We All Work for the Banks

In noodling a bit more about Alan Greenberg's book, The Rise and Fall of Bear Stearns, I've come to the conclusion that we're all essentially working for the banks*. I know I'm coming to this late, but here's the simple logic that finally hit me.

We depend on financial stability to thrive. Any major calamity in the banking system must be underwritten by the government because that's the only entity large enough to bail it out. That means we all backstop everything the bankers do, no matter what it is.

This is the key element missing in Greenberg's worldview. All he thought about was profit for Bear Stearns. He never showed awareness that he and his industry possessed an apocalyptic weapon. At the end of the book, when everything fell to pieces, he still talks about who did what to whom in Bear Stearns. Like we care. That nimrod and his little friends turned investments into a video game where the scores got higher and higher and connections with reality became more and more tenuous until it all finally blew up.


If I was rewriting the banking rules, I would simplify the whole thing - you have to service the loans you make. Period. Once you make a loan, you own it. You can pay your employees anything you want, but you can't get rid of the loans you make. No more bundling things up, slicing and dicing them and selling them off or playing strange tricks with them, squeezing fees out of every transaction.

Having read his book, I'm sick of Greenberg and all his buddies. I certainly don't want to be working for him.

* - "Banks" here is shorthand for the entire investment industry.