Here’s the short answer to the question posed on the cover of the latest Atlantic Monthly, “What’s inside America’s banks?”: No one knows. Not the regulators, not sophisticated investors, and not even the bankers themselves.
“Banks today are bigger and more opaque than ever, and they continue to behave in many of the same ways they did before the crash,” write Frank Partnoy and Jesse Eisinger, authors of the Atlantic piece.
Complexity and opaqueness are the core of the problem, according to the authors. They cite a wide range of former bankers, investors, and regulatory officials who know the banks best and who “absolutely” don’t trust their accounting. Even the banks with the best reputations, JP Morgan or Wells Fargo, are impenetrable black boxes with annual reports that defy parsing by even the most expert readers.
The fog of financial complexity is matched by a fog of rules – as regulators parry moves by the bankers – but always a few moves behind. The famed Glass-Steagall Act of 1933 ran to 37 pages. Dodd-Frank of 2010 was 848 pages and may balloon to 30,000 in the end. By the time the law’s “Volcker Rule” is finalized, “only a handful of partners at the world’s biggest law firms will understand it.”
The authors would offer the following version instead: “Banks are not permitted to engage in proprietary trading. Period.”
That would save a lot of paper.
Maybe the Luddites had a point
Traditionally, technology has raised incomes for each generation by raising worker productivity. But ever smarter technologies are replacing the need for unskilled labor altogether, argue economists Jeffrey Sachs and Laurence Kotlikoff in a paper for the National Bureau of Economic Research.
Think, for example, of the fully automated turnpike tollbooths or checkout stands at Home Depot. Investors are benefiting from these innovations, as are highly skilled programmers and technologists. (And lines are shorter.) But the jobs that are disappearing are the unskilled ones that offer young people a first few steps up the economic ladder. Without them, the authors argue, we don’t really have a ladder, and lifetime well-being slips by a generation. So what to do? For individuals, this sounds like a warning to get some skills.
“Although smart machines substitute for unskilled workers, they are designed and run by skilled workers. So it’s no surprise that the incomes of skilled workers have risen relative to those of unskilled workers.” The authors note that this is one reason the wage premium for college graduates has increased from around 40 percent in 1999 to more than 80 percent today.
From Benjamin Franklin to Oprah Winfrey, from “How to Win Friends & Influence People” to “The 4-Hour Workweek,” self-help advice is a very American phenomenon – and getting more so, according to Laura Vanderkam writing in the quarterly City Journal. More than 45,000 self-help book titles are in print, she writes, and the genre’s share of all titles published doubled from 1975 to 2000.
“There is much to mock” in this field, she notes, and she runs through its history and various critiques. But there is much that is useful as well. Socially mobile Americans construct their own notions of the good life, in DIY-style, “from what we see of the world around us – and what we find at the bookstore.”
Crime and recovery
In these weeks following the Newtown, Conn., shooting, there is something – dare we say healing? – in The New York Times Magazine story by Paul Tullis about the killing of Ann Grosmaire by her fiancé, Conor McBride, in 2010. The crime came in a moment of overwhelming emotion after an argument between the two community college students that had stretched on for 38 hours. It was not premeditated exactly, but it wasn’t an accident either.
As the father of the mortally wounded and unconscious Ann sat with her in a Tallahassee, Fla., hospital, he “felt” her say “Forgive him” so clearly that he spoke his refusal aloud. But he kept hearing that message in her voice. A devout Roman Catholic, he was praying in the hospital four days later, shortly before removing her from life support, when he “realized it was not just Ann asking me to forgive Conor, it was Jesus Christ.”
The journey the family went on then took them through a process called “restorative justice,” which strives for agreement among everyone involved in and affected by a crime over how to make restitution. This means that victims, offenders, and their families sooner or later end up sitting around a table and talking.
The upshot, in this story as in others, is forgiveness. Says Ann’s mother, Kate: “I think that when people can’t forgive, they’re stuck. All they can feel is the emotion surrounding that moment.... Forgiveness to me was self-preservation.”