Over Paid On The Way Up, Blameless On The Way Down

Matthew Yglesias asked the question of the financial markets: If It’s Not Your Fault, Then How Come You’re So Rich?

The market economists, the conservatives, the Milton Friedmans, all the people that stressed the advantages of the marketplace and the disadvantages of government intervention and regulation. They were all wrong.

The market does not regulate. It's a myth. It eats itself alive. It tears itself apart.

Quoting Ross Douthat from The Atlantic:

"Henry Blodget makes a related argument in the just-out December issue of our magazine [The Atlantic], arguing that “the interaction of human psychology with a market economy practically ensures that [bubbles] will form,” and that the mass pursuit of rational self-interest is the only real culprit for our present woes.

In one sense, I agree with these arguments, and indeed I’ve made similarly-themed arguments myself. But it’s also worth noting that saying “we’re all to blame” for what’s happened doesn’t exclude the possibility that some people, and some kinds of people, are more to blame than others - because some people have greater responsibilities than others, and all mistakes are not created equal."

The "nobody knew" defense is completely made up. Never accepting blame for how mortage deriviatives were exploited, nor explaining how the house of cards collapsed, is in the self interest of all those involved. It's just beyond most people's understanding of economics, so ignorance is bliss and a lot better than jail time.

Yglesias takes his shot:

"Ross goes in one direction with this, but I’d like to go in another. It seems to me that we should largely concede that, yes, the failures here have to do with systems and human psychology and the nature of the world rather than the flaws of any particular individual. Replace Richard Fuld and Robert Rubin with two other people, and much the same stuff would have happened. But rather than militating in the direction of letting the financial executives off the hook and saying “massive harm, no foul” it seems to me that taking this lesson to heart should push us in the other direction. After all, the underlying premise of our finance-led rush to hyper-inequality has been that the rich are very very very very different from you and me and that it’s so excruciatingly important that we maintain adequate incentives for them to ply their trade that we should ignore the immense damage rising inequality does to middle class well-being.

Once we realize that that’s not the case, that there’s no “magic” at work in the financial field and people are just mucking around I think that has quite radical implications. If nothing the CEOs and top fund managers are doing makes them worthy of taking the blame when the crash hits, then they also don’t deserve nearly the share of the credit — and money — that they got while things were going up."

Over paid on the way up, under punished bordering on blameless on the way down. Using other people's money, leveraging it 30 times, assessing absolutely no credible risk, then blowing it all is something anyone could do, no need for Harvard MBAs. Just pay me the $20 million bonus and I'll destroy your company. Heck, I'll do it $10 million.

Not to say black is white, or up is down, but the capitalism we have in America a farce, it is a unicorn. And right now it has it's horn someplace unpleasant.

Source: Matthew Yglesias