<p>]quote] You have a point, Jimmy, but Bill Gates actually CREATED something. He didn't just skim off some of the golden crumbs by moving play money around. (see Bonfire of the Vanities)
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<p>Word! I-bankers aren't creating anything; they're just figuring out how to fund it. Isn't it funny that figuring out how to fund it is more "prestigious" than being the actual creative person who comes up with something innovative and new that entices people to buy or do something different?</p>
<p>I have two perhaps contrarian thoughts on this thread. </p>
<p>First, if there is indeed an increase in Ivy graduates "flocking" to wall street to cash in on lucrative banking careers, then it might be interesting to investigate what proportion of those migrating in that direction have families forced to pay full freight. If my own Ivy bound child was attending college at a substantially reduced price that was not severely impacting our retirement planning, the tone in our house would be quite different and I can well imagine her envisioning altruistic non-profit career pathways. As it is, although we don't complain, she sees the huge sacrifice we are making and there is an unspoken pressure upon her to earn money, a lot of money and quickly. I think she wants to get that part of her life out of the way so that she can move on to other interests. In this more fluid economy and professional culture, I don't think that's unlikely. So an Ivy grad works in banking for a while, who is to say that they won't make a large amount of money, assure themselves of some modicum of financial security and perhaps even give back a bit to their families -- and then go on to more philanthropic pursuits?</p>
<p>Second, I object to the negative characterization of banking on here. In fact, I do think those at the top of the financial profession are frequently highly creative and productive individuals. Sure, there are abuses. Every profession has those -- including docs inflating Medicare fees, lawyers bribing expert witneses, and even United Way execs siphoning funds for personal enrichment. Those who move money in this day and age are really social and economic architects of all of our future. And the folks doing it aren't always evil. Some are visionaries who are very instrumental -- in fact essential -- to the innovation we all depend upon.</p>
<p>I-Banks and the investment industry they run have directly lead to the last two major economic crashes in this country. Don't tell me they are like doctors who skim a few bucks off of Medicare. They cost the people who invest TRILLIONS in losses. Get real.</p>
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In fact, I do think those at the top of the financial profession are frequently highly creative and productive individuals.
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<p>While that is an undeniable fact, the real question to ask is if our society is better off for the existence of an endless of derivatives that are mere toys in the hands of speculators and arbitrage specialists? I think that the millions of Americans who are facing possible foreclosures would not think very highly of "creative" products such as CMO's or applaud the few thousands "chosen ones" who lined their pockets with fools' gold by peddling worthless stacks of papers, even if it was to pay back student loans.</p>
<p>I believe that some wonder if all the intelligence and creativity that flocks to Wall Street in response to the mega-bucks siren songs could not find a better place for their amazing talents.</p>
<p>Oh, I think the answer is pretty easy to find. If they actually went to work in real companies and used their ability to improve products and production we would actually have net gains in the base economy. Instead they spend countless hours convincing the owners of Company A to take over Company B because all sorts of great synergy would result. Most times the results are bad for both companies. And that does not even touch on the creation of new financial intruments that even the IBers don't really understand how to value in the future.</p>
<p>Hey, guys. The development of CMOs and other types of mortgage securitization vehicles sharply lowered the cost of home-purchase and renovation financing. Most of the people whose homes are being foreclosed would never have been able to dream of purchasing a home without that financial infrastructure in place, and there are masses of people whose homes AREN'T being foreclosed who would have been out of luck, too.</p>
<p>We can debate the costs and benefits of widespread home ownership as national policy, and we can debate just where things went wrong with the subprime lending industry and its financiers. But the basic securitization idea and structure are going to survive this market just fine, and continue to make the U.S. residential ownership market active and vibrant.</p>
<p>You want to roll back the clock to the days of "Potter's Field" (see It's A Wonderful Life for the "good old days" of mortgage lending).</p>
<p>There was plenty of money to borrow on reasonable terms well before the CMO's came along. Local banks and thrifts were doing fine with local lending where they actually knew their customers. Yes you needed to put some money down but that's not a bad thing.</p>
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Hey, guys. The development of CMOs and other types of mortgage securitization vehicles sharply lowered the cost of home-purchase and renovation financing. Most of the people whose homes are being foreclosed would never have been able to dream of purchasing a home without that financial infrastructure in place, and there are masses of people whose homes AREN'T being foreclosed who would have been out of luck, too.</p>
<p>We can debate the costs and benefits of widespread home ownership as national policy, and we can debate just where things went wrong with the subprime lending industry and its financiers. But the basic securitization idea and structure are going to survive this market just fine, and continue to make the U.S. residential ownership market active and vibrant.
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<p>All good points, JHS. However, there might be more merit to a stable and low-growth real estate market than one that is too active and vibrant during the "boom times" and dead during the "bust times." </p>
<p>Pumping extremely large and mostly illusory sources of credit in the market and throwing people who can't swim into the deepend without a life preserver is not eaxctly a recipe for long term success. Offering easy credit to poorly qualified borrowers with the implied promise of unending inflation is an equally bad idea. Only in our country do we believe to build equity by spending over our means. Unfortunately, our country is also obsessed by growth and seem quite keen to live through cycles of boom and bust as long as the busts are a bit shorter than the boom times.</p>
<p>My oder bro did the ivy->public service->wall street (back office). Not a life that I would like, long hours, keeping the nation and company from falling over. Me OTH is on the otherside, state univ, dirt nails, then trying to keep ordinary people from falling over. Opposite ends of the spectrum and all interesting.</p>