Mark Haines Doesn’t Get It
If anyone on Wall Street is wondering: what is this “it” that we are supposed to “get”? Is it just that people are angry? Could I be one of those people who don’t “get it”? If so, how would I know?, s/he could do worse than consider this YouTube of CNBC’s Mark Haines interviewing Rep. Brad Sherman (D-CA) (via TPM). It’s a pretty good diagnostic tool.
This is what “not getting it” looks like. At about 50 seconds in, Haines says: “You and people who share your opinions seem to feel that, you know, let’s hold salaries on Wall Street to $100,000. Do you have any idea what Wall Street would look like if you did that?” If your immediate reaction is: that’s telling him, Mark Haines!, then you don’t get it.
A couple of years ago, it would have been hyperbole to suggest that we would all be better off if the senior executives at all our major financial firms were people picked entirely at random out of the phone book. Now, it’s arguably true. People picked at random would, admittedly, be likely not to have been to business school. They might not know a lot about futures or derivatives or put options. But so what? At least they might have been more likely to know that they were clueless, and a few of them might have had the common sense to ask questions like: will housing prices really go up indefinitely?
In any case, what’s the worst they could have done? Bankrupted their companies with ludicrously risky gambles that fell apart once markets went south? Destroyed trillions of dollars in value? Brought the world financial system to the brink of collapse? Left taxpayers across the globe on the hook for trillions of dollars? Bankrupted entire countries?
“Getting it” means understanding that the entire story that some people on Wall Street have told themselves about why they got such obscene levels of compensation is false. As a group, they were not uniquely talented. They did not make a lot more money for their company than they earned, at least not in the long run. Their salaries were not fair compensation for the value they produced. It would not have been worse if they had been replaced by people chosen at random.
Look at the YouTube clip again. Mark Haines seems astonished and baffled by Rep. Sherman’s comments. He acts as though he’s dealing with some ignorant Yahoo who just doesn’t see that when people on Wall Street and people on Main Street disagree, Wall Street is obviously right. That’s why he takes “What do people on Main Street know about running a financial system?” to be such a killer response to Sherman.
A few years ago, it would have been a killer response. Normally, it makes sense to think that people on Wall Street know more about running a financial system than people chosen at random, just as it makes sense to think that a successful director knows more about making movies than I do. When people reach positions of prominence in a given field, it makes sense to think that their opinions about the field they work in are entitled to some deference*. It takes a lot to completely forfeit any right to that deference. But the people in the financial services industries have managed to pull it off.
And that’s what Mark Haines doesn’t get.
* Preemptive footnote: their opinions are entitled to “some deference”, not “complete deference”. Imagine me talking to a successful director about what really goes on in the movie industry: I don’t think that I should slavishly abdicate my judgment just because the director is successful, but I do think that before I go spouting off, I ought to take seriously the possibility that that director might know more than I do. That’s all I mean.