Lekhni: No, in fact the exact words in my post are “Wall Street definitely shares some of the blame”.

Wall Street definitely made some bad decisions, but whom do you think is to blame in Wall Street – the CEOs and senior executives who made those decisions, or the people with less than 5 yrs experience whom I am talking about?

This is garbage, plain and simple.

Who gave thos no-doc loans, and why? Let’s say I’m on Main Street making 30K and go to a bank for a loan for a 1 mil house. Five, ten years ago, they would have laughed in my face and that would have been the end of the story. The greed DID start on Wall Street, with the mortgage guys thinking they could make a quick buck by lending to the poor sod, knowing full well the loan would turn sour down the road, but what did they care: their year-end bonuses would be pegged to how many loans they closed that year, not what happened 2 years later. Can you not see this: if huge bonuses are tied to how much money you make for the bank THIS quarter or this year, people WILL do the sort of nonsense that went on. The quants knew very well what was happening, but they were not considered “team players” if they pointed out the huge risks in these loans. So, yes, the industry at large is fully to blame for what has been going on, individuals working for the system also have to share part of the blame. When you are paid these huge sums in salary and bonuses, it is your responsibility to not screw up. Lots of professional put in as long, if not longer hours as i-bankers: doctors, academics, researchers, but they have infintely more accountability for their work even when they are paid peanuts compared to Wall Street.

Lekhni: I completely agree with you that the commercial banks who lent those mortgage loans are to blame. Yes, they should never have made those loans.

The quants you mention don’t make loans. They are part of Investment banks, which are Wall Street, and who take the loans that commercial banks have already lent, and package them into securities.

What I am, is an I-banker’s wife. and a less arrogant person i have yet to come across. there’s a saying in hindi about how the lowest constable wearing shorts at the police station, is the most arrogant of the lot. and i’ve noticed that a lot of the really intelligent, interesting or even moneyed people – are very humble. its usually the newcomers on the block who are cocky – but that usually wears off. i’ve noticed that in all fields. the newest airhostesses are the most arrogant of the lot!

my husband’s has i-banker friends too and i’ve yet to come across an arrogant one. most of the time i ignore them of course because they’re talking shop. but they’re some of the most humble, friendly people i know. its a silly sad stereotype and yes, i believe most of the people talking are doing it out of envy and ignorance. schadenfreude is right.

Lekhni: I agree completely Arrogance has nothing to do with one’s profession. I have seen everyone from government clerks to customer service reps being arrogant – even though these people are supposed to be all about helping others Pay has nothing to do with arrogance. If we brand everyone in an entire profession as arrogant, it’s not them, it must be us

Lekhni: How I wish that were true, folks in Wall Street would jump up in joy on hearing this Sadly, it’s not. What you are referring to is the concept of “Carried Interest” which is taxed at capital gains tax rate. That is applicable primarily to owners of Private equity and hedge funds – and even there, not to the employees, only the owners. Ordinary Wall Street employees get taxed at the marginal rate for every dime they earn.

For all your talk about them working 17 hours a day and being geeky geniuses who deserved all the salary they earned, the fact remains that they bungled, big time. And I am not talking only about the upper management. As far as I know, the mid-level chaps would have been responsible for all the risk modelling with regards to securities they bought and sold.

As to your entirely valid point regarding blame not being apportioned to sub-prime home buyers, it is also an indictment of the creditors who lent them these loans. Obviously the banks didn’t lend sub-prime borrowers money because they thought that society should share the fruits of wealth. They did lend the money at hefty interest rates to compensate for the risk. They did it because they thought that the ‘brilliant’ idea of bundling their loans together with prime borrowers’ loans would mitigate that risk. Their bonus being linked to short term performance was a big incentive in not worrying about long term risks since these sub-prime loans were provided with an attractive teaser interest rate which they knew the sub-prime borrowers would pay off making their securities more attractive and showing up as good assets on their balance sheets, at least until their next bonus pay.

So, if you are a finance chap who happens to be paid tons of money and are supposedly amongst the finest minds, you are also in charge of loads of information about the credit worthiness of individuals and debt instruments you are dealing with, and yet, with all this information and long hours you put in, you cannot factor in some basic risks in your calculations? Then why the heck should I not think that you didn’t deserve your high pay and your fat bonus? I am not saying that me or other heartless people who think they deserve no sympathy or for that matter government regulation would have been better at managing the risks than these whiz kids. But, this is the system that these guys have promoted which they call creative destruction. They took the risk and it proved to be more than they could handle. Now its time to bear the consequences. This is what these finance types have been preaching to all and sundry in other industries.

Farmers are dying in Vidarbha: “Oh, well, farming, like all other professions, is a business and there are risks involved. If the farmers are in so much debt why the heck are they still in farming? They should change their profession and move to cities.”

Jobs are being lost and companies are being destroyed because of corporate raiders short selling stocks: “They serve an essential function in our economy. One should look at them as signaling mechanisms for the market about businesses that are going down.”

Jobs will be lost after this meger/acquisition goes through: “Tough luck, we are Investment Bankers. We facilitate these mergers. We don’t factor in the costs for families involved. We just make sure due diligence is done. It is not for us to worry about how many jobs will be lost. Ultimately the economies of scale would be beneficial to consumers.”

Auto majors are closing their plants and blue collar jobs will be lost: “Government should not bail them out. That will set a bad precedent. A moral hazard, if you will.”

But when their own jobs are on the line: “BAIL US OUT! It is not only us who will sink but everyone in the economy. Ban short selling of OUR stocks! And while you are at it, pretty please, don’t puncture our golden parachutes”

So when you are talking about a bunch of folks who didn’t bother about other people’s job losses resulting from their actions, then why is there an expectation that others should bother about their job losses? This is the kind of thinking these guys have favored when it came to other professions. When anyone highlighted these job loss incidents and tried to bring out the other side of the story they spoke about intellectuals ‘manipulating liberal guilt.’ They used their money to fund politicians that favoured their ideology. But when the other side wants to use the same tactic against them, they are crying foul and talking about a witch hunt! They are the ones who, for want of unfettered functioning of their businesses, made a Faustian bargain with the religious conservatives and brought about eight years of stupid policies that bore a hole through the heart of science in this country and depleted the finances in an unnecessary war.

Yes, all the reasons they gave when justifying their ideology are valid. I am not suggesting that automakers should be bailed out or that mergers and acquisitions should be banned. In fact, I am more sympathetic to their ideology than the other side. But that doesn’t mean that I sympathise with their plight. They didn’t let me sympathise with anyone else’s in similar situation. Given that they promoted this ideology, it isn’t unreasonable for people who had suffered from their actions in the past to feel smug that the wheel has come a full circle.

Another reason why people are angry at them is because, because of their actions many of them will be losing their jobs without any fault of their own. Many in IT, including me, will lose their jobs as the economy sinks. Not because we weren’t competent, but because these guys weren’t! So why should I shed a tear?

Anyways, we are the ones who are spending time debating whether or not we should lend a shoulder to cry on. I am certain that being the whiz kids that these guys are, they must have made wise investment of their own money which will see them through the downturn pretty comfortably.

One other aspect that is being muddled in this debate is individual versus institution. People are cheering the downfall of the institution. I doubt if anyone is really ‘happy’ that their neighbour/relative or someone they know has lost his/her job.

Let’s not ignore their political hypocrisy of the average financial industry executive – either top, middle, or lower-rung. Many of these people who are in the higher tax brackets oppose government spending on services for the poor, which includes programs that re-training for blue collar workers who suffer from job losses due to outsourcing. These guys oppose universal health care in America, but don’t balk at taking huge infusions of taxpayer money to save their organizations. These people want to keep their taxes as low as possible as well give unjustified incentives and protections to corporation which do not deserve them. When Main St is in trouble, even the average Joe in the financial industry dismisses it as a consequence of the ‘free market’ by saying that whatever firm is competitive enough should be allowed to fail (I am not against free market capitalism; I just want the gains and pains of market adjustments to be distributed in a way that makes sense). But Wall St itself, guilty at all levels of massive breaches of financial hygiene cannot be allowed to fail. Why does it get to be this way? Their bungling is of such magnitude that it precipitates a daisy-chain of destruction.

What I want is for the more fortunate in America to realize that reap the benefits of being born to a middle-class family, of going to good public schools in their suburbs and government-aided colleges, and of having a judicial system that protects their private property. They should realize that they too could one day exchange places with the neediest. The laid-off traders of Wall St should realize that America is way behind than other countries in providing necessary services to deserving citizens, and not oppose spending on good welfare plans and government oversight and mandatory disclosures on corporate America.

Secondly, many people who received approval for sub-prime mortgages and loans were often victims of deceptive marketing practices (See: http://www.ftc.gov/opa/2002/09/associates.shtm, http://www.federalreserve.gov/newsevents/speech/bernanke20070517a.htm). So these financial industry workers are not entirely blameless. They knowingly targeted low-income, often less educated and minority individuals.

See, see? We no fight.