Post: #1

I've increasingly begun to believes that modern day banks are the new mafia. From today's NYT:

Quote:MOUNT CLEMENS, Mich. — Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

http://www.nytimes.com/2013/07/21/busine...ml?hp&_r=0

TL;DR:
Goldman-Sachs bought a bunch of aluminum warehouses. They fuck with the commodities markets by hoarding aluminum. To get around regulations prohibiting the stock piling of aluminum they just shuffle it back and forth between their warehouses.

To me that seems like scheme out of an episode of Sopranos.

Post: #2

sounds like how Rockefeller would screw with markets by buying up a bunch of businesses and having them engage in fake price wars with each other to drive competitors out, or buy up all of the suppliers for a competitor's business and just turn off his supply of raw materials.

Post: #3

This is what the brightest minds in our country do: they sit around and figure out ways to cheat the system for their own benefit.

This is not innovation. This is not adding value. It's literally the exact opposite. It's finding new ways to insert themselves as middlemen. It's pure financial rent-seeking.

The government is completely captured by the big banks and passively enables this behavior by looking the other way.

We might as well be paying taxes directly to Goldman Sachs and the other banks.

Sooner or later these people will answer for their crimes.

Post: #4

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain. - Mark Twain

Post: #5

I think you're absolutely right scorpion.

A huge flaw with our modern system is that so much brain power goes into transfers and rent-seeking rather than creating value. I believe the argument that investment banking creates value by increasing the efficiency of capital allocation has been proven false-or at least negated-by this type of behavior. A large part of the reason unemployment persists is because the 'elites' are so focused on gaming the system they've forgotten how to make money off of labor. CEOs lament the lack of skills in our workforce but I think the real problem is executives are spending too much effort figuring out how to get something for nothing rather than focusing on how to put people back to work in a profitable way. A good CEO who knew how to create value with a skilled workforce would be happy to pay to train unskilled workers. Given that that's not happening on a large scale I'm convinced that corporate executives just aren't trying that hard. Instead they're spending all their time coming up with schemes like this.

Post: #6

(07-21-2013 04:21 PM)scorpion Wrote:  This is what the brightest minds in our country do: they sit around and figure out ways to cheat the system for their own benefit.

This is not innovation. This is not adding value. It's literally the exact opposite. It's finding new ways to insert themselves as middlemen. It's pure financial rent-seeking.

The government is completely captured by the big banks and passively enables this behavior by looking the other way.

We might as well be paying taxes directly to Goldman Sachs and the other banks.

Sooner or later these people will answer for their crimes.

The part about cheating the system is spot on. The part about answering for their crimes... what crimes? The laws are written by these people and their puppets. It'll continue as long as there are enough suckers to scam and enough stuff to steal... which means for the foreseeable future.

Post: #7

I agree there are many bankers who are crooks, but to make an assumption on everyone based on the actions of a few, that's just stupid. I work in finance for a bank and while there are definitely a lot of assholes without ethics or concerns for others, there are also just as many people who really do noble things in finance for the betterment of society.

That goes for any profession... lawyers, doctors, salespeople. Not everyone is a crook out to screw over others.

Post: #8

Except that the Bankers own the government, not the doctors or lawyers.

Post: #9

(07-21-2013 07:07 PM)pegador Wrote:  I agree there are many bankers who are crooks, but to make an assumption on everyone based on the actions of a few, that's just stupid. I work in finance for a bank and while there are definitely a lot of assholes without ethics or concerns for others, there are also just as many people who really do noble things in finance for the betterment of society.

That goes for any profession... lawyers, doctors, salespeople. Not everyone is a crook out to screw over others.

Do you actually believe this? Are you talking about investment or commercial banking? I suppose at least commercial bankers can say they help people purchase homes and plans their finances.

But no one goes into investment banking for any reason except to make as much money as possible. In fact, if you worked in investment banking and made it known to your colleagues that your intentions were to do noble things for the betterment of society, you would almost assuredly become the laughingstock of the office.

Post: #10

(07-21-2013 09:07 PM)scorpion Wrote:  

(07-21-2013 07:07 PM)pegador Wrote:  I agree there are many bankers who are crooks, but to make an assumption on everyone based on the actions of a few, that's just stupid. I work in finance for a bank and while there are definitely a lot of assholes without ethics or concerns for others, there are also just as many people who really do noble things in finance for the betterment of society.

That goes for any profession... lawyers, doctors, salespeople. Not everyone is a crook out to screw over others.

Do you actually believe this? Are you talking about investment or commercial banking? I suppose at least commercial bankers can say they help people purchase homes and plans their finances.

But no one goes into investment banking for any reason except to make as much money as possible. In fact, if you worked in investment banking and made it known to your colleagues that your intentions were to do noble things for the betterment of society, you would almost assuredly become the laughingstock of the office.

People within the financial services industry, including investment banking, do commit acts that lead to the advancement of civilization.

Companies that create huge amounts of value have depended on investment banks to obtain the financing they needed to create that value. Numerous markers for health and wealth have exploded upward worldwide over the past 60 years, and innovations fueled in part by financial institutions have played a positive role in that.

However, I do agree with those who criticize the upper echelons of finance (and corporations in general) for playing a game in which they use their money shape the laws of the US government (and other governments) to allow themselves to consolidate ever increasing amounts of wealth at the expense of everyone else.

This rigging of the system will not likely end well for anyone involved - which is all of us - if it continues unabated. This blurring between finance and politics in the United States is the thing that should be brought to peoples attention, criticized and fixed.

Some people involved in Occupy Wall Street cited this corruption as their main reason for participating, but they were largely drowned out by those who were content to demonize all finance professionals.

Many within the Occupy movement spent quite large amount of energy on harassing stockbrokers, securities traders and investment banking analysts; they went so far as physically trying to stop them from going into work in the morning.

If they focused more of that energy on their elected officials in Washington DC, something positive would have been more likely to happen.

Demonizing financial professionals is ineffective and will not constructively change corrupt policies created by the the encroachment of finance into US politics.

In order to make such changes, it would require a popular movement which puts pressure on those who are chosen, sworn and paid to be accountable to the American people: our politicians.

Post: #11

Double.

Post: #12

This thread reminds me of this story.

Quote:A trader for a British hedge fund, Armajaro Holdings, has bought up nearly all the cocoa beans in European warehouses, single-handedly pushing the price of the commodity to its highest level since 1997. Who is this mystery trader, and what does he plan to do with all that cocoa?

Why did he buy them all?
He thinks he can make a lot of money. Before Ward's big purchase, cocoa bean prices had already risen by 150 percent over the past two and a half years, as demand outstripped demand following several weak harvests in Ghana and the Ivory Coast, the biggest growing areas. Armajaro sells cocoa to chocolate makers, and now that the hedge fund controls such a large chunk of the world's supply, it stands a good chance of being able to push prices — and its profits — higher, especially if this winter's cocoa harvest is weak.

http://theweek.com/article/index/205182/...ng-of-2010

Post: #13

Holy fuck.... that is just mind-boggling, both on the scale and complexity. If there is any area where tight government regulation would be well-deserved, it is here. Still, I fear it is too late. The banks have too many paid representatives in the legislative bodies for a reform to ever be pushed through. It's going to be slow, painful stagnation until a bloody revolution.

Post: #14

(07-22-2013 04:47 AM)Handsome Creepy Eel Wrote:  Holy fuck.... that is just mind-boggling, both on the scale and complexity. If there is any area where tight government regulation would be well-deserved, it is here. Still, I fear it is too late. The banks have too many legislative bodies in debt servitude to them for a reform to ever be pushed through. It's going to be slow, painful stagnation until a bloody revolution.

Yeah I fixed that. We're passed the point of Banks simply having lobbyists and cronies stacked in houses and chambers. Countries are basically now trapped in debt to these Banks.

Post: #15

As long as society continues to reward non-producers, people like bankers--who conspire all day to parasitically suck value out of society while giving back nothing of actual value--will continue to exist.

Post: #16

(07-22-2013 01:01 PM)Tuthmosis Wrote:  As long as society continues to reward non-producers, people like bankers--who conspire all day to parasitically suck value out of society while giving back nothing of actual value--will continue to exist.

This is a generalization about some bankers that doesn't talk about the reason we have banks in the first place.

Do some of them suck value out of society? Yes.

Do some of them add value to society? Yes.

People find it super easy to say bankers are terrible people, they suck off society, they only care about ripping people off etc.

In order to expand and operate, most businesses (and most other organizations) need some sort financing; they need to borrow money.

In order to store wealth, most individuals are best served by some sort of financial institution (i.e. bank). There is the option of securing gold bricks in your basement, and there are other ways to store wealth as well, but many people don't have the resources to safeguard gold in their basement, and banks are very good at this.

The people who work at financial institutions are experts on making sure that stored wealth is used in a way which will create more wealth, through loans and investments.

Banks facilitate the transfer of funds from Surplus Spending Units (SSU's) to Deficit Spending Units (DSU's).

This is another way of saying banks hold savers (SSU's) money for them, and then invest it into organizations of creators (DSU's) so that they can go create!

In return for this service, banks then make some money off the creator in the form of interest on the loan, and give some of it back to the saver in the form of interest payments; they hold some of the surplus in order to pay for overhead costs, and the rest of what they don't give back is profit.

The reason they are entitled to this profit, the reason people continue to use banks, is because this transaction never would happened in the first place if the bank didn't exist! The saver wouldn't have been able to save, and the creator wouldn't have been able to create. Value was created for both sides, the SSU and the DSU, value that didn't exist before.

Without these finance experts doing their jobs, business would grind to a halt, and people would not have a reason to work and save money because they wouldn't have anywhere to save it.

In other words, without a healthy financial system, we would not have most of the luxuries that we have today.

What these bankers do sometimes requires enormous amounts of expertise and man hours, shouldn't they get paid for what they do?

The internet, and other technology, does eliminate the need for some of these people to work in banking; this new technology does help facilitate easy transfers from from savers to creators. But that doesn't change the fact that bankers do in fact provide a valuable service to our economy and society.

Post: #17

(07-21-2013 11:19 PM)Nacirema Wrote:  People within the financial services industry, including investment banking, do commit acts that lead to the advancement of civilization.

They have also done their fair share of fucking over the economy. If you mean advance society by shipping jobs offshore where labor is cheaper (ok more of a vc or consulting thing - but even bankers factor this stuff in when modelling their cashflows to justify an acquisition, etc.).

I am sure high frequency trading is definitely a value add to society.

I won't get too deep about the housing market. Or betting against your client's positions.

Don't get me wrong, having an efficient capital market is good for the economy. Lowering borrowing costs and bringing together different parties to do deals that make sense is all good.

But I don't think any of them go into wanting to be angels. They go into it to make money, as much as possible as fast as possible. When banks determine that it is cheaper to pay the fine and make the money than not doing the questionable transaction, it just shows that the goal is to make money at all costs.

After all, corporations are people too.

Post: #18

Nacirema's heart is in the right place, but I find that summary hopelessly naive. It describes more or less classic, boring banking that deals only with savings and loans. That kind of bank is a great thing indeed and does help mankind.Our modern life could not exist without those banks. However, we're not talking about that kind of bank here. We're talking about a bloated monstrosity insured by the taxpayers, gambling rather than lending or investing money, racketeering business, cities and states, and manipulating almost every single thing that is supposed to have nothing to do with the financial markets, like oil, cotton, aluminium or carbon credits.

Those are two extremely different things.

Post: #19

(07-22-2013 03:47 PM)Nacirema Wrote:  

(07-22-2013 01:01 PM)Tuthmosis Wrote:  As long as society continues to reward non-producers, people like bankers--who conspire all day to parasitically suck value out of society while giving back nothing of actual value--will continue to exist.

This is a generalization about some bankers that doesn't talk about the reason we have banks in the first place.

Do some of them suck value out of society? Yes.

Do some of them add value to society? Yes.

People find it super easy to say bankers are terrible people, they suck off society, they only care about ripping people off etc.

In order to expand and operate, most businesses (and most other organizations) need some sort financing; they need to borrow money.

In order to store wealth, most individuals are best served by some sort of financial institution (i.e. bank). There is the option of securing gold bricks in your basement, and there are other ways to store wealth as well, but many people don't have the resources to safeguard gold in their basement, and banks are very good at this.

The people who work at financial institutions are experts on making sure that stored wealth is used in a way which will create more wealth, through loans and investments.

Banks facilitate the transfer of funds from Surplus Spending Units (SSU's) to Deficit Spending Units (DSU's).

This is another way of saying banks hold savers (SSU's) money for them, and then invest it into organizations of creators (DSU's) so that they can go create!

In return for this service, banks then make some money off the creator in the form of interest on the loan, and give some of it back to the saver in the form of interest payments; they hold some of the surplus in order to pay for overhead costs, and the rest of what they don't give back is profit.

The reason they are entitled to this profit, the reason people continue to use banks, is because this transaction never would happened in the first place if the bank didn't exist! The saver wouldn't have been able to save, and the creator wouldn't have been able to create. Value was created for both sides, the SSU and the DSU, value that didn't exist before.

Without these finance experts doing their jobs, business would grind to a halt, and people would not have a reason to work and save money because they wouldn't have anywhere to save it.

In other words, without a healthy financial system, we would not have most of the luxuries that we have today.

What these bankers do sometimes requires enormous amounts of expertise and man hours, shouldn't they get paid for what they do?

The internet, and other technology, does eliminate the need for some of these people to work in banking; this new technology does help facilitate easy transfers from from savers to creators. But that doesn't change the fact that bankers do in fact provide a valuable service to our economy and society.

Typical Economist speak.

Bankers aren't your low level HSBC socket full of CDs. Banks make most of their doing speculation and mob casino tricks like what the OP posted. Before 1970s savings dictated the path of capital not debt. The Banks as they should handled mostly just the savings and it was not them holding the balance of credit at their will.

Post: #20

This is brilliant... they couldnt control the output from the mining companies, so they went on to the next choke point

Post: #21

(07-22-2013 05:37 PM)kosko Wrote:  Bankers aren't your low level HSBC socket full of CDs. Banks make most of their doing speculation and mob casino tricks like what the OP posted. Before 1970s savings dictated the path of capital not debt. The Banks as they should handled mostly just the savings and it was not them holding the balance of credit at their will.

Even HSBC is full of crooks:
http://www.ft.com/intl/cms/s/0/8ce703aa-...z2ZonhMYpx

In my opinion banks lost their way when they went from being private partnerships to publicly traded companies. Nobody working at the bank has any skin in the game. Take Lehman Brothers: Dick Fuld at his peak was probably worth about $1 billion. After he lost it 'all' he was still worth $100 million. That's not skin in the game. The consequence of running a bank into the ground should be that you go broke, like college student broke.

http://money.cnn.com/2010/08/24/news/com.../index.htm

To the extent that there are honest bankers who just seek to add value to the world via efficient capital allocation they're not doing a very good job of policing their unethical brothers.

Post: #22

(07-22-2013 04:48 PM)Handsome Creepy Eel Wrote:  Nacirema's heart is in the right place, but I find that summary hopelessly naive.

I'd like to know what I said in that summary that isn't true.

Did you want to hear something about a Blood-Sucking Vampire Squid?

I'm not posting in this thread to defend people who are playing games with the future prospects of hundreds of millions of people while risking very little to their own future ability to eat.

I'm posting here to add some balance for the impressionable reader with little knowledge of finance who sees a bunch of excellent forum contributors demonizing "bankers", when what they are talking about really only applies to certain elements within that industry.

Once again, without a healthy financial system, an economy doesn't function and people suffer.

Massive cultural level attempts to shame everyone in finance for the actions of some is not the cure for our current economic problems; it is also not the salvation for that kid who just graduated with a useless degree, a ton of debt, and no job prospects.

Post: #23

Like I said, there are a lot of crooks, but many others who do good things. The father of a good friend of mine was head of investment banking at a mid-sized firm. He's probably worth at least 35 million, easy, but he was worth much more, possibly double. He's one of the biggest philanthropists I know. If you see how they live, you'd never think they were multi-millionaires. Sure, they have a nice house and all, but for the amount of money they have, they're quite humble.

His father grew up poor, so for him making money was really important. That was his only goal...he studied hard, went to UPENN and then into a large investment bank before being recruited by another firm. The guy always remembered where he came from and in the end gave back...a lot. I've never seen someone give so much money away.

There are many rich bankers, hedge fund managers etc who give away hundreds of millions of dollars to worthy causes, whether it be to fight poverty or for medical research or whatever. The point is, they don't have to do it. Sure, they get tax breaks, but at the end of the day the money is going somewhere else, not staying in their pocket.

Not everyone in high level finance is a crook.

Post: #24

We need a new acronym: NABALT

Post: #25

Modern day upper class in a nutshell:



It's not just enough for rich people to accumulate wealth, they have to remove it from everybody else in the process