Banking Industry Described as an Employee Compensation Engine

This article was written by an author who wrote about the misuse of probability theory by bankers to minimize the risk in the securities that they were packaging and selling to investors. That is why so called "black swan" events occurred so frequently during the banking meltdown. Events that were calculated to be extremely rare became common. He is still highly critical of the banking industry in the US and elsewhere. He views the industry as a banker compensation engine that extracts wealth out of the economy without putting anything back into it. Over the last 5 years, in the US, bankers have extracted over $2 trillion out of the economy as compensation. They do so by taking excessive risk and using leverage to bolster profits. They benefit from the upside but they transfer the risk to taxpayers on the downside.

Teleb describes this scheme as a massive tax on the public, and as a penalty to savers who are harmed by low interest rates. The tax will reach $5 trillion over the next 5 years. He does not believe that government, which has been captured by the industry, can do much about the problem. More regulation won't work either because the bankers will always stay one step ahead of the regulators. He argues that money managers should step into the void and stop buying the securities of banks with excessive compensation schemes. He believes that they are paying prices that do not reflect the real value of the shares that they purchase.