Sunday, December 28, 2008

Another Voice that Financial Services Do Not Make An Economy

From Scotland's Sunday Herald:

First of all, I concur wholeheartedly that Britain needs to reintroduce manufacturing as the mainstay of our economy - and for the reasons which Boyd gives so eloquently. The spivs and speculators (unlike Alex Salmond, I mean the senior managers of our banks and investment companies) did indeed bring about our downfall. However, all they did was hasten the inevitable.

The financial model to which Boyd refers so scathingly was indeed doomed to destruction, just as soon as the people of Dubai, Mumbai and Shanghai got wise to the kind of legalised larceny that prevailed in the City, and learned to "add value" in similar ways themselves.

Many years ago, I was standing outside my law school smoking a cigarette and listening to some of my classmates. They all were basking in their importance as future lawyers. I stood there listening and watching the traffic as it passed us by and thought something different - that those truckers carrying the goods made by others were what made the world go by and taht the law and lawyers were only the lubricant to make the machinery run.

I think some self-satisfied finance majors mistook their role to be main one and not the business itself. That this kind of thinking exists somewhere besides Wall Street gives no consolation.

And then give By Saying Yes, WaMu Built Empire on Shaky Loans from The New York Times a read:

According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion — not least, Kerry K. Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

Maybe now our "wise men" do know how it feels to be thick as a brick.

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