According to Nassim Nicholas Taleb and Mark Spitznagel, in the last 5 years executives and employees of US banks were paid $2.2 trillion,
transferred from the American economy to the personal accounts of bank executives and employees. Such transfers represent as cunning a tax on everyone else as one can imagine. It feels quite iniquitous that bankers, having helped cause today’s financial and economic troubles, are the only class that is not suffering from them – and in many cases are actually benefiting.
Why does any investment manager buy the stocks of banks that pay out very large portions of their earnings to their employees?
If investment managers and their clients don’t receive high returns on bank stocks, as they would if they were profiting from bankers’ externalization of risk onto taxpayers, why do they hold them at all? The answer is the so-called “beta”: banks represent a large share of the S&P 500, and managers need to be invested in them.
According to Andy Xie
As financial services industry loses value-added to customers and the real economy, it is increasingly dependent on gaming the system and profiting from customer ignorance. This makes the industry and financial market more volatile and bubble-prone. In the last financial crisis, the financial sector survived by holding the real economy hostage.
Unless policymakers understand that the financial industry isn’t necessary for the real economy anymore, and that it should scale down dramatically, the sector will remain a gigantic parasite on top of the real economy.