Newspaper article The Christian Science Monitor

Bankers Arouse Public Anger. but Will They Change?

Newspaper article The Christian Science Monitor

Bankers Arouse Public Anger. but Will They Change?

Article excerpt

Bankers from Lehman Brothers to Ireland and beyond are increasingly unpopular, but that hasn't impacted their salaries much.

It's not easy being a banker these days.

In some European countries, they're the target of street demonstrators who blame them for the financial crisis and resulting government austerity plans. Britain raised its terror alert in September after Irish Republican Army dissidents threatened British bankers because of Ireland's woes. Now, British bankers worry their bonuses will stoke local public anger.

The mood's not much better on this side of the Atlantic, where commentators wonder how useful some banking really is. "What good is Wall Street?" asked a New Yorker magazine article, the second most- read story on its November website. Much is "socially worthless," concludes author John Cassidy, who has been making the rounds on radio talk shows.

Banking practices have also come under stinging attack from prominent economists and political scientists in the latest issue of Daedalus, a quarterly magazine of the American Academy of Arts and Sciences. The financial system can quietly distort the direction of the real economy, write Benjamin Friedman of Harvard University and Robert Solow of the Massachusetts Institute of Technology, both in Cambridge, Mass. "It can induce the real economy to spend human and material resources on activities that can lead to immense private profits for some of those engaged while nonetheless making little or no contribution to general well-being."

That's a sharp indictment. In the run-up to its near meltdown, the financial system operated with the benefit of top bankers too much in mind. They took enormous risks, borrowing as much as 25 to 30 times their own firm's basic capital to enhance profits. When the market turned and their gambles went terribly wrong, taxpayers had to commit their own money, and shareholders of investment banks like Bear Stearns and Lehman Brothers were largely decimated. …

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