John Gault Speaks Up - He must be stopped

[armor99]

I think there is truth to this.

But don't we expect markets to arbitrage away price discrepancies like this? Certainly the "supply side" has responded to the price incentives by churning out legions of MBAs. And yet, at least on Wall Street, financial types have never been paid more. It doesn't make a lot of sense to me.

I guess, ultimately, where I'm going with this is to question whether the market for financial services (and for its employees, by extension) is really all that efficient.

And if it's not an efficient market, does that mean we have badly missallocated our smartest and most ambitious people to finance instead of potentially more productive areas?

I read you post very carfully and wonder about the bolded print above. What do you mean by that? Productive according to whom? Missallocated by who's definition?

I would think that people would choose their profession, and where they want to be because of their own personal thoughts and desires about what would make them happy in a job. Not because of what they think "others" might want them to do. Or what might be good for "society". At least I would hope that most people think that way. I do not work for the benefit of others, I work to improve my own life. I have been in situations at work where I thought my pay was unfair, so I left and found a better position somewhere else.

 

[Independent]

Thanks, I understand your position better this time around.

There have been many times in history where the market didn't manage risk very well - previously called panics. Once question is if government intervention reduces them in some way or magnifies them as they do not allow the markets to fully shake out the excesses.
Panic of 1893 - Wikipedia, the free encyclopedia

The case could be made that the US government created the current problems when it created the secondary mortgage market and expanded it over time. Since banks did not have to keep the loan they made on their books they didn't have much of an interest in the ability of the borrower to pay.

Where we differ is that I don't think there needs to be a "benefits to society" (positive externalities) in determining a person's salary and that the AIG worker's work only needs to be a benefit to AIG and the worker.

I'll agree that gov't bears some of the blame - primarily for pushing the notion that everybody "deserves" to own a house. That led to F&F, and not overseeing them well, and politicians taking credit for the increase in home ownership instead of looking under the numbers to see why it was going up. I also think that private firm managers correctly saw that they were protected by limited liability laws and by the "too big to fail" doctrine, and managed accordingly. The gov't made bad rules and the managers followed the incentives*. I think that CMO's would have been invented by purely private firms on their own, even if the GSEs hadn't been there first.

* One example is not doing something it should have done - enforcing the capital requirements that we thought we established way back in the 30's.

I agree that private salaries should be set by the market without gov't interference, and in this case the punitive tax is wrong (note my original post). So maybe we don't disagree at all.

My point was that not all jobs provide the same amount of postitive externalities. In this particular case (commodity trader) I think the private compensation is very high but the positive externalities are hard to find. So I'm not concerned if this individual decides to quit (other than my temporary interest as his employer) i.e. if there really are John Galts in our society, this person doesn't appear to be one of them. I'm guessing that I'd find that to be true about a lot of Wall Street jobs, but I haven't studied them to know for sure.

 

[Independent]

I think there is truth to this.

But don't we expect markets to arbitrage away price discrepancies like this? Certainly the "supply side" has responded to the price incentives by churning out legions of MBAs. And yet, at least on Wall Street, financial types have never been paid more. It doesn't make a lot of sense to me.

I guess, ultimately, where I'm going with this is to question whether the market for financial services (and for its employees, by extension) is really all that efficient.

And if it's not an efficient market, does that mean we have badly missallocated our smartest and most ambitious people to finance instead of potentially more productive areas?

Good questions, I've wondered the same thing.

Dex's comment makes sense. I've worked for companies with commissioned salespeople. In some cases, a shift in the market means that volumes go up suddenly and individuals make a lot of money. My observation is the companies decide that's a reason to hire more salespeople (the current staff probably doesn't have time to get to all the available sales), and average compensation goes down. I've also seen cases where they re-priced the product to give the customer and/or the company a better deal, taking the money out of the commission rates.

So with all the Ivy League MBA's headed to Wall Street, why hasn't the market driven average incomes down? Maybe it was just a matter of time and this collapse happened to come before the incomes started to slide. Maybe the bubble was the result of the all the smart aggressive people trying to find any way they could to make the kind of money they expected.

Similarly, I've wondered why "finance" should have such a high percent of total corporate profits. It doesn't seem like the average person doesn't want to spend a very large percent of his income on financial services, how does this low demand convert into high profits?

 

[FUEGO]

If you've got the right interpretation, than I don't have much of a problem with Rand. I suppose the issue would be just how much more productive are these "highly productive" people. I remember something more like the Wikipedia description of the novel.

I see where you are coming from. The "cliff notes"/wiki summary of the book really focuses on the plot, and the plot primarily concerns the highly productive people going on strike and essentially shutting down the world's economy. But when you read the whole book, it is really filled with the theme that interfering with anyone's right to act in their own rational self interest puts a damper on the entire economy which we all rely on in our own self interested ways.

I can't recall specific examples, but something along the lines of "If the guy shoveling coal into the train engine's furnace isn't acting for his own benefit, then what motivation does he have to do his job?"

The main point of Rand's philosophy is rational self-interest. One should act in accordance with this principle. The strikers are doing so, not to hurt others, but to force a societal collapse and then to rebuild the system according to rules of rational self interest. But the strikers are striking because they can and because it serves their own self interest best. Each has to make their own decision to strike. The concept that striking and causing a collapse of society is bad for the general public does not enter into the equation.

The conflict between the strikers and those who have yet to strike can be seen by looking at Dagny's efforts to keep her railroad in business even as all the other strikers are leaving (as they all do one by one). She fights to the end, until finally she realizes the futility of operating in an environment that does not recognize her right to pursue her rational self interests. Then she strikes.

Although the end result is societal collapse, it isn't the main purpose of the strikers. They simply refuse to work under a confiscatory system of economics and governance that refuses them the gains of their own hard work. It is all about individual freedom.

from the wiki of Atlas Shrugged:
"The strikers believe that they are crucial to a society that exploits them, denying them freedom or failing to acknowledge their right to self-interest, and the gradual collapse of civilization is triggered by their strike. This is not to say that they believed that giving the creators their due would cost civilization. Rather, the strikers believe that the current irrational altruist/collectivist culture impeded them and therefore the rest of society as well. Thus it would serve no one's interest to continue to allow himself to be exploited, although the strike is not primarily motivated by the harm the current state of society does to others as well."

 

[Independent]

Interestingly enough.... I once asked someone who said "benfits to society" exactly WHO society was? Which people were those?

He replied that society was not him, or me, or anyone else either of us knew or would ever know.... but everyone else. Apparently, according to his world, view he and I and everyone else we knew did not qualify as part of society.

It is sort of like the definition of salary. I have heard lots of people say that people should be paid "enough", but not "too much". When asked to define those terms.... there is usually a blank stare. I think it is the pinnacle of arrogance when anyone claims to know what is a "decent" salary is for everyone.

And just one more point for clarification. When Rand talks about "self interest" that does not translate out to "do whatever you feel like doing". It is actually stated as "rational self interest", and that is an important distinction. Burning down every forest in the world just because you feel like it, is not rational, and would probably cause you great harm in the future. Obviously not a good idea for your survival, so not in your rational self interest.

Now on the other hand, if there was a global plague that threatened the survival of the human species, and it was found that a rare species of fish was the cure, it would be in the rational self interest of makind if that fish had to go extinct to allow man as a species to survive. At the heart of Ayn Rands philosphy is the idea that people are more important than "non-people" and yourself and your loved ones are more important than complete strangers. Not that the other group is completely unimportant at all... just of lesser importance. Most people would choose to feed their own family first and worry about feeding others later.

How does Rand's "rational self-interest" differ from the older notion of "enlightened self-interest"?

Here's an example. Let's assume that James Cayne of Bear Stearns saw that he had a chance to make a quarter billion dollars, at the cost of betting all the stockholders money on something that was far from a sure thing (and possibly triggering a global depression). It was clear to him that he could walk away with his money and not be financially harmed by the possible bad results. So what does he do if he accepts either of the concepts above?

 

[samclem]

And if it's not an efficient market, does that mean we have badly missallocated our smartest and most ambitious people to finance instead of potentially more productive areas?

Good point. I saw a couple explicit references in various newspaper/magazine articles when the meltdown began. For years, many of America's brightest have become lawyers and MBA's, while those in other countries became engineers, scientists, and doctors at higher rates than ours. Thsi could be a silver lining of our present woes. I've got nothing against MBAs and lawyers, but they are more involved with "upkeep of the sandbox" rather than building the castles in that sandbox. And, for completeness/full disclosure's sake, I'd say soldiers/sailors/airmen/Marines and policemen are also part of the "overhead" rather than the "builders."

Tangentially related:

"I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain."John Adams
US diplomat & politician (1735 - 1826)​

 

[Gone4Good]

I read you post very carfully and wonder about the bolded print above. What do you mean by that? Productive according to whom? Missallocated by who's definition?

I'll let samclem answer that (in part) . . .

For years, many of America's brightest have become lawyers and MBA's, while those in other countries became engineers, scientists, and doctors at higher rates than ours.

My thought is that finance doesn't create wealth (although it does facilitate its creation). So ideally, you'd have as few people as possible employed as "facilitators" and as many people as possible employed as "creators". But as things stand now, finance professionals are some of the most highly paid people in the US. So the market is encouraging our most ambitious youths to become facilitators, rather than creators. If the market is indeed inefficient and is overpricing financial talent, than this seems to me to be a missallocation of resources.

The incentives are perverse. Consider that a bright, hard working, kid can join a Wall Street firm and be guaranteed a six figure salary. He has a very reasonable chance of earning seven figures at some point in his career. The best of his class can rise to make eight figures . . . all without taking a single ounce of personal risk. With those kind of fortunes dangled in front of our brightest kids, why would anyone with access to a quality education start a business? Why would anyone become an engineer, or a scientist?

 

[Gone4Good]

So with all the Ivy League MBA's headed to Wall Street, why hasn't the market driven average incomes down?

After having thought about this some more, I've come to the conclusion that financiers are overpaid because we massively overpay for financial services. The most obvious example is the large cap mutual fund that is nothing more than a closet indexer but gets away charging 1% of NAV plus a commission. Those fees are making people rich.

Similar examples are seen throughout finance. It almost seems like the financial world can get away with egregious fees because they're priced as very small fractions. Nobody misses a few basis points here or there, but on trillions of dollars of transactions, it turns into major mulah.

 

[clifp]

I realize that Jake has become a John Galt like figure to the "Government is the problem" group. I have some sympathy for both Jake and the government is the problem group. I am also almost as disgusted by the Congresses populist reactions as to the AIG bonus.

Never the less I am not ready to let Jake DeSantis off the hook so easily. Jake is an executive VP in a 400 person organization. Now maybe there are lot more Executive VP at AIG a than manufacturing company, but I have got to believe that Jake was one of the top dozen or so executives in the Financial Product group. I spent most of my career in 400-1,000 person organization. Only few years as one of the top 12 executives. Even as lower level manager I had a pretty good idea of one most of the other 400 odd people did. Around bonus time intergroup competition became evident.

If you or your boss, had a suspicion that group X was getting a good bonus, because it was BSing upper management. You had every incentive to raise a red flag and say, I think something is fishy going on.

After 11 years in a 400 person, surely Jake most have known folks in the CDS trading group, had friends transfer in or out of the organization. Had co workers that left to go somewhere else. Attended management reviews, heard rumors of the bonus for the group etc. Much like Enron, while there were only a few people engaged in illegal activity a whole lot of people had suspicion. As an executive Jake had an obligation to the shareholders to raise questions.

I have yet to meet a dumb MIT graduate. Even if he did nothing or knew nothing, he must have suspected something. Turning a blind eye to the risky behavior occurring next door. Is easily enough to justifying forfeiting your bonus.

It reminds me after Nazi death camps were liberated, that Allies would force the local towns people, to clean up the camps. The mayors and town official would always say we had no idea what was going on. The US commanders said but you aren't blind you had to suspect something. The German people risked being shot if they asked too many question, what was Jake DeSantis risking?

 

[ERD50]

My thought is that finance doesn't create wealth (although it does facilitate its creation). So ideally, you'd have as few people as possible employed as "facilitators" and as many people as possible employed as "creators". But as things stand now, finance professionals are some of the most highly paid people in the US.

I think people keep ignoring the large sums of money that athletes and entertainers get. They seem to be some of the most highly paid people to me.

And what do they "create" when they move a ball from one side of a field to the other, or throw it through a hoop or into a net? Or cause the air to vibrate in a pattern?

Why aren't we taxing them at 90% After all, many sports stadiums received a govt bailout (subsidy), didn't they?

-ERD50

 

[ERD50]

I haven't seen a single politician show an ounce of common sense or integrity on this one -- they are a pathetic bunch. I think I will have to switch my colors from Democratic to Libertarian.

Wow, this is an amazing statement coming from you. I had to go peek back in the soapbox to assure myself this is the donheff that I remembered.

I get the sense that you are not alone, but it's hard to get any real reading on the level. I suspect many people wouldn't admit it, even if they felt the same.

I'll just add that it seems to be much easier to see the problems more clearly w/o any allegiance to either one of the two major parties.

-ERD50

 

[Independent]

I think people keep ignoring the large sums of money that athletes and entertainers get. They seem to be some of the most highly paid people to me.

And what do they "create" when they move a ball from one side of a field to the other, or throw it through a hoop or into a net? Or cause the air to vibrate in a pattern?

Why aren't we taxing them at 90% After all, many sports stadiums received a govt bailout (subsidy), didn't they?

-ERD50

You’ve mentioned this before, in that case the context was CEOs. I’ve been trying to figure it out. I’ve got a few thoughts about CEOs in particular.

Control -

I have complete control of whether or not I buy a Garth Brooks CD. If I enjoy it, I buy it. If I think the price is too high, I don’t buy it. I know that GB gets some portion of the price. If GB earns a lot of money, that must mean lots of other people enjoy it enough to pay the price.

It’s not so clear when the subject is teams. I may be a Yankees fan who thinks A-Rod is grossly overpaid. Now it’s harder for me to vote with my dollars. I think people are more likely to complain about high pay in these cases that involve teams. But at least I know that Yankees tickets are discretionary entertainment I can drop if it really bothers me.

CEOs and other corporate execs are way out on the spectrum in terms of “I can’t control whether or not I buy their services”. Their salaries are buried in everything I buy, I have trouble buying anything without paying some CEO. And, unlike GB or A-Rod, I don’t see them working.

What’s good for the goose …..
No athlete or entertainer ever fired me. Most of us have worked for companies where the CEO said “Competition forces me to make the hard decision to [ fire people, freeze salaries, cut benefits, extend hours, whatever]." So we have the obvious questions of why competition allows the CEO to earn so much?

The CEO Cartel -
Some people (I’m one of them) suspect that CEOs don’t have to compete like the rest of us. Their compensation is set by the Board, and the CEO often picks Board members. Even if that’s not the case, many board members are CEOs themselves. They think that the “right” CEO can single-handedly make or break the company. (The rest of us think that we do almost all the work.) Imagine what plumbers would earn if all plumbers’ salaries were set by other plumbers.

Pay (halfway) for "results"
When CEOs get big pay from stock options, they say it's justified by "pay for performance". But when the stock goes down they still seem to walk away with lots of money. It's a funny way to pay for performance. We've just seen some really extreme cases in the financial sector.

When the subject is “executives”, most people just transfer their skepticism about CEOs to other execs.

Regarding the “create” perspective, pro athletes and entertainers actually do produce a consumer good – we call it “entertainment”. It’s not a necessity of life, but we value it enough to pay for it. People may complain about lawyers and traders because they perceive them as simply shuffling stuff that other people created. (From this perspective, I’m okay with CEO pay – I think that organizing big companies really is a “productive” job.)

You mention gov’t subsidies of sports stadiums. That one bugs me, too. I think my fellow citizens are being irrational on that topic, just as they are on many tax breaks.

 

[ziggy29]

I'll just add that it seems to be much easier to see the problems more clearly w/o any allegiance to either one of the two major parties.

Word.

 

[Gone4Good]

I think people keep ignoring the large sums of money that athletes and entertainers get. They seem to be some of the most highly paid people to me.

And what do they "create" when they move a ball from one side of a field to the other, or throw it through a hoop or into a net? Or cause the air to vibrate in a pattern?

Why aren't we taxing them at 90% After all, many sports stadiums received a govt bailout (subsidy), didn't they?

-ERD50

You misunderstand me. I'm not advocating a 90% tax on anyone. Elsewhere on these boards I'm on record saying the House Bill was a stupid piece of legislation. It still is.

All I'm suggesting is that the "market" for labor (or at least certain types of labor) may not be particularly efficient. And we as a nation are poorer for that. Nowhere did I suggest any remedy for this inefficiency. Indeed, the currently inefficient market may still be better than any available alternative. But maybe not. It's at least worth considering.

With respect to entertainers, they certainly do create. I don't think you'd argue that Mozart or Shakespeare have added immeasurably to the wealth of society. Britney Spears is not of that caliber, but she creates something unique that only she can provide. A bond salesman, not so much.

 

[ziggy29]

It’s not so clear when the subject is teams. I may be a Yankees fan who thinks A-Rod is grossly overpaid. Now it’s harder for me to vote with my dollars. I think people are more likely to complain about high pay in these cases that involve teams. But at least I know that Yankees tickets are discretionary entertainment I can drop if it really bothers me.

And even this is distorted by the fact that the Yankees are getting outrageous subsidies from the taxpayers to build their new ballpark. To the extent that the subsidies allow the Yankees to use more of their own money on player salaries, the taxpayers are (indirectly) footing the bill for part of the salary of A-Rod and other Yankees players. So in that sense, this example can't be used as a breakdown of the "free market" valuing various types of labor.

 

[ERD50]

You misunderstand me. I'm not advocating a 90% tax on anyone. Elsewhere on these boards I'm on record saying the House Bill was a stupid piece of legislation. It still is.

All I'm suggesting is that the "market" for labor (or at least certain types of labor) may not be particularly efficient. And we as a nation are poorer for that. Nowhere did I suggest any remedy for this inefficiency. Indeed, the currently inefficient market may still be better than any available alternative. But maybe not. It's at least worth considering.

With respect to entertainers, they certainly do create. I don't think you'd argue that Mozart or Shakespeare have added immeasurably to the wealth of society. Britney Spears is not of that caliber, but she creates something unique that only she can provide. A bond salesman, not so much.

OK, those 90% tax comments were more general comments to the thread and the article rather than meant to be specific towards you.

But as far as whether someone is "creating" something or not - I just look at it as - if someone is willing to pay them, well then they must be "creating" *something* worth paying for. Or extorting it somehow.

I'll refer back to Independent's post - I pretty much agree that some CEO/BOD are distorting the free market - it's too buddy-buddy. At some point, shareholders need to organize to do something - I'd prefer that to the govt, but I do think there is a reasonable case to be made for some "price fixing" in these CEO packages.

-ERD50

 

[ziggy29]

I'll refer back to Independent's post - I pretty much agree that some CEO/BOD are distorting the free market - it's too buddy-buddy. At some point, shareholders need to organize to do something - I'd prefer that to the govt, but I do think there is a reasonable case to be made for some "price fixing" in these CEO packages.

The thing is, the "shareholders" are usually composed of a majority of large institutions that can schmooze with the BOD and create some kind of toxic and incestuous relationship with each other. This, IMO, often comes at the expense of the individual investor. And usually, even if every individual investor voted all of his/her shares against the BOD, if the board could woo the institutions holding their shares, the board would keep their seats in a landslide.

 

[Gone4Good]

But as far as whether someone is "creating" something or not - I just look at it as - if someone is willing to pay them, well then they must be "creating" *something* worth paying for. Or extorting it somehow.

I generally agree. But this gets to the heart of the question I started with . . .

For example, a corporate bond salesman can make a couple million dollars or more per year. Corporate bonds aren't a particularly difficult product to understand. I can't imagine that selling them is all that different than selling other things. So why are they paid so much better than other sales people?

I understand why A-Rod gets paid the way he does. Because he fills stadiums, sells TV rights and sneakers (or at least is perceived to do so).

But what does your average bond salesman bring to the table that any other reasonably good salesperson couldn't if given the same job?

 

[ERD50]

I generally agree. But this gets to the heart of the question I started with . . .



I understand why A-Rod gets paid the way he does. Because he fills stadiums, sells TV rights and sneakers (or at least is perceived to do so).

But what does your average bond salesman bring to the table that any other reasonably good salesperson couldn't if given the same job?

I don't know specifically. But generally, it must be *something*, right? I mean, why would people pay that if they were not getting something for it. And if "any other reasonably good salesperson" could do it, I really, really think they would hire them for less money. Unless.... like the possible CEO/BOD thing, there is a buddy-buddy system going on and they are keeping the goods in the clique.

There's lots of things I don't understand, but that does not mean there isn't a good reason for them. I don't understand why someone would pay big bucks for a Brittany Spears concert, or a Football game for that matter. But they do, so who am I to argue? If a bond salesman can earn a big salary (w/o coercion or illegal/immoral stunts) I say good for him/her.

-ERD50

 

[NW-Bound]

I am as much a capitalist as anyone here, but the overpay of CEOs bothers me to no end. I read all the posts above, and see good points being made. I think we can agree on the problem; that's the easy part. Coming up with a solution is the hard part.

Anyway, about bond salesmen, I read "Liar's Poker" by Michael Lewis many years ago, when he was a salesman at Salomon Brothers in the 80s. He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.

If it was a really big bad putrid bond, the boss would come down to the trading desk to "knight" the salesman, and to declare that he now joined the rank of "the big swinging dicks" !

A very good read. Highly recommended.

 

[armor99]

Let's not confuse rights with convienience here in this discussion. There was a comment made a few back (sorry I did not quote it) about not neccessarily knowing who the CEO is of each company that you want to buy or not buy a product from. You are right... the CEO's name is not clearly printed on each product they sell. Maybe it should be. But the point is this information is easily available if you choose to do some internet searching.

It is not convienient, nor is it easy, but as a consumer, if you really have a serious issue with a particular CEO that runs a certain company, it would be easy enough to find out. Unfortunately, as it looks from my point of view, far too often government legislation is in the business of allowing the rest of us to be lazy.

If anyone is truely "outraged" at a particular CEO, company, etc. You can always vote with you wallet. Other than utilities in certain areas, I am fairly sure there is enough variety in most products, that you can find alternative companies if you really want to. Many people are upset that Immelt, the CEO of GE was doing business with Iran. So... I urge those that are, to look up all of the holdings of that company and no longer buy those products. Not easy to do.... but to me if someone is pissed enough about it... that can easily do that sort of thing.

 

[FUEGO]

He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.

As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. Doesn't matter whether you pay them $50,000 a year or $50,000,000. Anyone can bank equally as well as anyone else, so it is impossible to say that one banker is naive and another is skillful at his craft.

Or perhaps some people are worth more based on their unique sets of skills and abilities... Perhaps skills and abilities that might save small banks in the Midwest or European banks hundreds of millions of dollars in bond default losses? Nah, all bankers are the same!

 

[armor99]

As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. Doesn't matter whether you pay them $50,000 a year or $50,000,000. Anyone can bank equally as well as anyone else, so it is impossible to say that one banker is naive and another is skillful at his craft.

Or perhaps some people are worth more based on their unique sets of skills and abilities... Perhaps skills and abilities that might save small banks in the Midwest or European banks hundreds of millions of dollars in bond default losses? Nah, all bankers are the same!

I would claim that no matter how skilled you are as a banker (or any job really), that negotiating your salary and terms of employment, is a skill, just like any other you might use in your profession. Some people are better in that area than others. Many people that I know are intimidated trying to negotiate a better salary, and subscribe to the "keep your head down" approach to working. Many managers that I have had, really tended to respect people that drove a hard bargain. There is certainly a line between assertive and being at PITA thought...

If someone can get a better salary with less skills than someone else because they were a better negotiator... then I say BRAVO!!!

 

[NW-Bound]

As has been clearly established with ample support in this thread, bankers are bankers are bankers. Fungible people all the same. ... Nah, all bankers are the same!

Your comment reminded me of the movie "Trading Places", where a street con artist could, in a short time, learn to become a successful commodity trader. Sure, there is some truth in that. I could also say "a politician is a politician is a politician". But then, why does one get to the national scene, while another is stuck at a state capital? There is some chance involved, but surely other factors are at play too.

Back on our bond salesman, the book "Liar's Poker" is a non-fictional book, and tells what was going on behind the scene at Salomon Brothers, at the time perhaps as large and influential as Lehman that collapsed recently.

It is a very interesting book. Again, I highly recommend it. I wonder if another book like this will come out to tell what happened at Lehman and AIG trading floors that handled CDOs and CDSs.

From Wikipedia:

... the book gives a first-person account of how bond traders and salesmen truly work, their personalities, and their cultture. The book captures well an important period in the history of Wall Street.

Lewis was an art history student at Princeton University who nonetheless wanted to break into Wall Street to make money. He describes his almost pathetic attempts to find a finance job, only to be roundly rejected by every firm to which he applied. He then enrolled in the London School of Economics to gain a Master's degree in economics. While in England, Lewis was invited to a banquet hosted by the Queen Mother, where he was accidentally seated next to the wives of two Salomon Brothers managers. While the managers and their wives proved to be extremely uncouth and rude, especially in the presence of royalty, Lewis managed to get a job interview through them and land his first job.

For his job, Lewis moved to New York City for Salomon's training program. Here, he was appalled at the sheer bravado of most of his fellow trainees, and indoctrinated into the money culture of Salomon and Wall Street in general.

After New York, Lewis was shipped to the London office of Salomon Brothers as a bond salesman. Despite his lack of knowledge, he was soon handling millions of dollars in investment accounts... However, growing disillusioned with his work, he eventually quit to write this book and become a financial journalist.

The book's main contribution to literature and history is its unflattering, but accurate, portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices.

During the training sessions, Lewis was struck by the infantilism of most of his fellow trainees. ... Lewis attributed their behavior to the fact that the trading pit required neither finesse nor advanced financial knowledge, but rather, the ability and desire to exploit others' weaknesses, intimidate other people into listening to you, and generally the ability to spend hours a day screaming orders under high pressure situations. He referred to their worldview as "The Law of the Jungle."

He also noted that, although most arrivals on Wall Street studied economics, this knowledge was never used—in fact, any academic knowledge was frowned on by traders.

Lewis also attributed the Savings and Loans Scandal to the inability of small-time, provincial bank managers to compete with Wall Street. He noted that people on Wall Street are experts at fleecing and taking advantage of ignorant people, which the Savings and Loan banks provided in abundance.

 

[Gone4Good]

Anyway, about bond salesmen, I read "Liar's Poker" by Michael Lewis many years ago, when he was a salesman at Salomon Brothers in the 80s. He described how, when a bond salesman was successful in unloading a stinkin' bond that all insiders knew would default onto some naive institutional bankers - such as a small bank in the Midwest, or a banker in Europe - the boss would announce the sales on the PA.

Michael Lewis' experience was pre-"TRACE" (Trade Reporting And Compliance Engine) which now requires the reporting of price & volume data on most bond trades within 15 minutes or so. Gone are the days when brokers could "rip people's f-n faces off" because only they knew where the market was. These days the naive midwest bank can look up where the bond "everyone new would default" last traded and get a market price.