The Post ran a lengthy piece in the Sunday Outlook section about the plight of the Wall Street investment banks and the millionaires and billionaires who run them. According to the article, without the sleaze practices of the last decade, they just can't make any money. It's touching to see that some of the richest people in the country might be worried about their future and the future of their industry, but why would a serious newspaper devote space to such nonsense. Is there a public interest in ensuring that incompetent investment bankers can still make millions, tens of millions or even hundreds of millions a year pushing deals that harm the economy? While the author tries to argue the case, anyone who has taken an intro econ course or has enough intelligence to tie their own shoes can recognize the argument as nonsense. Let's take the author's worst case scenario. Suppose Goldman Sachs, Merrill Lynch, Lehman Brothers and the rest go out business. Does that mean that no one is doing underwriting of stock and bond issues? Absolutely not. The whole premise of the piece is that the profits have been driven down so much by competition that there is no money in this line of business any more. The demise of these Wall Street giants would simply mean that a large number of overpaid bankers would have to look for jobs elsewhere in the economy. The elimination of this huge layer of waste in the industry would mean an enormous increase in the productivity of the investment banking sector and for the economy as a whole. Perhaps we should have government retraining programs for unemployed investment bankers, but there certainly is no reason to stand in the way of economic progress. The real outrage is that the Post allows this sort of shallow special interest pleading for investment bankers, while it would never publish a comparable piece on behalf of autoworkers or textile workers. Even worse, the Outlook section would never consider a piece that would correct some of the inaccurate impressions given by this article. As every economist knows, the public should be applauding the elimination of waste in the investment banking sector (i.e. the loss of tens of thousands of investment banking jobs and big pay cuts for those remaining). It is unfortunate that the Post will not allow an economist to make this point in its newspaper.
--Dean Baker
