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Joined: Nov 2011
Posts: 282
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Even though I work in the financial industry, I normally stay out of financial discussions and let people vent about what they think happened. But since Dude says he works in the industry as well, my opinions differ from him in some ways. The housing bubble and associated financial crisis was caused in part by a "homeownership for everyone" crusade, which necessitated lowering mortgage underwriting standards.
Wall Street played a role in the housing bubble and financial crisis, but so did politicians who pushed for easy credit, quasi-governmental entities such as Fannie Mae and Freddie Mac who purchased low-quality mortgages, off-Wall-Street mortgage brokers who encouraged people to borrow too much, and home buyers who borrowed too much and lied on their mortgage applications. Blaming Wall Street alone makes for a tidy morality play but is not accurate. Well, sure, there were others that "had a role" in the disaster, just like there are passengers who would "have a role" in a bus flying off the overpass... but there's only one driver. Who was this single bus driver? Was it the "independent" ratings agencies that were bought off by the companies that paid them to rate their products? Was it the money management firms (my field) that knew the ratings were a joke but where some people ignored them because of the fees they could generate? Was it the mortgage brokers that encouraged the liar loans? Was it the quasi-governmental Fannie & Freddie that accepted these loans knowing that they had a government backstop? Was it the guys at AIG that priced credit default swaps like it was car accident risk (claims occur mostly randomly, and costs are well understood) rather than hurricane risk (claims are all tied to a single event--the hurricane, and upper bounds of damages not easy to estimate). In other words, there is plenty of blame to go around. And a key part of the blame rests with people that lied through their teeth in order to get the loans in the first place. A contributing factor is populist support for home ownership. Stopping any part of this chain would have stopped or limited this crisis. First of all, there's almost no difference between Wall Street and the federal government anymore, because they all went to the same schools, they're constantly exchanging employees, and the latter owes its job entirely to the campaign financing of the former.
So pretending they're different entities is a waste of time... they're both privileged members of the top 1% financially. This is not to be confused with the top 1% IQ... a Venn diagram of the two groups would look not unlike the view through poorly-focused binoculars. Sure you can find some people in government at high levels that are privileged. But most are not. There are two kinds of "talent" in finance. Some people really have a gift of making money. But others have a talent of knowing the weak spots in regulation and pushing those limits without necessarily breaking them, because that is where money can be made. Invariably the people with either of these talents end up in industry for most of their careers, not the government, because that is where they money is. Case in point is Bernie Madoff. The SEC couldn't pin anything on him for years, despite someone in the industry, Harry Markopolos, describing to the SEC in minute detail what Bernie Madoff did and why it could not possibly be realistic. Another example is high-frequency trading. Now in reality the costs to long-term investors of high frequency trading are minuscule, but a very good argument can be made that it is front running. The reason it exists is that the guys in the trading firms are smarter than the guys in government. There are some fairly simple ways to get the benefits of high frequency trading (yes, there are some) while discouraging front running, but don't look to the government to figure it out. Then these same Wall Street analysts who cooked up this pyramid scheme began repackaging loans, trading default options and buying insurance amongst themselves, while making absurd guarantees to their investors, buying favorable investment ratings that had no basis in reality, and overall creating such a fantastically elaborate fiction that they even started believing it themselves... because... talent? I actually don't blame the Wall Street trading firms much at all. Anyone who has been in the financial industry for more than a week knows that they are sharks that would sell out their own mothers if it would help them profit. Trading firms serve a useful function in that they make a market (selling when others are buying and buying when others are selling), but why would you possibly believe what they said about an investment? Also a bit of perspective. Before I worked in the financial industry, I worked in the telecom industry in the late 1990s at a fairly high level. Worldcom was a customer of ours, and I have presented to Bernie Ebbers a few times (another Bernie!). Bernie helped fuel the Dot-Com boom by making false claims about Internet growth. These numbers were used to justify the valuations of Worldcom, and that of other dot-com companies as well. I knew these were false because our company provided Worldcom with the accurate growth numbers--the traffic was measured by our equipment. So while there are dishonest people in every profession, the vast majority of people in finance, like telecom, are decent, hard-working and honest people. Just watch out for those traders. :-)
Last edited by mithawk; 06/02/15 04:40 AM.
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Joined: Oct 2011
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Well, sure, there were others that "had a role" in the disaster, just like there are passengers who would "have a role" in a bus flying off the overpass... but there's only one driver. Who was this single bus driver? Was it the "independent" ratings agencies that were bought off by the companies that paid them to rate their products? Was it the money management firms (my field) that knew the ratings were a joke but where some people ignored them because of the fees they could generate? Was it the mortgage brokers that encouraged the liar loans? Was it the quasi-governmental Fannie & Freddie that accepted these loans knowing that they had a government backstop? Was it the guys at AIG that priced credit default swaps like it was car accident risk (claims occur mostly randomly, and costs are well understood) rather than hurricane risk (claims are all tied to a single event--the hurricane, and upper bounds of damages not easy to estimate). I won't say anything more about this topic, because it's unrelated to gifted education, except this: If the Wall Street ratings firms were giving fraudulent ratings to Wall Street investment products made of loans issued by quasi-governmental Wall Street companies (who, by the way, were actually late-comers to the subprime party, which is always a surprise given how much primary blame they get, at their peak Countrywide owned 20% of the mortgage market, mostly junk) backstopped by a government with an incestuous relationship to Wall Street, then it isn't too hard to identify the driver. Or maybe we're just dealing with a difference of terminology, because I consider Countrywide and Fannie Mae to be part of Wall Street, even though they weren't headquartered in New York (at the time under discussion, both were listed on the NYSE), so let's just say Big Finance instead.
Last edited by Dude; 06/02/15 08:06 AM.
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Joined: Feb 2011
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My apologies for inserting a serious thought, but this video on the value/not of college-for-all is worth viewing (Citrus College, "Success in the New Economy"): https://vimeo.com/67277269Didn't want this to get lost here. It really is worth a look.
Schrödinger's cat walks into a bar. And doesn't.
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Joined: Feb 2010
Posts: 2,640 Likes: 2
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My apologies for inserting a serious thought, but this video on the value/not of college-for-all is worth viewing (Citrus College, "Success in the New Economy"): https://vimeo.com/67277269Didn't want this to get lost here. It really is worth a look. I disagree. I don't know where Fleming (the video author) gets his numbers, but they look wrong. At 1:18 he says that 2/3 of high school graduates enroll in higher education right after high school, and "only a quarter of those that enroll will finish a bachelor's degree". According to the National Center for Education Statistics, the college graduation rate is much higher for such students: Question: What are the graduation rates for students obtaining a bachelor's degree?
Response: The 2012 graduation rate for first-time, full-time undergraduate students who began their pursuit of a bachelor’s degree at a 4-year degree-granting institution in fall 2006 was 59 percent. That is, 59 percent of first-time, full-time students who began seeking a bachelor’s degree at a 4-year institution in fall 2006 completed the degree at that institution within 6 years. Graduation rates are calculated to meet requirements of the 1990 Student Right to Know Act, which required postsecondary institutions to report the percentage of students that complete their program within 150 percent of the normal time for completion, which is within 6 years for students pursuing a bachelor’s degree. Students who transfer and complete a degree at another institution are not included as completers in these rates. Around 3:37 Fleming says the ratio of jobs requiring master's, bachelor's, and associate degrees in *all* industries is 1:2:7, and that "it was the same in 1950, the same in 1990, and will be the same in 2030". Someone who opines with such certainty about the future should be laughed at, not listened to.
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Joined: Aug 2010
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According to the National Center for Education Statistics, the college graduation rate is much higher for such students: As much as it pains me ;), I'm going to have to agree with Bostonian here. The "only 25%" figure is incorrect; the 60% figure--note that this is in SIX years, NOT four--is generally cited as accurate for students at 4-year colleges starting right after HS. If we prefer to look at "students finishing in 4 years," that's only 40%, which is NOT great, but it's not 25%. I didn't watch the video, but I'd be concerned about its general accuracy based on this claim.
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Joined: Feb 2011
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Um-- "higher education" would also include other post-secondary institutions such as for-profits, and community colleges, which have notoriously awful rates of completion.
I do agree that the jobs ratio is laughable-- unless one examines this as a matter of jobs which actually require (as opposed to using it as a ridiculous screening tool) higher education.
Because of College-4-All, many skilled labor jobs now nominally have "college" as a gatekeeping mechanism, though why such positions actually require that level of education is a thing to wonder upon.
Schrödinger's cat walks into a bar. And doesn't.
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Joined: Apr 2013
Posts: 5,261 Likes: 8
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Posts: 5,261 Likes: 8 |
I don't know where Fleming (the video author) gets his numbers, but they look wrong. At 1:18 he says that 2/3 of high school graduates enroll in higher education right after high school, and "only a quarter of those that enroll will finish a bachelor's degree". According to the National Center for Education Statistics, the college graduation rate is much higher for such students... As to where he gets his numbers... The video description states that the transcript is available on the college website. transcript: Success in the New Economy This philosophy has increased college enrollment, resulting in 66 percent of high school graduates in this country enrolling in higher education right after high school.3 That’s two out of three. Initially, they are deemed the successful ones. But, what you won’t see advertised is the reality that most drop out and only a quarter of those that enroll will finish a bachelor’s degree.4 ... footnote/citation 4: Horn & Berger. (2005). College persistence on the rise? Changes in 5-year degree completion and postsecondary persistence rates between 1994 and 2000. Washington DC: National Center for Educational Statistics. And: Symonds, W., Schwartz, R., & Ferguson, R. (February 2011). Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans for the 21st Century. Report issued by the Pathways to Prosperity Project, Harvard Graduate School of Education, And: Gray, K. & Herr, E. (2006). Other Ways to Win: Creating Alternatives for High School Graduates. Third Edition. Thousand Oaks: Corwin Press. Around 3:37 Fleming says the ratio of jobs requiring master's, bachelor's, and associate degrees in *all* industries is 1:2:7, and that "it was the same in 1950, the same in 1990, and will be the same in 2030". Someone who opines with such certainty about the future should be laughed at, not listened to. As to whether this is opinion... The transcript cites a reference for this: The true ratio of jobs in our economy is 1:2:7.15 For every occupation that requires a master’s degree or more, two professional jobs require a university degree, and there are over half a dozen jobs requiring a 1-year certificate or 2-year degree; and each of these technicians are in very high-skilled areas that are in great demand.16 This ratio is a fundamental to all industries. It was the same in 1950, the same in 1990, and will be the same in 2030.17... footnote/citation 17: Gray, K. & Herr, E. (2006). Other Ways to Win: Creating Alternatives for High School Graduates. Third Edition. Thousand Oaks: Corwin Press. A book twice cited, Other Ways to Win: Creating Alternatives for High School Graduates, is found on Amazon.
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Joined: Nov 2012
Posts: 2,513 Likes: 1
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The fixed ratio is baseless. He's implicitly assuming two things, both incorrect:
1. A fixed capital-labour ratio in all sectors and professions over time.
2. Constant total factor productivity (a proxy for technical change and the efficiency of use of factors of production-- capital, labour, natural resources, institutions, etc.) universally across industries and geographies.
As a counter example on the first, do we believe that the capital intensity of the development of biologics by doctoral biochemists requires the same capital intensity as the work of university professors of literature with doctorates, always and everywhere?
On the latter, should we believe that productivity changes in the automotive industry in New Dehli are the same as in the southern US, and eternally so?
What is to give light must endure burning.
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Joined: Apr 2013
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The fixed ratio is baseless. He's implicitly assuming two things, both incorrect:
1. A fixed capital-labour ratio in all sectors and professions over time.
2. Constant total factor productivity (a proxy for technical change and the efficiency of use of factors of production-- capital, labour, natural resources, institutions, etc.) universally across industries and geographies.
As a counter example on the first, do we believe that the capital intensity of the development of biologics by doctoral biochemists requires the same capital intensity as the work of university professors of literature with doctorates, always and everywhere?
On the latter, should we believe that productivity changes in the automotive industry in New Dehli are the same as in the southern US, and eternally so? Would you explain how capital, natural resources, institutions, etc are implied/assumed in the 1:2:7 ratio of employment by type post-secondary degree?
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