A Peek Inside the Finance Bubble

If you have some money automatically deducted from your paycheck and put into a 401(k), the value of your investments will go up during booms, but down during busts and recessions. Nobody would, I think, consider you to be a genius investor. But on Wall Street, if you make a lot of money during booms and then lose all your money and require a government bailout during a bust, that’s considered “no one could have predicted” territory and it’s very important to pay you millions of dollars lest your unique talents be lost. In this universe, someone like Jamie Dimon of JP Morgan who ran a company that not only managed to make a lot of money during the boom, but actually lost less money than other companies, is considered to be an enormous genius.

Thus, from inside this alternative universe you get things like a David Reilly columm for Bloomberg in which he suggests firing Timothy Geithner and replacing him with Dimon. Of course, by Wall Street logic that’s technically impossible since nobody takes jobs unless they pay millions of dollars. But what’s really striking here is how stunningly out of touch it is with the public mood. I think that if you put a bank CEO in charge of the Treasury, that might end with the building getting burned down. As Felix Salmon says “With unemployment at 8.1%, underemployment (U6) at 14.8%, and a similar number of Americans underwater on their mortgages, no one is any longer buying the idea that only the people who were paid hundreds of millions of dollars getting us into this mess are qualified to get us out of it.”

But, again, I would only call your attention to the fact that this isn’t a column lamenting the fact that political reality makes it impossible to formally put the Masters of the Universe in charge of the trough in order to enrich their buddies more efficiently. It’s a column that’s actually blind to the political impossibility of doing it. Like it’s been written from Mars, or by a visitor from spring of 2005.