How does banking cause more harm to society than, say, construction or databases or cars?
Neither provides fundamental utility to other sections of the economy through lending activity, which can result in liquidity events at otherwise perfectly solvent firms.
Neither can drive prices in other sectors through speculation in financial instruments or through financial reporting and reporting downgrades.
Leverage is not the sole determinant of risk. Wildcatters are far riskier than someone who is 10x leveraged and holds 2 year notes.
> Neither provides fundamental utility to other sections of the economy through lending activity, which can result in liquidity events at otherwise perfectly solvent firms.
You picked the method of harm that is unique to finance. I could just easily claim that bankers will not build faulty levees or cause untold harm to the planet.
> Neither can drive prices in other sectors through speculation in financial instruments or through financial reporting and reporting downgrades.
It's not obvious to me that this is a method of harm. If oil is underpriced in the US and overpriced in Europe then buying one and selling the other will cause a shift in prices. Arguably this is a benefit because now everyone is paying/receiving fairer prices.
Regardless, bankers are neither traders nor research analysts so I'm not sure how relevant this is.
I seriously doubt that car salespersons' incentives are a noticeable factor in global warming.
It is not unreasonable for the category to be extended to include financial-industry incentive risk in general.
How about if you put up an argument for your position? Just one, to start with.
> I think both are massively corrupt, but there seems to be a disproportionate amount of breath wasted on bankers as compared to other salesmen.
I'm not sure what you want to see. Do you want me to link to articles about corruption outside of finance? I'm not sure that I'm aware of a study on the amount of corruption in banking as compared to database sales for example.
Maybe banking shouldn't be either?
"The right amount" then is when expected losses are less than expected profits; with some safety factor. This is complicated by allowance for both rare really bad sets of loss all at once and absorbing losses over a longer time. I think the solution for both is insurance. In fact, I really hope that the US FDIC (mandatory insurance for deposits, though it hasn't kept up with inflation) represents the basic insurance for the 10% figure you quote.
The recent housing debacle was fundamentally a banking issue: irresponsible real-estate dealing could not have happened, to any extent, without irresponsible banking.
Bank losses are socialized through deposit insurance. When a bank goes bankrupt, taxpayers make depositors whole.
Further, this article, and hence the whole thread, does not distinguish between banking and investments (like Glass Stegall did). Depositors are never affected by a bank going under (up to FDIC limits). Rather, securities holders are affected. Huge difference.
Even in 2008, banks did not get bailed out by taxpayers, they got bailed out by the Federal Reserve, which again, is not funded by taxpayers. [2]
[1] https://www.fdic.gov/about/learn/symbol/ [2] https://www.richmondfed.org/faqs/frs
- Steel Mills (in 1952)
- Railroads (most notably Penn Central in 1970)
- Car companies (all three in the last 40 years)
- Manufacturers (various)
- Utilities (mostly nuclear plants/companies)
- Airlines (post 9/11)
My impression is that most people believe the government will step in before any industry is ruined (assuming a quick decline, not necessarily a slow one over many years).