Jacob Weisberg has a good corrective to anti-banking hysteria, The Case for Bankers. My post below, Kill the traders!, was an indictment of a small minority who have an outsized effect on the majority. We’re talking a power law distribution, most of the havoc is due to a few. Weisberg notes:
If you want to sputter, choke, and turn purple with rage at the people who wrecked your retirement, you might start with Cramer himself, the most prolific dispenser of bad advice to the investing public. But if you’re looking for someone in the securities industry, you’d be justified in directing your outrage at Joseph Cassano, who ran the London-based AIG Financial Products subsidiary. As explained in a superb New York Times piece last fall, his 377-employee unit issued $500 billion in credit-default swaps–insurance against default on mortgage-backed securities. Losses on these once wildly profitable instruments led to collateral calls that undermined AIG’s credit rating and thereby threatened the global financial system so seriously that the Fed had to step in. But even if you assume every one of those 377 employees in that London office…you’re looking at less than 1 percent of the firm’s 116,000 employees spread among 130 countries.
If a few hundred employees can cause such chaos, the system is clearly not robust. All that being said, I think it is important to remember that Weisberg helped write Robert Rubin’s memoir, In an Uncertain World: Tough Choices from Wall Street to Washington. This might give him a bit more sympathy than the typical journalist when it comes to bankers. It is also notable that Rubin’s reputation has greatly suffered recently.
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