Celebrated author of the Black Swan theory fame Nassim Nicholas Taleb and Mark Spitznagel questions the propriety of nearly $5 trillion paid to bankers, who continues to operate on the model of privatizing profits and socializing losses.
They write, (bold emphasis mine)
One may wonder: If investment managers and their clients don’t receive high returns on bank stocks, as they would if they were profiting from bankers’ externalization of risk onto taxpayers, why do they hold them at all? The answer is the so-called “beta”: banks represent a large share of the S&P 500, and managers need to be invested in them.
We don’t believe that regulation is a panacea for this state of affairs. The largest, most sophisticated banks have become expert at remaining one step ahead of regulators – constantly creating complex financial products and derivatives that skirt the letter of the rules. In these circumstances, more complicated regulations merely mean more billable hours for lawyers, more income for regulators switching sides, and more profits for derivatives traders.
Investment managers have a moral and professional responsibility to play their role in bringing some discipline into the banking system.
So ad hoc conventionalism or peer pressures have been one of the key influences for the financial industry to shore up bank equities, which apparently has resulted to the unethical banking practices brought about by the sense of entitlement and moral hazard from continued government support.
Obviously this has been part of the comprehensive framework to buttress the decadent welfare state-central banking-banking system architecture.
Read the rest of their excellent piece here
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