Whining About Those Financial Services Jobs Lost

Let's keep the hand-wringing about job losses in the financial sector in perspective.

In the first four months of 2009 the nation lost nearly 500,000 manufacturing jobs. By contrast over 12 months, from April 2008 to April 2009, the financial industry including banks, credit companies and insurers lost 352,000 jobs.

No offense to the financial guys, but I do not see how we can build a viable long-term economy that is based on one part guys doing intricate deals and, on the other part, people buying double-shot lattes from either Starbucks or McDonalds. Maybe I'm old fashioned at this, but it's easy to see the value that gets added in taking a ton or so of steel, aluminum, plastic, copper and rubber and making a car. I don't see how that works in the financial sector, where they carve up a gazillion loans and deals, they say they are adding value to the economy, but it's basically a heap of paper that means nothing.

Which leads in to this:

Most lawyers have to do continuing legal education, which for the most part is boring has hell. A lot of states let lawyers do the courses by listening to recorded lectures (or over the Internet), which is a hell of a lot better than burning up a couple of days in classrooms, especially for those of us who practice out in places that "it's not at the end of the known world, but you can see it from here."

The most recent lecture I've been listening to is about commercial real estate financing and the deals they are talking about are securitized loans with tranches and bonds and S&P ratings and inter-financing agreements and mezzanine financing and CBOs and CDOs and stuff like that. It's a long series of lectures, it probably was a day-long course.

So I'm motoring down the interstate, listening to this stuff and it hits me: No wonder the whole frakking shootin' match came tumbling down! For other than maybe one or two guys at the core of any one deal, nobody knew what the hell was truly going on. And nobody was doing all that much due diligence in the first place because real estate values were going up like a rocket so even if a project fell apart, the collateral was still going to be worth more than enough to pay everyone off. What they knew was that their buddies were buying a piece of any one deal and the ratings agencies said that everything was copacetic. The folks at the center, the borrowers, had every incentive to make it as confusing as possible, for the smaller the pieces of the deal, the less cost they had to pay. If they wanted to borrow half-a-billion from one bank, they would pay a lot more in interest than they would if they got someone to slice-and-dice it up into collateralized securities with a bunch of other deals.

It was a cross between a bubble and a form of organic/herd-based ponzi scheme that sort of created itself.

So how do we prevent the financial guys from doing it all over again once the economy revives? If there is a way other than government regulation and keen-eyed oversight, I'm listening.