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Investment Bankers Paid for a Culture That Glorified Them. RIP

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I spoke to my friend James North today on the phone and he made the following points about the financial crisis that I think are worth hearing. I'm paraphrasing, except where I quote:

There's a famous joke that leftwing economists have predicted 7 of the last 2 recessions. Well this time it's the big one we've been predicting. This may be a more important event than 9/11, which is turning out not to be that big. The chickens are coming home to roost. There will be "epochal change" and likely even a levelling of society.

Some of the most interesting changes will be cultural. "Financial types purchased a cultural environment that surrounded them and glorified them and made them out to be masters of the universe. And this environment made them overweening and arrogant. They really thought that they understood the economy and the way the world works. Well that's over. Now that cultural environment will end, and they'll be back to being dull people on Wall Street."

When you and I were in college in the 70s, finance was considered boring. That soon changed. A recent Harvard magazine said that from 1970 to 1990 the number of graduates who would go on to finance nearly doubled, to 38 percent– and that last year, of the 3/4 of male Harvard college graduates who were going right to work, close to 60 percent were going into finance or consulting, and 20 percent of them into investment banks.

Those figures reflect the fact that it's been fun to be in finance for a very long time. The run in the market really began at the end of the Reagan recession
in '83 and hasn't stopped since. They managed to keep the bubble going
in 2000 during the dotcom crash but they couldn't keep it going now.

One of the reasons that kids go into investment banks is it's interesting and glamorous. It's where the action is. Well, it really was interesting when the market is going up and up and up to go into finance. You feel like a worldbeater. That's over. Christopher Caldwell in FT agrees:

Since the instruments that permitted an extraordinary leveraging of
assets have been discredited without really being understood, leverage
itself will be regulated against. Once that happens, there simply will
not be the profitability in investment banking to enable hundreds of
well-connected Ivy League kids of middling talents to become
multi-millionaires every year.

Even Tom Friedman will be affected. His books have boosted globalization and the markets thoughtlessly, and he's been a tremendous bestseller. To his credit, David Brooks has been more thoughtful about the transformation of our society and said that we're a class-ridden society; and his books haven't been as big. Because the upper middle class, which buys books, doesn't want to hear that, doesn't want to think about levelling. Now it will have to.

James North

James North is a Mondoweiss Editor-at-Large, and has reported from Africa, Latin America, and Asia for four decades. He lives in New York City.

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