We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

“The investment business is based on people being able to do what they want with their money. They may want to do some odd things. “People put their money where their thoughts are,” said one investment banker I interviewed. This means that there are a lot of men who are, so to speak, in financial topless bars, sticking millions of dollars into the G-strings of lap-dancing debts and equities.”

– PJ O’Rourke, Eat The Rich (page 27).

8 comments to Samizdata quote of the day

  • One thing that happened with the big investment banks after the tech boom scandals of the 1990s is that they became incredibly cautious about their public images in superficial ways. They did not want to be seen to be involved in anything morally dubious in any way, and therefore they reduced the extent to which they would deal with industries like gambling or anything else that was seen as tawdry or dubious in any way, and concentrated on things which were seen as impeccably above board (securitisation of mortgages, say).

    In short, parts of the business of large financial firms has often been not too far from “in topless bars” in a literal sense. In recent times, banks (in the US in particular) have been constrained from doing this kind of business, or anything that could be portrayed as looking like this kind of thing in the eyes of lawyers, regulators, and politicians. “Is this a good deal which will make money?” has been replaced by “Will this deal be acceptable to the lawyers and regulators, and the law departments of the large banks have spent a huge amount of time preventing the actual bankers from doing business.

    As a consequence, the big banks gave up a lot of profitable business – probably a great deal more than their executives realised when they made such decisions (or were forced to by governments and regulators). None of this business went away, but it just went instead to companies with more lenient regulatory environments and fewer scruples. (A good friend of mine works for a small merchant bank from a middle income country and spends his time doing complicated financial tricks with the gambling income from Japanese motor boat racing, and things like that).

  • Ham

    Yeah, I’ve been hearing on the BBC’s Woman’s Hour every other day that this financial crisis wouldn’t have happened if only women were allowed to be investment bankers.

  • guy herbert

    “Will this deal be acceptable to the lawyers and regulators,”

    Indeed, and a number of people were sent to jail, for doing things that were fine at the time but retrospectively were disapproved of by the lawyers and regulators when they went wrong. Particularly in the US. Hence, I surmise, St James’s became a home for so many private equity businesses in this decade. It was, in a sense, flight capital, escaping the shadow of Mr Spitzer’s gibbet.

  • RRS

    Hopefully this will not be too great a digression:

    This is from direct, personal, and “internal” observations of actual operations:

    A (if not the) major factor in the “decline and fall” has been that the now “vulnerable” institutions deemed “too big to fail” became to “big” to manage.

    They became composed of sectors of operations that, while huge and complex in assets and exposures – as well as sources of revenues, were not significant or material in accountancy terms of the overall entity. Thus intensity of operation revenues and scrutiny of the many parts by managers was by-passed.

    This was reflected throughout the various levels within operations. Business sector A, comprised of several states or territories, subdivided into “regions,” etc. was less than 10% of assets and reveunes to the whole. No state or territory was “significant” within the sector; no region was significant or material within the territory. Attention was not paid; underlying ills evolved – but they were not significant. The same would be true of Sectors B,C, D, etc.

    If one examines a structure such as B/H (Buffet’s), every sector is separately managed – intensely,remorselessly – as did Welch at GE.

    But, in the “vulnerable,” the decay took place throughout the components of the sectors. The corporate cultures were fatally flawed, somewhat by ‘greed,” or agrandizement, but largely by “size” in excess of managerial capacities.

  • RAB

    As I type, I am looking at a vote in Congress
    that is clearly a no vote, being arm twisted into a yes.

    What the hell is going on???

    Home of the Brave
    Land of the Free?

  • Sam Duncan

    How will B&B be rebranded then?

    Brown & Balls?

  • kentuckyliz

    Too close to the election. Those who are up for re-election are voting no because of overwhelming and vigorous citizen input saying hell no. 97% against.

    Bumper sticker that begs to be made:

    Bernanke/Paulson for Dictator 2008!