that you use you accuse Wall Street? If a man is bent on shooting himself, is it the fault of Smith&Wesson when he does?

    A final point I’d like to make is that many, many of the folks being sent pink slips are not high-buck masters of the universe. Of course there are exceptions, but I don’t think anyone wants charity for the Gordon Gekko-wannabes. If you read the details of the layoffs (the Goldman Sachs layoff in particular) the phrasing usually goes something like this: “Goldman is laying off 20% of X division, with associated layoffs in *support staff*”. These are not $2MM bonus employees. These are back office peons who have three kids and take the train to work and home two hours each way. They don’t have three homes, a jet, and the 2008 Ferrari line. They have mortgages, tuition, and car loans. They are people who work because they need a paycheck, not to satisfy their ego. If I were in charge of doling out aid, the people who were spending 60 hours a week at the office to pay the bills and support their families would be at the top of my list.

  2. alifinmath said

    I share the opinion of the following writer:

    http://www.marketoracle.co.uk/Article4074.html

    QUOTE But Paulson is clearly out of his depth. He’s just not the man to deal with a crisis of this magnitude. His only interest is bailing out his friends in the banking industry. The interests of workers and consumers are just brushed aside. Has anyone from the Dept of the Treasury (or the Fed) suggested a bailout for the 14,000 Bear Stearns employees who lost not only their jobs but the entire retirement when the company was purchased by JP Morgan?

    The Bear bailout was engineered to serve the needs of the banking establishment; nothing more. The Federal Reserve and the US Treasury are merely an extension of the financial industry. The Bear bailout proves it.ENDQUOTE

    All I know is that the masters of the universe will come out more or less unscathed (less maybe a Porsche or two). The price will be paid by employees and taxpayers. And the pretext for bailing out the rich will be the “urgent need to stabilise the markets and provide much-needed liquidity.”

    As for the beggars not trying. Dunno about that. I live close to Nicollet and I’ve seen homeless people huddled in temperatures close to zero fahreneheit. It’s acutely uncomfortable. Any sort of job has to be more fun than that. My plausible deduction is they don’t have a choice.

    As for reading the fine print, that may be a piece of cake for a bright young spark like yourself but not so easy for ordinary people not accustomed to legal and financial terminology. As G.B.Shaw once said, every profession is a conspiracy against the lay public. As I’ve recently read somewhere, many extra charges are inflicted by unscrupulous brokers on the customers at the very last moment — when they’ve committed themselves to moving. Now you can blame this credulity and naivete on a broken-down American public educational system. Or maybe most people just aren’t smart enough to deal with con men, but I think it’s unfair to accuse them of short-sightedness when their motives have been merely to improve their humble lot (in contrast to the short-sighted greed of financiers who are smart enough to sense that the racket is unsustainable but have a cynical disregard for long-term consequences).

    Finally, don’t take everything I say at face value. I’m too old to feel outraged by anything and my real motives for posting are partly to provoke young innocents like yourself. 😉

  3. Chris Prouty said

    “As G.B.Shaw once said, every profession is a conspiracy against the lay public.”

    I agree with that line absolutely. In my opinion a good bit of higher education is learning the vocabulary necessary to re-cast generally simple ideas in a manner that disallows understanding by the unwashed masses.

    “…but I think it’s unfair to accuse them of short-sightedness when their motives have been merely to improve their humble lot…”

    I disagree with the premise of this statement. The tacit assumption you’re making is that the recklessness exhibited by a homeowner greedy for a bigger property is somehow forgivable, whereas that same color of greed that drives the facilitator (investment banker) is scornful. I think it’s disingenuous to forgive bad behavior due to a small bank account. When you make excuses for someone’s unacceptable behavior, you infantilize them and create an environment ripe for them to reoffend. I could argue that lack of standards is the root problem behind many of America’s shortcomings. Greed is greed, whether the desired result is a new Lamborghini or a split-level home. A pox on all their houses (no pun intended).

  4. alifinmath said

    In some cases, cupidity has clearly been the culprit. In many other cases I’m not so sure. Real estate prices in major metropolitan areas are now often beyond the reach of a couple on median wages. The same for renting. Places such as rural Arkansas or Oklahoma may be cheaper — but the jobs may not be there. It’s a bit of a dilemma for many working people: how to afford accommodation in the vicinity of where they work? I’m sure other people have bored you to tears with how in the old days (roughly 1945-1975) it was possible for a single blue-collar worker to buy a humble abode and start a family. That isn’t possible today and indeed even working couples have problems affording accommodation and other big-ticker items such as health care and higher education. In the old days a bright young feller like yourself might already have a family. Now, young people have to keep postponing it, getting ever-deeper into hock for graduate work (for those who can make it that far, that is), with no guarantee of employment or the security of such employment if and when obtained. Meanwhile those at the top have been making out like bandits. It suggests to me that there are *structural* problems with American late capitalism and it’s a typical cop-out for American politicians to stress “individual responsibility” when the rules of the game have changed and the dice are more loaded than ever before. With stagnating wages and insecure employment coupled with rising real prices for big-ticket items like housing, health care, and education, it’s inevitable that more and more people are going to fall deep in debt. Indeed, some theorists argue that American late capitalism depends crucially on people going ever deeper into debt to support the functioning of the system — e.g., American businesses would have been in a bad way if consumers had not been using their houses as ATMs after 2001. And, no, it’s often not a case of being an irresponsible spendthrift: people haven’t otherwise been able to afford a bit of surgery or sending a child to college.(Indeed health care costs have been the number one cause of personal bankruptcy in the USA.)

    If it’s any consolation, the same problems exist in Britain as well. Couples have been borrowing upto five times their joint earnings to get a first tentative foot on the housing ladder — often some modest maisonette (half of a small terraced house, with barely enough space to stretch one’s legs).

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