4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

What's Wall Street Worth? Little, If Anything

John Cassidy of the New Yorker has an excellent piece in the Nov. 29 edition, titled "What Good Is Wall Street?" Cassidy answers the question with well-constructed logic: Wall Street is worth little. Wall Street will claim that it finances new business. But only 13% of Goldman Sachs's business is financing new business, while 63% is trading. Cassidy quotes a financial industry realist who says that most of what Wall Street does could be eliminated "without doing any damage to the economy." Up to 1980, compensation on Wall Street was roughly the same as in other industries. Now that compensation is up 60%, as the number of money-shufflers has risen from 5 million to 7.5 million. Although volume in credit default swaps, those poisonous derivates, has dropped steeply, the "insidious culture tat allowed Wall Street firms to peddle securities of dubious value to pension funds and charitable endowments remains largely in place," writes Cassidy. He wraps up this splendid piece: "For a long time economists and policymakers have accepted the financial industry's appraisal of its own worth, ignoring the market failures and other pathologies that plague it." He does NOT, however, touch on the obvious: most of those economists work directly or indirectly for the financial industry, and policymakers (Congress) are in the pocket of Wall Street.

Here's something you might be interested in.
Submit a free classified
or view all

Previous article

The $100,000 gamble in Mission Hills

Editor's picks of Reader stories by David Steinman

John Cassidy of the New Yorker has an excellent piece in the Nov. 29 edition, titled "What Good Is Wall Street?" Cassidy answers the question with well-constructed logic: Wall Street is worth little. Wall Street will claim that it finances new business. But only 13% of Goldman Sachs's business is financing new business, while 63% is trading. Cassidy quotes a financial industry realist who says that most of what Wall Street does could be eliminated "without doing any damage to the economy." Up to 1980, compensation on Wall Street was roughly the same as in other industries. Now that compensation is up 60%, as the number of money-shufflers has risen from 5 million to 7.5 million. Although volume in credit default swaps, those poisonous derivates, has dropped steeply, the "insidious culture tat allowed Wall Street firms to peddle securities of dubious value to pension funds and charitable endowments remains largely in place," writes Cassidy. He wraps up this splendid piece: "For a long time economists and policymakers have accepted the financial industry's appraisal of its own worth, ignoring the market failures and other pathologies that plague it." He does NOT, however, touch on the obvious: most of those economists work directly or indirectly for the financial industry, and policymakers (Congress) are in the pocket of Wall Street.

Sponsored
Here's something you might be interested in.
Submit a free classified
or view all

and policymakers (Congress) are in the pocket of Wall Street.

And therein lies the problem.

Policy makers putting themselves and the almighty buck ahead of the good of the nation.

You see the same thing on the state and local level with the public unions.

Nov. 24, 2010

Politicians get rich in office and then get even richer as a lobbyist after they leave office. Best, Don Bauder

Nov. 25, 2010

...And the beat goes on...

I'd add that those that replace Politicians (the newly elected) are typically picked and endorsed by the same Politician, so they are not in any way encouraged to make waves or to point to them as the cause of current problems.

A current example in MidCity: Is the Big Unions support of the Kehoe->Atkins->Gloria "Transition of Power" along with the pension payments that makes them all smile!

Nov. 26, 2010

Politics is an inside game -- locally and nationally. Best, Don Bauder

Dec. 1, 2010

At a certain point, Wall Street diminishes as a third-party dictator of economic direction as an increasing portion of our economy goes underground. This is a natural reaction by individuals who once were invested more heavily than they are now due to feelings that markets are stacked in favor of flash traders, whales, and other relative insiders. Having an underground enterprise on the side is becoming a safety play for individuals when even large financial institutions are leery of getting themselves overextended in current market conditions. If the bank is no help, then we retain the right to help ourselves.

Nov. 25, 2010

Right On, Or as they used to say in the Sixty's: Confusion of roles leads to deviate behavior!

Nov. 26, 2010

The underground economy is a huge influence today. The major users of the underground economy are the superrich, although a lot of waiters and waitresses work "off the books," etc. Best, Don Bauder

Nov. 25, 2010

I'd suggest that all the waiters and waitresses "off the books" money when added together would not even be a drop in the bucket compared to one of the Superrich which includes all the illegal cartels which are all doing Multi-Billions "off the books" each and every year!

Nov. 26, 2010

"Off the books" activity is indeed small compared with the stashing of billions in offshore banks, etc. Best, Don Bauder

Dec. 1, 2010

Don, it would be helpful if you provided a 25 word definition of "Wall Street." It is obviously more than a place, but what is included, and what is not part of Wall Street? We readers of your blog then could focus better on the issues you raise.

Nov. 25, 2010

I mean most of financial services industry -- investment banking, banking, bundling and sale of mortgages, credit card debt and the like, leveraged buyouts, IPOs, research and sales of fixed securities and equities, mergers and acquisitions and many other activities that detract from rather than enhance the functioning of the economy. Best, Don Bauder

Nov. 25, 2010

That's a bigger tent than I imagined the term to cover. Those firms and functions have grown much faster than the economy as a whole, becoming an end unto themselves. There was a time when they existed because they provided efficient access to capital for those who really needed it for productive purposes. Too much of that activity now is just involved in gaming the system.

Accepting anyone's self appraisal of worth is a quick route to misery, disappointment, and failure.

Nov. 25, 2010

Forget efficient capital. Forget patient capital. Wall Street is now all about fast bucks for Wall Street by fair means or foul, mostly the latter. Those who do business with these firms deserve the screwings they get. Best, Don Bauder

Nov. 26, 2010

For most medium and small investors, Wall Street is the only game in town...

I suggest investors remember the Casino Owner in an old western movie who rigs all the tables, has a gang of bully thugs and only fears the strangers with the ultra fast draw.

Nov. 26, 2010

Our society, unfortunately, has no outsiders with fast draws. Best, Don Bauder

Dec. 1, 2010

There was a time when they existed because they provided efficient access to capital for those who really needed it for productive purposes. Too much of that activity now is just involved in gaming the system.

I think it was in the movie trailer that said the same thing, that Wall Street does very LITTLE actual financing of business endevours.

Today it is casino wheel of fortune, where all the profits are privatized and all the losses are socialized onto the poor and middle class.

Nov. 26, 2010

You put your finger on it: socialization of the risk and privatization of the gain. I wish it were an easy concept for the public to grasp. Best, Don Bauder

Nov. 26, 2010

Congress is a perfect example of that, and so is our City Council...

Nov. 26, 2010

Agreed. Best, Don Bauder

Dec. 1, 2010

the guy with the homeless sign at the freeway offramp is part of the underground economy. right?

Nov. 26, 2010

....unless he pays taxes on his take. Best, Don Bauder

Nov. 26, 2010

If he is under the minimum threshold then he pays no taxes, which is not much different (except in scale) than the Ultra Wealthy that also is below the threshold because he can afford to divest on paper most if not all his income.

A flat tax would solve our Country's problems but it will not never happen because those that make the laws stand to also lose...

Nov. 26, 2010

I can't think of a single problem that the flat tax would eliminate. It would create enormous new problems. Best, Don Bauder

Nov. 27, 2010

It seems odd that in this era of gigantic computer data bases and instant retrieval of transaction data from years ago, people can be engaged in all this underground activity. But they definitely are, and it is getting bigger, not smaller. One major incentive to stay out of the mainstream economy is avoidance of payroll taxes. A small contractor can avoid paying the 15.4% self-employment tax, any federal or state income tax, and workers compensation. Of course, he/she is at risk in any number of ways, starting with no coverage for work injuries, and the fact that failing to pay SE tax results in tiny Social Security benefits in later life. In other areas of economic activity there may actually be no downside to cheating. And so, why not cheat if you can do it with impunity?

Nov. 26, 2010

Most "temporary" employees would only be too happy to get paid in 100% cash, as they are worried about getting by today, not receiving Social Security retirement benefits when they are over 60. What used to be called "cheating" is now probably referred to as just delayed structured payments or some such verbiage.

Nov. 26, 2010

I fully agree. But it seems sad that these people are unwittingly cheating themselves out of transfer payments when they will need them most.

Nov. 26, 2010

Or "accelerated generational transfer payments." Best, Don Bauder

Nov. 27, 2010

Of course, he/she is at risk in any number of ways, starting with no coverage for work injuries, and the fact that failing to pay SE tax results in tiny Social Security benefits in later life. ===============\

There won't be much SS later in life for anyone-it is a ponzi scheme.

I basically avoid buying anyhting retail b/c the sales tax is far too high currently-if Prop D passed it would have driven locals sales WAY down.

I didn't mind paying sales tax when it was 6.5%, but it is 8-10% in the state today-far too high.

Nov. 26, 2010

That is why many now buy on the internet...

Nov. 26, 2010

I buy the majority of my goods on the internet today.

Nov. 27, 2010

Yes, but as a government sponsored Ponzi scheme, SS can be kept alive by government, IF the political will and pressure so demands. I agree with you that sales taxes are now past the threshold of reasonableness. I do many things to avoid them, especially my own city's half-percent override, which I call the "clown tax" in recognition of the pack of clowns that now run the city government here.

Nov. 26, 2010

RE: "clown tax" It's not funny to me and many others in SD...

As for me, I think that every cash register is making the "RIP" sound at the end of the transaction, because we all are being ripped off!

Maybe folks should prefacing their "public comments" at City Council with a stack of papers that they could then take about 5 seconds to rip in half next to the mic (before recycling the paper) and say they're not happy getting ripped off by the City Council...

Nov. 27, 2010

I wish we could put a "clown tax" on the idiots who are running gov for every bone headed blunder they implement or cause!!

We would be out of the red in record time!

Nov. 27, 2010

Great idea!

If we start now, do you think we could get it on our next ballot? I wonder what it would cost?

Prop B for Bonehead Tax or Prop C for Clown Tax or Prop D for Dummy Tax

I know it would pass, imagine linking Council Performance to Salary & Pension - $WEET

Nov. 27, 2010

If we put a small tax on financial transactions we could get out of the red. But it won't happen. Best, Don Bauder

Dec. 1, 2010

Look at all the retailers your city has subsidized to attract, supposedly, those retail tax receipts. Best, Don Bauder

Nov. 27, 2010

Buy online. Jurisdictions are trying to collect taxes, but it isn't working well. Best, Don Bauder

Nov. 27, 2010

Buy online. Jurisdictions are trying to collect taxes, but it isn't working well.

I buy online for one reason and one reason only, eliminating a 10% sales tax.

I would much rather buy local, and I don't mind paying a REASONABLE sales tax, which to me is no more than 6%-6.5%

I will NOT pay a 10% sales tax just so cops and ff's can retire at age 50 as multi millionaires.

Nov. 27, 2010

But you can expect the battle over online taxes to accelerate. States are not going to let that potential income sit there, and I can't blame them. I do a lot of Internet shopping, but I should be paying taxes on it. Best, Don Bauder

Nov. 28, 2010

The proliferation of the underground economy punishes the honest people who pay their taxes, and makes tax collection much more difficult, thus worsening the economy. However, we can say one thing: the underground economy, as deleterious as it is, is smaller, relatively, in the U.S. than it is in other countries. Best, Don Bauder

Nov. 27, 2010

One reason I like the underground economy is because I can barter for things that are not permitted to be sold in the first place. I can swap my un-inspected navel oranges for my neighbor's baked goods coming from her un-inspected kitchen. The equivalent cash value of the transaction? Zero dollars and cents, because neither of us are able to sell our goods at any price on the open market as prevented by government regulatory restrictions. I get satisfied, my neighbor gets satisfied, and the government is not out anything because the value of the goods exchanged is zero, where the sales tax on zero is zero.

I and others like me will continue to use the underground economy in this way as long as our elected elite at City Hall, in Sacramento and inside the Beltway are busy ignoring us in favor of the favors of corporations, developers, and other artificial personalities. If honest people paying their taxes are OK with the way things are between the elected elite and their major campaign contributors raising fees and tax rates on the rest of us, then at least the honest taxpayers are getting what they paid taxes for.

Nov. 28, 2010

You imply that once governments start paying attention to you, you will pay your taxes. Sorry. I am not aware of people who don't pay taxes suddenly coming out of the woodwork and paying them. This was one flaw of supply side economics. Its adherents figured that those who had not been paying taxes would start paying them as soon as the rates were lowered. Hogwash! Best, Don Bauder

Nov. 28, 2010

I thought I was implying that ordinary reasonable people have the same right to read the Internal Revenue Code to our advantage just as corporations, limited liability constructs and other artificial personalities do to their advantage on a daily basis, year after year.

On the corporate side of things, hasn't that always been the mantra? Do only those things that can't be taxed or if taxed, are taxed least of all!

If it's a good idea for GM and what's left of American Industry in America, then it must be good for the rest of us...

Nov. 28, 2010

If it's a good idea for GM and what's left of American Industry in America, then it must be good for the rest of us...

===================== It is- and as long as $$$ controls Congress all ways will be- a double standard.

One example=Corporations can deduct business losses from previous years going forward until those losses are all deducted-try that as an individual taxpayer and you will wind up in the Big House.

Nov. 28, 2010

There are a lot of crimes that people can commit with impunity. The really big stock market swindles are a classic example. Best, Don Bauder

Nov. 27, 2010

Remember, the institutions with all that computer power are the same ones lining the pockets of people in Washington. Best, Don Bauder

Dec. 1, 2010

Here is a question for Don, What would be the effect on Wall Street if a flat tax was legislated and enforced at point of sale?

Nov. 26, 2010

You haven't said that financial transactions would be taxed under the flat tax. Therefore, Wall Street nabobs would salivate, because a flat tax would widen the vast gulf between rich and poor even more. Best, Don Bauder

Nov. 27, 2010

I meant ALL transactions including "financial transactions"...

Nov. 28, 2010

If the U.S. started taxing financial transactions, much of the financial industry would go offshore. However, enough of it would stay onshore that the U.S. might even be able to pay off the national debt. And then the U.S. should tell the institutions that DID move offshore to STAY there. Best, Don Bauder

Nov. 28, 2010

Seems like this "fix" would make just about everyone happy except of course all those with their hand in the "Till"... Best 2 U 2

Nov. 28, 2010

Those with sticky fingers in the till are unhappy with any change. Best, Don Bauder

Nov. 28, 2010

If the U.S. started taxing financial transactions,

If you put a 10% transaction tax on all stock and bond transactiosn then Wall Street would be in the same boat-and feel the same pain-as Main Street.

of course then there would be no double standard where the rich get all the breaks and the poor and middle class get shafted.

Nov. 28, 2010

You don't need 10%. With a tenth of 1% you could eliminate the national debt. Best, Don Bauder

Nov. 28, 2010

Don't forget the illegal drug trade. Tons of pot, untold amounts of cocaine for the wealthy. Cash never sees the light of day.

Nov. 27, 2010

Oh yes, the drug trade is a major part of the underground economy. Best, Don Bauder

Nov. 28, 2010
Ask a Hipster — Advice you didn't know you needed Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Drinks All Around — Bartenders' drink recipes Excerpts — Literary and spiritual excerpts Feast! — Food & drink reviews Feature Stories — Local news & stories Fishing Report — What’s getting hooked from ship and shore From the Archives — Spotlight on the past Golden Dreams — Talk of the town The Gonzo Report — Making the musical scene, or at least reporting from it Letters — Our inbox [email protected] — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Outdoors — Weekly changes in flora and fauna Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Sheep and Goats — Places of worship Special Issues — The best of Street Style — San Diego streets have style Surf Diego — Real stories from those braving the waves Theater — On stage in San Diego this week Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close