Making this kind of money is undeniably absurd.
All questions of right and wrong, fairness, paternalism, and jealousy aside, one question still remains. Where is all that money coming from? Those are real dollars, and plenty of them. These people aren't (exactly) running a gold mine, or a going concern of any real kind.
Last spring or maybe earlier, someone was explaining the subprime market to me, how these loans were bundled and redivided and sold in bits. It was like throwing a bunch of ingredients in a bowl and mucking about until eventually you were selling pieces of cake--all the same ingredients, transformed. And I asked what happened when the real estate market tanked, or when people couldn't make their loan payments. Because, you see, I couldn't figure out how they could separate the loan from its collateral--a very real house owned by people who may or may not pay their mortgage.
And I was basically laughed at. I was thinking too small, I guess.
So I know that fund managers are paid a percentage of profits, and they're paid fees by their wealthy clients. But those fees and profits? That money is coming from somewhere and going to a private bank account. And even if it's then reinvested, things have shifted and changed. But what? And how, and to where?
How profound of an economic shift is this, and what are its effects? Are these the robber barons of our age? They hardly seem brutal despots--they seem mild-mannered bankers and (dare I say) geeks.
Henry Ford mass-produced cars and became staggeringly rich. Gates and Jobs did the same with computers. The Google guys with, essentially, knowledge. People who gain the wealth of Croesus but give the world something in return, well, that's not too hard to understand. Perhaps it's the difference between fortunes made and fortunes won--the former seem admirable, the latter more questionable, even if the resulting bank balances are roughly equal and astounding. But why?
Yeah, I'm no financial wizard, but when those ads started coming out about "No matter how BAD your credit is, we'll loan you money for a house!" I was asking myself, "How can they DO that? That doesn't sound right." Hmph. How could they be so stupid? or so greedy? or what??
Posted by: ckm | April 16, 2008 at 11:51 AM