Bankers

Sarkozy is right. Banking is not the problem. Banking is great if it gives an entrepreneur the opportunity to start a business that creates jobs for products that Americans can use. It is the gambling that is the problem - especially arbitrage that attempts to eliminate risk at soaring levels of leverage because of the tiny margins involved. To be able to afford a $30,000,000 home in the Hamptons, a gambler has to make $60,000,000 before taxes. Usually his firm will only pay him 10% of the profits this gambler generates. So he will have to make $600,000,000 for the firm to get his Summer home. If he leverages in the range of thirty to one to do this that means he is putting 1,800,000,000 at risk. If 100 partners are doing this, that comes to a pot of close to 200 billion at risk. All the while this spinning is going on NO GOOD is being done for the citizens of the United States. For a while it took the losers at Lehman and Bear to be on the wrong side of these trades but when Goldman toasted them, it was the American people who had to pay. And all this gets is 100 houses in the Hamptons for 100 guys with their trophy wives. Think of all the houses in Palm Beach, Nantucket and NYC that are also necessary. And then there are the jets, art collections, charities and tuitions beyond that.

And there is another problem with the rewards that the arbitrage gamblers pay our young people turning them away from productive lives.

Their wives and fiancees see what their friend's husbands are making as gamblers and so our best minds turn toward gambling to have an happy bed at night. This is by far the strongest force known to man. As tough as these masters of the universe may appear to be, they practice abject subservience when it comes to a relationship with a good woman. And right they are.

So now you are a headmaster at a good school. All you can afford to pay great teachers is about 1% of what these gamblers are making. Same goes for doctors, detectives, judges, mechanics, engineers. Why do something that really helps the society when all you make is 1% of what a gambler makes on Wall Street.

This is the tragedy. And this rage is not going to go away for a long time. You have to be one remarkable man to feel good about yourself and what you do if you are making 1% of what your wife's friend's husband brings home. This is why we are so weak today compared to China and India.

Graham Arader

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