true

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"The investment banking sector may have its role, but it is a marginal one. It is not directly responsible for the creation of anything that enhances human welfare in any way. Apart from trading financial assets, an entirely zero (at most) sum game, its role is simply a co-ordinating one. Investment bankers are responsible for setting up corporate finance for firms that want to start new projects or when firms merge or acquire other firms. They get paid well not because any of this is intrinsically very difficult – it's really a matter of having access to the right markets, knowing the right procedures and being known to the right people – but because the sums of money involved in these deals tend to be staggering. And payment in the financial sector tends to follow a "linear fee pattern", by which I mean that fees are usually some fairly consistent percentage of the size of any deal irrespective of the actual effort, skill or risk involved in setting it up."

Word.


Addition 04-12-09:

I have been reading through the comments below this article and there are several interesting points deriding Diarmid Weir's observation that investment banking being a zero sum game. I want to examine this further as it echoes Adair Turner’s recent characterisation of the city as “socially useless”. Investment banking involves the provision of capital to corporations in the form of loans, trading securities and managing corporate mergers and acquisitions. I imagine staff at such institutions specialise in one of these areas and immerse themselves in the arcane laws and regulation that govern such substantial transactions. As far as socially beneficial outcomes go, few examples of socially useful produce of the city are offered. One poster, “TraderTrader”, doesn't supply any appropriate examples but does point out that "[m]ost of the city runs very successful business models that contribute enormous sums of revenue for the UK economy and Treasury." This is true and is one of the reasons why the UK has been so profoundly affected by the fuckyounomic debacle so its hardly a supporting argument for our current dependence upon tax revenue from the finance sector.

One response to Weir comes from Zac Smith. Of course, it is quite possible for the government to make and example of RBS and prohibit bonus payments and force them to adopt ethical business practices. However, this would have no effect whatsoever upon all the other financial coporations out there which will simply snigger, employ the disgruntled talent that will flee RBS and undercut them in the market. RBS will collapse, taking all of our tax money with it. And probably the country too. Making scapegoats of the RBS bankers is simply stupid. We should be directing our efforts towards installing a political party that advocates fundamental revision of the economic system to produce a more egalitarian and socially productive system. Weir does allude to this in the title but spends much of his rant targeting the specific iniquities of RBS and Lloyds.