Mainstream Media is still worried sick about the brain drain of top-talent from Wall Street. My advice: don’t lose any sleep over this one. A re-balancing of our workforce is a crucial step towards recovery. Financial firms should not provide 40% of the S&P 500’s earnings, as they did at the peak. Besides, calling it a brain drain is a stretch.

You see, most of the “talent” on Wall Street are really just Sales Guys. They have fancy titles, and may prefer to think of themselves as deal makers, strategic thinkers, or sound boards (like Larry Summers, who earned $5+ million working as a sound board for a year, only 1 day a week). Anyway, the point is that the stuff they’re selling doesn’t actually contribute much to the economy. And it frequently does serious damage, as we found out in this most recent bubble.

Traditional loans play an important role in helping the economy grow. But do we need debt frenzies that wind up funding stock-buybacks, huge bonuses, and unsustainable dividends (think GE)? Trillions of dollars in exotic acronyms? The sale of complex derivatives to local governments, which is costing them dearly now? No, no, and no.

What about the traders? Yes, they do provide liquidity to markets. But that benefit is rather small when weighed against bubbles, corruption, and increases in our taxes to pay for bailouts and service the deficit. Don’t get me wrong, there are many honest bankers out there, and we need to support those guys, and make sure they don’t have to keep subsidizing the bad ones.

Examples



A cynical person might ask, aren’t we being blatantly ripped off by these dudes? Do you have any examples? Why yes, I do. JP Morgan, for example, sold a LOT of derivatives and complex contracts to local municipalities. According to Bloomberg, they did not fully disclose the fees involved. Deals like this probably contributed to Moody’s downgrade of ALL local governments in the US to negative. There are countless other factors involved, but JP Morgan demanding these non-disclosed fees from local govs right now can’t be helping. And Moody’s would never be as crass as to mention that. Anyway, the Bloomberg piece on the local government debacle is a must-read.

Disclaimer: None of this information is investment advice. If anything posted here is inaccurate, please use the contact button at the top of the page to let me know. I will change any incorrect facts or inaccuracies ASAP.

