Fed Creates $1 Trillion 'Out of Thin Air"

[TraneWreck]

That's the problem. I'm not sure how many "smart, ethical people" with the relevant experience would be willing to take the job at 1/100 the salary. Or to put it another way, I'm not sure I'd believe that anyone willing to take the job at that price was actually that smart or ethical.

Driving a bank isn't like driving a lawn mower; it's not the sort of thing any neighborhood fifteen year old can do. And the consequences of a mistake are a lot worse than simply a badly mown lawn.

Oh, I bet you could easily come up with a host of talented young folks ready to jump into those positions. Now that every ivy league grad can't immediately go into investment banking, there's a whole bunch of people on the east coast looking for an avenue to express their skills.

I can also tell you that a great many lawyers have been downsized over the past few years. This may not be the best pool to draw ethical applicants from, but I know a number of my classmates who would be more than qualified to take those positions for the same amount of money they make lawyering in Chicago (which I promise you is a more difficult position).

Incidentally, this is why all the talk about "going Galt" will never amount to anything. People in those positions know damn well that there are tons of people willing to jump into their positions for significantly less compensation.

The competence will be the easy part, but i'll agree with you that the ethics might be difficult to come by.

 

[Piggy]

Yeah, and I should take your unsupported word for this WHY?

Is there anyone else out there who believes that this junk isn't totally worthless? Aside from Warren Buffet, I mean? Since, after all, it's obvious that he knows less about the market than the Chicken Littles wandering around terrified of falling sky....

Yeah, there are folks sniffing around at it. The thing about the bundling is that you're gonna get a certain percentage defaulting, but not all of it. There's a sweet spot on the price for this stuff. As long as the revenue from the sound portion, combined with the discount price, adds up to a good enough potential for long-term value, you'll find folks who are willing to take the risk.

I think we're at that point now. We'll see how it plays out.

I like the plan to introduce a market valuation on this stuff rather than having the feds peg a price, which would have to be arbitrary in the final analysis.

 

[drkitten]

Oh, I bet you could easily come up with a host of talented young folks ready to jump into those positions. Now that every ivy league grad can't immediately go into investment banking, there's a whole bunch of people on the east coast looking for an avenue to express their skills.

I can also tell you that a great many lawyers have been downsized over the past few years. This may not be the best pool to draw ethical applicants from,

Screw "ethical."

What makes you think a lawyer is qualified to run a bank?

People who want a lawyer to run their bank deserve to have a banker defend them in court. Entirely different skill set.

Why don't the lawyers go into neurosurgery instead? Or work for NASA as rocket scientists? Or maybe get a gig as underwear models?

Similarly, I'm not sure I really want a still-wet-behind-the-ears newly-minted Harvard MBA running Citigroup, any more than I want a freshly-scrubbed Lt. Niedermeyer on the Joint Chiefs of Staff.

 

[TraneWreck]

Screw "ethical."

What makes you think a lawyer is qualified to run a bank?

People who want a lawyer to run their bank deserve to have a banker defend them in court. Entirely different skill set.

Why don't the lawyers go into neurosurgery instead? Or work for NASA as rocket scientists? Or maybe get a gig as underwear models?

Similarly, I'm not sure I really want a still-wet-behind-the-ears newly-minted Harvard MBA running Citigroup, any more than I want a freshly-scrubbed Lt. Niedermeyer on the Joint Chiefs of Staff.

Because a significant percentage of lawyers went through JD-MBA programs, worked in banks before law school, work for banks as lawyers, and generally have a great deal of experience in a number of subjects relevant to banking.

And litigation is only one aspect of being a lawyer. A number of corporations will send up and coming people to law school for a variety of reasons. But a lot of transactional legal jobs are directly applicable to banking.

Unlike the medical profession, much of the knowledge and many of the skills relevant to being a lawyer are broadly applicable through the business world. Mergers and Acquisitions, Corporate structure, tax, securities, commercial paper, etc.

A good percentage of the bar exam deals directly with banking issues.

 

[charles brough]

So you'd prefer the bankrupcy of the American people to the bankrupcy of the American government? WOW!!!!!

You are setting up an arbitrary line between the government and the people as if you were comparing shovels with apples. The government is ours, our way of organizing to get things done for our own welfare. It does what we determine. If we elect the wrong people, it is our own fault. We have to have someone there representing us. Don't you like the Constitutional government we have?
If it goes bankrupt, it is the American public that becomes bankrupt, not some alien entity.

 

[drkitten]

Because a significant percentage of lawyers went through JD-MBA programs, worked in banks before law school, work for banks as lawyers, and generally have a great deal of experience in a number of subjects relevant to banking.

Lt. Neidermeyer went through a commission program and has worked for the military, and has a great deal of experience in a number of subjects relevant to the military. I assume you therefore have no objection to him serving on the Joint Chiefs?

 

[TraneWreck]

Lt. Neidermeyer went through a commission program and has worked for the military, and has a great deal of experience in a number of subjects relevant to the military. I assume you therefore have no objection to him serving on the Joint Chiefs?

Now you're just being silly. Obviously you have to deal with individual applicants, you aren't qualified to head a bank because you're a lawyer, a great many lawyers happen to be qualified to lead a bank.

This point is so silly I shouldn't need to reply.

Incidentally, I bet a quick check of major bank executives would reveal a sizeable percentage of folks with law degrees.

 

[gdnp]

Yeah, there are folks sniffing around at it. The thing about the bundling is that you're gonna get a certain percentage defaulting, but not all of it. There's a sweet spot on the price for this stuff. As long as the revenue from the sound portion, combined with the discount price, adds up to a good enough potential for long-term value, you'll find folks who are willing to take the risk.

I think we're at that point now. We'll see how it plays out.

I like the plan to introduce a market valuation on this stuff rather than having the feds peg a price, which would have to be arbitrary in the final analysis.

In my mind these things are intrinsically impossible to evaluate given the fragility of the world economy. We are still not sure how deep the current recession/depression will be, whether inflation or deflation will be the problem 2 or 3 or 10 years down the road, whether unemployment will peak at 9% or 15%. The default rates on the underlying mortgages thus becomes impossible to predict with any degree of accuracy, making the securities impossible to value except as highly risky junk.

 

[drkitten]

Now you're just being silly. Obviously you have to deal with individual applicants, you aren't qualified to head a bank because you're a lawyer, a great many lawyers happen to be qualified to lead a bank.

And I disagree.

If nothing else,.... if there are so many lawyers out there qualified to run a bank (and willing to do so for 1/100 of the usual salary), why aren't they doing so?

Incidentally, I bet a quick check of major bank executives would reveal a sizeable percentage of folks with law degrees.

I'm sure it would. That doesn't mean that a sizeable percentage of folks with law degrees are qualified to be a major bank executive. ("This point is so silly I shouldn't need to reply.")

Most finance MBAs aren't qualified even for mid-level money running positions. Beyond the simple academic credentials, the experience is key. And that's experience that lawyers, almost by definition, do not have, because they've been busy being lawyers.

I fear you greatly underestimate the amount and value of specialist knowledge in banking.

 

[mhaze]

Now you're just being silly. Obviously you have to deal with individual applicants, you aren't qualified to head a bank because you're a lawyer, a great many lawyers happen to be qualified to lead a bank.

This point is so silly I shouldn't need to reply.

Incidentally, I bet a quick check of major bank executives would reveal a sizeable percentage of folks with law degrees.

Your point is equally silly. The degree doesn't matter, 10-20 years after graduation. It is the many years of experience that do. Thus if by lawyer you mean "those who have been practicing law for the last 10-20 years", your assertion is false. They are not qualified to run banks.

That's the problem. I'm not sure how many "smart, ethical people" with the relevant experience would be willing to take the job at 1/100 the salary. Or to put it another way, I'm not sure I'd believe that anyone willing to take the job at that price was actually that smart or ethical.

Driving a bank isn't like driving a lawn mower; it's not the sort of thing any neighborhood fifteen year old can do. And the consequences of a mistake are a lot worse than simply a badly mown lawn.

I think this is not a problem. We could go take 500 presidents of small regional banks tommorrow, ask them to help and run the big ones. Then the ones that refuse, offer then 10x the initial pay offer and hire them on the spot.

Don't forget that salary or bonus to these individuals goes back into the local economy, which is kind of part of what is supposed to help pull out of a recession, as I recall.

 

[TraneWreck]

And I disagree.

If nothing else,.... if there are so many lawyers out there qualified to run a bank (and willing to do so for 1/100 of the usual salary), why aren't they doing so?

I don't even know how to respond to this. I would say probably because a corporate board of directors that's granting itself $10 million salaries and millions more in bonuses wouldn't want to hire a guy for say, 200k, that made them unecessary.

I'm sure it would. That doesn't mean that a sizeable percentage of folks with law degrees are qualified to be a major bank executive. ("This point is so silly I shouldn't need to reply.")

THis is quite literally what I said. To refresh your memory, "you aren't qualified to head a bank because you're a lawyer, a great many lawyers happen to be qualified to lead a bank."

So you repeat back to me exactly what I said and pretend like it's something clever you came up with, interesting.

Most finance MBAs aren't qualified even for mid-level money running positions. Beyond the simple academic credentials, the experience is key. And that's experience that lawyers, almost by definition, do not have, because they've been busy being lawyers.

You clearly have no idea what lawyers actually do, as evidenced by the comment above and this, "People who want a lawyer to run their bank deserve to have a banker defend them in court. Entirely different skill set."

Either you don't understand the concept of transactional law or you're trying to be funny. Regardless of the choice, it's a silly, absurd point.

When a bank agrees to a credit default swap with an insurer, who do you think writes the deal? When a contract is made, who do you think writes that contract? When a more complicated financial instrument is created, who do you think they approach to make sure it's done correctly?

Lawyers participate in every aspect of banking. Every deal, every mortgage, and every security goes through a lawyer. There is no aspect of banking that a lawyer in that field wouldn't be experienced to handle.

I fear you greatly underestimate the amount and value of specialist knowledge in banking.

Please, introduce me to the aspect of banking that doesn't require someone with experience in the law to at least oversee.

 

[TraneWreck]

Your point is equally silly. The degree doesn't matter, 10-20 years after graduation. It is the many years of experience that do. Thus if by lawyer you mean "those who have been practicing law for the last 10-20 years", your assertion is false. They are not qualified to run banks.

No, it's your interpretation of my point that's silly. Obviously the population of lawyers qualified for the job will include those who have worked with banks or related financial institutions.

But nice job of turning a relatively simple point into a ridiculous straw man. let me refresh your memory as to what I wrote earlier, "Because a significant percentage of lawyers went through JD-MBA programs, worked in banks before law school, work for banks as lawyers, and generally have a great deal of experience in a number of subjects relevant to banking."

Relevant education + experience.

You're making the same error as drkitten, transactional lawyers in practice will be engaged in every aspect of a bank's operation.

I think this is not a problem. We could go take 500 presidents of small regional banks tommorrow, ask them to help and run the big ones. Then the ones that refuse, offer then 10x the initial pay offer and hire them on the spot.

Don't forget that salary or bonus to these individuals goes back into the local economy, which is kind of part of what is supposed to help pull out of a recession, as I recall.

This is another good possibility. Promote people who have kept their banks clean through the last couple decades.

 

[drkitten]

You clearly have no idea what lawyers actually do, as evidenced by the comment above and this, "People who want a lawyer to run their bank deserve to have a banker defend them in court. Entirely different skill set."

Either you don't understand the concept of transactional law or you're trying to be funny. Regardless of the choice, it's a silly, absurd point.

When a bank agrees to a credit default swap with an insurer, who do you think writes the deal?

I think it's you who has no idea what bankers do.

The banker is the one who decides what deal to make. The lawyer writes it up, as directed by the banker.

My lawyer wrote the contract for the house I bought; he certainly didn't tell me which house to buy or even whether it was a good investment. My lawyer wrote my will, but didn't tell me who should get the record collection or the antique watch that used to belong to my great-grandfather.

Please, introduce me to the aspect of banking that doesn't require someone with experience in the law to at least oversee.

You have it exactly backwards. NO part of banking requires a lawyer to "oversee"; oversight is a function of the banking experts. There is also no part of a hospital that doesn't involve lawyers in some way(which is why every deal a hospital makes is written by a lawyer) -- but the key business is medical, not legal.

A lawyer is no more qualified to "oversee" a bank than is one of the tellers.

 

[drkitten]

No, it's your interpretation of my point that's silly. Obviously the population of lawyers qualified for the job will include those who have worked with banks or related financial institutions.

But nice job of turning a relatively simple point into a ridiculous straw man. let me refresh your memory as to what I wrote earlier, "Because a significant percentage of lawyers went through JD-MBA programs, worked in banks before law school, work for banks as lawyers, and generally have a great deal of experience in a number of subjects relevant to banking."

Relevant education + experience.

Except that working for a bank "as lawyers" isn't relevant to a money-running job.

 

[charles brough]

Perhaps we should change the title to this thread "lawyer vs. banker" posts.

Myself, I did not think of bankers as needing a law degree, but it seems to make sense that the higher up the banker moves in the heirarchy, the more legal expertise he had would be useful. I do know that some if not all corporations and probably banks do have a legal department. So, perhaps, each banker need not be a lawyer.

Perhaps much of the dispute rests on underlying thinking that lawyers are crooked. Well, there is a certain amount of justification for that view! . . .

 

[drkitten]

Myself, I did not think of bankers as needing a law degree, but it seems to make sense that the higher up the banker moves in the heirarchy, the more legal expertise he had would be useful. [ I do know that some if not all corporations and probably banks do have a legal department. So, perhaps, each banker need not be a lawyer.

That's not the question.

The question is whether being a lawyer can magically substitute for the thirty years of money running experience you don't have because you were too busy working as a lawyer.

The fact that TraneWreck thinks it can is probably the strongest argument I could make for the preservation of the existing system.

 

[TraneWreck]

I think it's you who has no idea what bankers do.

The banker is the one who decides what deal to make. The lawyer writes it up, as directed by the banker.

My lawyer wrote the contract for the house I bought; he certainly didn't tell me which house to buy or even whether it was a good investment. My lawyer wrote my will, but didn't tell me who should get the record collection or the antique watch that used to belong to my great-grandfather.

At this point you have to see the absolute folly of your stance. Of course the lawyer is doing as directed. But that work gives the lawyer a massive amount of experience with the ways and means of bank business. If you were looking for someone to promote to a decision making position, you would pick the person who has involved themselves in the major functions of the business.

That's like saying, "we can't promote this Colonel to General because he's just been following the orders of the General." That's how a hierarchical structure operates. But within the context of the job given to them, lawyers have a significant amount of decision making.

You have it exactly backwards. NO part of banking requires a lawyer to "oversee"; oversight is a function of the banking experts. There is also no part of a hospital that doesn't involve lawyers in some way(which is why every deal a hospital makes is written by a lawyer) -- but the key business is medical, not legal.

A lawyer is no more qualified to "oversee" a bank than is one of the tellers.

This is honestly astonishing. Every deal made by a bank will go through a lawyer to insure that the bank doesn't leave itself open to liability or run afoul of the law.

As for the hospital, I would say a lawyer who has worked with hospital administration would be a perfect person to eventually take over the business aspects of that institution. Who better to direct than someone intimately familiar with all the legality surrounding any potential course of action?

 

[TraneWreck]

That's not the question.

The question is whether being a lawyer can magically substitute for the thirty years of money running experience you don't have because you were too busy working as a lawyer.

The fact that TraneWreck thinks it can is probably the strongest argument I could make for the preservation of the existing system.

THis is such a foolish summation of the point at hand. Now I understand why you're having so much difficulty.

When you work as a lawyer in a bank you are dealing with the specific financial functions of that institution. You learn the laws surrounding all of the financial instruments and the various ways to create them. When an executive makes a deal of any kind, he will go to a lawyer to make sure it's done properly. If you know how to do the work of the executive properly when directed, it's an easy step up to making the decision in the first place.

I would love to hear you explain what it is that a bank executive does that a lawyer working in that field wouldn't know how to do.

 

[drkitten]

At this point you have to see the absolute folly of your stance. Of course the lawyer is doing as directed. But that work gives the lawyer a massive amount of experience with the ways and means of bank business.

No more than doing as the hospital administrator directs gives the lawyer a massive amount of experience with neurosurgery.

As for the hospital, I would say a lawyer who has worked with hospital administration would be a perfect person to eventually take over the business aspects of that institution. Who better to direct than someone intimately familiar with all the legality surrounding any potential course of action?

A doctor or other medical professional.

We've done that experiment. Which is why most hospital administrators are MD's.

 

[drkitten]

When you work as a lawyer in a bank you are dealing with the specific financial functions of that institution.

Do you really think that if you repeat a wrong statement often enough it will become right?

I would love to hear you explain what it is that a bank executive does that a lawyer working in that field wouldn't know how to do.

Run the money.