View Full Version : Obama Disturbing reminder of how bad our banks have gotten.
03-28-2009, 12:06 AM
This interactive chart by the Financial Times illustrates how dramatically our banks have become impotent by global standards.
Check this out. Go through the last ten years if you want, but it's notable just to compare 2000 with 2009.
Talking Points Memo was talking about something simliar today...
03.27.09 -- 3:37PM // link | RECOMMEND RECOMMEND (20)
TPM Reader PW with some more thoughts on the size of the finance 'industry' ...
Absolutely. You've probably been noticing some people talking about "overcapacity" in the finance industry, and in a sense this is what they're talking about. It's like the auto industry's ability to produce way more cars than the world needs or wants to buy in a given year, only worse. Worse because finance wizards, like doctors, are also the ones telling you how much of their product you need to buy to maximize your investment returns -- indeed, in the case of funds that they manage, they're the ones who make that decision for you. So the more masters of the universe there are (attracted by the way-higher-than-median compensation) the more trading and the more deals you need to generate the commissions and underwriting profits to keep them in cigars and summer homes. And the more they tilt the playing field to divert surpluses to themselves, leading to more of the "best and brightest" going into finance...
So what we really need is a downsizing along the lines of the auto industry's, against a lobby that makes the AMA and the legal profession look like the Society of Friends.
03.28.09 -- 1:00AM // link | RECOMMEND RECOMMEND (4)
SuperSized, Pt. 2
I wanted to share this graph with you. It's not dispositive of any specific questions in itself. But it's a valuable set of data for evaluating the question we've been discussing in many posts today -- the relative size of the financial sector relative to the rest of the economy.
The graph comes from an article by Simon Johnson in the current issue of The Atlantic, 'The Quiet Coup', which I strongly recommend.
The text is a little small. So the first graph shows financial sector profits as a percentage of US business profits going back to the end of World War II. The second charts income per worker in the financial sector as a percentage of average compensation across the economy. As you can see, the pivot in each case is around 1980.
The number that jumps out at me is that at that peak point upwards of half the profits in the entire US economy was in the financial sector. And it's been near or above a third for most of the last decade. Quite apart from the public policy implications, but rather in the realm of political economy, these graphs provide a revealing look at what the 2005 push to privatize Social Security was all about and what the implications of its success could have been.
For now, late as it is, I'll leave you to make your own judgments about what it means and, I'd strongly recommend, read Johnson's article. And we'll return to this subject over the weekend.
Also check out our TPMtv interview with Johnson from last month.
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