Comments on: The inefficient financial sector http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: gospel http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-54239 Mon, 06 Oct 2014 06:17:16 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-54239 Very interesting topic, thanks for posting.

]]>
By: books http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1881 Sat, 23 May 2009 08:55:55 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1881 Thank you.

]]>
By: Don the libertarian Democrat http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1231 Mon, 04 May 2009 23:12:08 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1231 I believe that the growth of the financial sector is due to the growth in government backing for it. Take Citi, or whatever the hell it’s called now. How many bailouts or government subsidized mergers has it had?

The financial sector has grown as implicit and explicit guarantees by the government backing it have grown. And, please, no more about free markets or deregulation. What we had was increased leverage backed up by government guarantees.

I’m for Narrow/Limited Banking precisely because this happened right in front of everybody’s eyes, and yet few people, apparently, outside of the people investing based upon it, knew that this was our system. I remember the phrase “Too big to fail” being from the S & L Crisis. Since then, we’ve had a policy of “Too gigantic to fail”. Zero learning curve.

We can’t be trusted. Since I want a market economy, I feel that we need a secure and trusted base upon which to rest it. Otherwise, next time, it will be “How’d they get too big, connected, important, powerful, to fail again?”

The rise in finance had less to do with innovation than subsidization.

]]>
By: Dave http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1224 Mon, 04 May 2009 21:40:01 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1224 It is all well and good, and probably correct, to argue that the financial sector is inefficient.

It is simply not correct, however, to argue that, in an industry of thousands, “a lot of people in finance [took] home billions” as Ryan Avent claims.

The distribution of income on Wall Street is skewed, but not as skewed as Avent seems to suggest.

]]>
By: jonathan http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1221 Mon, 04 May 2009 21:12:23 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1221 Add in two points:

1. Productivity in the financial industry was a mirage. Productivity was measured by number of transactions, which makes little sense compared to how we measure productivity in other fields, and that overstatement was used in a variety of ways, from claiming US productivity was growing (or that it has been higher than those socialist Europeans) to meaning that higher pay was warranted.

2. Much of the financial industry is a middleman, a distributor equivalent to the company that reps for the window maker to sell products for the window maker to the end consumers. Innovation in the middle should decrease costs, not increase them and yet much of the time the opposite has occurred. Much of this increased cost was passed off as innovation but much of that has been revealed as false – easy example, auction rate securities sold as “same as cash” by overpaid middlemen salespeople who read their canned speeches off notes provided by their companies. In blunt terms, how much innovation has actually enhanced the essential job for middlemen to connect the producer with the end consumer versus? Much of the innovation was unrelated – again, an easy example would be derivatives such as CDO squared that functioned as gambling instruments for the middlemen to sell but which had zero connection with the actual underlying product.

]]>
By: /mr http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1220 Mon, 04 May 2009 21:11:14 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1220 ….we’ll, we’re still here, working hard to validate the point that you make. Clearly the cartel is a tough one to break, but we feel strongly that as an efficient and transparent capital raising mechanism, OpenIPO is indeed a better mousetrap. Better for the issuer, better for the purchaser, and the one approach to underwriting that can help the buyer and the seller to make better decisions. As to the cartel, one thing that WR Hambrecht + Co has clearly accomplished is to prove to the world of issuers that the notion of underwriting risk, as it was traditionally described and understood, is largely bunk, and that a bulge bracket investment firm is loathe to sacrifice their vested interest in their large commission paying clients for the benefit of an issuing company. We’d say that the argument for a 7% underwriting fee in every situation has been proven absurd. Perhaps the recent carnage on Wall Street, the removal of a number of bulge bracket firms, and the attendant loss of trust that has accompanied the meltdown will lead to a broad embrace of the openness and fairness that OpenIPO represents. Here’s hoping.

]]>
By: nadezhda http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/comment-page-1/#comment-1219 Mon, 04 May 2009 21:00:11 +0000 http://blogs.reuters.com/felix-salmon/2009/05/04/the-inefficient-financial-sector/#comment-1219 If you want cartel-like behavior, just take a look at the investment management business. Apart from the expense of establishing backoffice and distribution networks, even the big retail funds business isn’t a capital-intensive business. It’s a fee-based service business. Even more so for the folks who sell services privately to qualified investors. Yet they raise capital in public offerings. Barclay’s “crown jewel” is their advisory business, apparently worth “billions”. Etc. Competition ought to have narrowed those sorts of margins drastically, but of course no one wants to kill the golden-egg-laying goose, so they all pretend that they’ve got this fabulous net worth.

]]>