I recently read an article from Portfolio.com about how and why the stock market collapsed, and how we ever got there to begin with. In this article, writer describes the pervasive apathy in Wall Street and around the world. The traders on Wall Street never cared about the investors. They never cared about the people who were sold loans. They never cared that millions of people would lose their jobs. Here is a new insight that I hadn't considered, but I think is very much true. But first, some background on this.
In 2000 I went to work for a financial information firm in Charlottesville, VA (name withheld) as an Executive Compensation Analyst. My husband went to work there as a REIT (Real Estate Investment Trust) Analyst. As soon as I got there I was expected to read through companies' DEF14-As, which were documents disclosing executive compensation for all executives in publicly held Banks, Thrifts, Insurance, Financial Services, etc. I had no idea what I was supposed to do, but my boss sat down with a form, showed me where to get the data, and where to put it in, and so I began. I did it, but I did it badly to start. I was the only analyst in that department at the time, and my boss spent more time outside smoking than he did in his office actually doing work.
Eventually I learned what I was doing. I learned what a Golden Parachute was. I learned how stock options worked, and that they were the biggest piece of BS I had seen in a long time. Paper wealth is not real wealth. They are a lure and a trap, but God help you if your company loses money, because all of that paper wealth is just paper and nothing more.
Eventually other analysts came into the department. I trained them and I wrote the training manuals for the new analysts, and I even created a web page for training procedures. No, this wasn't the first time we had done the thing. The books we were producing had been in publication since 1989, when the whole S&L crisis happened. People wanted to know what everyone was making back then, and this information company had its birth during that time.
Regardless, there was no information on how to do the job, what the terms meant or anything like that. So, I created the page that would be used to help others learn how to do their job. I was essentially managing the department for half the pay and none of the credit. Thankfully my name did go on the front page, which is more than what a lot of editors get. At the end of the production cycle I, with the help of others, had created over 1,000 pages on compensation data, and because of an analyst's early departure, the responsibility of editing those 1,000s of pages fell onto my shoulders, and I did it. At first I thought my boss was insane to suggest that I could produce that many pages in a matter of weeks, but I was surprised to see that I could do it.
But there was one problem. I did not care. I cared about getting it done. I was interested because I was learning about the finance world, and I was always at his door asking him questions. Ultimately, I did not care about what I was doing.
Incidentally, this is also when I learned about MBS's, or Mortgage Backed Securities. I asked my boss what they were, and he explained them to me. I understood that these securities were built on people's mortgages. Having experienced my father going through a foreclosure mess, I asked my boss what would happen to the securities if people started to default on their loans. He told me that would be bad, but that real estate was a stable market, and the chance for default was less than 1% amongst all mortgages. Still, I knew that there was a risk, and it seemed risky to me. That was only from what my dad had gone through, and when you apply fractals to this concept, it seemed to me that it was likely for others. Still, I walked away from him thinking that MBS's didn't sound like a good idea. That was in 2000. We all know what happened in the years to come. To be sure, they worked, until the waters started getting muddier and muddier as the world became increasingly apathetic and greedy.
After working on Executive Compensation, I needed to transfer departments. The production cycle for those books was 6 month and I knew I needed to find another position. So, I went to work in the department that dealt with financial information software that all of the big investment firms in NY used. The only problem: I didn't have a clue about the data I was helping the analysts in NY find, and I really did not care about it, once again. I hated it. I sat in a cube and took calls from junior analysts who were in dire need of my help for them to pull the data that their bosses needed. The problem with that was that they themselves did not know what they were doing. They called and asked for information, but they didn't know why they needed it, or even what it was. Interesting, I thought.
In one instance, I received a call from an executive from Lehman Bros. who had seriously messed up his spreadsheet that he was using for compiling a report. He was the kind of person who needed my help, but was so arrogant about his company and his job that he had a major attitude when asking for help. I looked at his spreadsheet that he sent me, and discovered that he had divided a number by 1,000, which was why his spreadsheet was so f-ed up. I corrected his mistake, e-mailed him back to explain what was wrong with it (basically, you are an idiot), and sent it along. I didn't receive a single word back from him. That said a lot to me. Here was a guy who made the stupidest of mistakes, but was so arrogant that he couldn't thank me for helping him and couldn't even acknowledge that he had messed it up. If only I knew how telling that really was.
So, again I was miserable. I was dealing with pricks up on Wall Street who did not know what they were doing. The fact that I was learning and understanding more, as a political science major, was frightening. Thank God, I was laid off. That was the best thing that happened to me.
I hated the job because I didn't care. I didn't care about numbers, and I didn't care about data, and I most certainly did not care about investment bankers who acted as if they ruled the world, yet could not function without the help of many others. So, I was blessed to have been laid off.
Here's what I have realized. We are the situation that we are in with the economy because the people sitting up in Wall Street did not care either. They didn't know what they were doing, and didn't care about it enough to know, so when billions, no trillions, of dollars started floating around in bad securities, did they care? No. As long as they got their billions, that's all that mattered.
My husband has always complained about working in finance mostly because he does not find it to be fulfilling. He doesn't care about those numbers. He cares about the people behind the numbers, but truth be told, most of the people do not care. This morning he said that he wasn't one of those kids who wanted to go into any field. He felt no passion towards any one thing, so he decided that majoring in business would be good. He could make money, so it sounded good to him. But, his heart is not in it. He believes that most people go into finance and business for much the same reason: lack of passion. There is a passion for the money, but that is about it. He contends that most people who work in finance or stocks do not care. To me, that is why our world is in the state that it is in.
So, I got out of the corporate world because the total apathy I saw was palpable. I saw people losing their jobs and benefits all for the bottom line and shareholders. I saw people make bad decisions because their hearts were not in it. I think maybe if people started to care about others the way that teachers care about their kids, the way nurses and doctors care about their patients (they do), then maybe our world would be better. I don't know what it takes to get others to care, but I think once we do, things will get better.
If the investment banks who created AAA bonds from BBB loans actually cared, then none of this would have happened. Sure, the investors who bought the MBS's made a fortune, but at the cost of who? Selling a loan for a $720K house to a strawberry picker in CA is unconscionable. When the debt to income ratio is 10:1, there is a big problem. There was never any way that that farmer could afford that house, but it didn't matter because no one cared if he lost everything in the end.
What I wonder is, did the bankers who created these loans every think that they themselves could lose it all? If they did, I would think they would have then cared.
Then again, I suppose if everyone worked in a field that they actually cared about, then no one would work in finance, and I suppose that someone has to manage the money.
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