Search Results for: Banking

The Growth of Financial Services in the U.S.

“The financial services sector as a whole accounts for more than 20 percent of US GDP, and this share has grown by around 10 percentage points since the 1970s. Additional expansion has taken place in the business services sector, encompassing law and accounting firms and other outgrowths of a financialized economy. Overall, it seems reasonable to conclude that Wall Street in its various forms accounts for around 20 percent of total US income, a share comparable to that of the US government.”

John Quiggin, in Jacobin, on whether the growth of the financial sector has paid off for America. Read more on banking.

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Multiplayer Game ‘Eve Online’ Cultivates a Most Devoted Following

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A visit to Iceland and CCP Games, the company behind the sci-fi video game Eve Online. The game has grown to 500,000 users and $65 million in revenue:

“Economists have written dozens of papers celebrating the sophistication of Eve’s economy and the amazing level of industry among the players, who basically create everything within the game from scratch. ‘It feels like a real economy instead of one rigged by a gaming company,’ says Vili Lehdonvirta, a researcher at the London School of Economics who’s studied virtual games since 2004. ‘Since there’s no legal system, the economy resembles that of a developing nation where people trade based on trust and social relations.’

“The thought of Eve advancing economic teaching provides some measure of comfort for Icelanders who’ve grown to detest the presumed economic whizzes in the real world. Just down the road from the CCP headquarters, the Harpa, a giant glass opera house, glows in different colors at night. It symbolized Iceland’s banking boom. Now it may have to be torn down, because it’s too expensive for the country to maintain. CCP held its most recent Christmas party there.”

Source: Businessweek
Published: Apr 19, 2013
Length: 11 minutes (2,872 words)

The Occupy movement is trying to figure out its future, and keep the momentum going:

But Ross, too, soon found himself enchanted by the possibility of the movement. A trained economist, he decided to start an Alternative Banking working group, with the ambitious plan of setting up an Occupy Bank – built on a cooperative, credit-union model, but operating nationwide. ‘There’s a big Hyde Street retailer in Britain with huge profits, all shared amongst its workers,’ Ross notes. ‘Everyone gets eight weeks holiday a year, wonderful pension plans. But culturally, we’ve been told there’s only one model of a company, which is purely profit-driven, where the workers get paid the least possible. In fact, that’s not the best model for a sustainable economy, and there’s some evidence that shows if you treat your workers better and pay them more, particularly if you give them a stake, then they will perform better. It’s kind of obvious.’

What’s also obvious is that this phase of Occupy, with talk of credit unions and occupying the SEC, while eminently worthy, is also kind of boring, especially when compared to the thrill of Occupy’s park phase. Some, though, are ready to move on. ‘It’s easy to go back to the park occupation and fetishize it, in a way,’ says Occupy Chicago’s Brian Bean. ‘I prefer not to run a mini-society – I want to run society.’

“The Battle for the Soul of Occupy Wall Street.” — Mark Binelli, Rolling Stone

More from Binelli

The Battle for the Soul of Occupy Wall Street

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The Occupy movement is trying to figure out its future, and keep the momentum going:

“But Ross, too, soon found himself enchanted by the possibility of the movement. A trained economist, he decided to start an Alternative Banking working group, with the ambitious plan of setting up an Occupy Bank – built on a cooperative, credit-union model, but operating nationwide. ‘There’s a big Hyde Street retailer in Britain with huge profits, all shared amongst its workers,’ Ross notes. ‘Everyone gets eight weeks holiday a year, wonderful pension plans. But culturally, we’ve been told there’s only one model of a company, which is purely profit-driven, where the workers get paid the least possible. In fact, that’s not the best model for a sustainable economy, and there’s some evidence that shows if you treat your workers better and pay them more, particularly if you give them a stake, then they will perform better. It’s kind of obvious.’

“What’s also obvious is that this phase of Occupy, with talk of credit unions and occupying the SEC, while eminently worthy, is also kind of boring, especially when compared to the thrill of Occupy’s park phase. Some, though, are ready to move on. ‘It’s easy to go back to the park occupation and fetishize it, in a way,’ says Occupy Chicago’s Brian Bean. ‘I prefer not to run a mini-society – I want to run society.'”

Source: Rolling Stone
Published: Jun 7, 2012
Length: 25 minutes (6,437 words)

How Goldman Sachs Blew the Facebook IPO

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An inside look at how banks jockey for “left lead” status on an IPO—especially one as big as Facebook’s:

“For the past couple of decades, Goldman Sachs and Morgan Stanley have ruled the tech IPO business, with one of the firms serving as lead manager on most of the hottest deals.

“Goldman took Microsoft, Yahoo, and eBay public, for example. Morgan won Netscape and Google. Although other firms have picked off an occasional deal over the years, when it comes to tech banking, Goldman and Morgan remain in a class by themselves. To be sure, having Morgan or Goldman take you public is no guarantee of success—they’ve banked plenty of dogs. But going public without Morgan or Goldman means signaling that you weren’t good enough for Morgan or Goldman. In other words, that your company is second-rate.

“In the last few years, though, there has been a shift in the Morgan-Goldman power balance in the Valley. Specifically, until very recently, Morgan Stanley has won almost all of the hot IPOs.”

Published: May 9, 2012
Length: 21 minutes (5,485 words)

The Bank of England’s Andrew Haldane on banking, risk and how to bring social and financial equity back into the system:

Consider the effects of the too-big-to-fail problem on risk-taking incentives. If banks know they will be bailed out, those holding their debt will be less likely to price the risk of failure for themselves. Debtor discipline will therefore be weakest among those institutions where society would wish it to be strongest. This encourages them to grow larger still: the leverage cycle isn’t merely repeated, but amplified. The doom loop grows larger. The biggest banks effectively benefit from a disguised, and growing, state subsidy. By my estimate, for UK banks this subsidy amounts to tens of billions of pounds per year and has often stretched to hundreds of billions. Few UK government spending departments have budgets this big. For the global banks, the subsidy can reach a trillion dollars – about eight times the annual global development budget.

“The Doom Loop.” — Andrew Haldane, London Review of Books

See also: “Secret Fed Loans Helped Banks Net $13 Billion.” — Bob Ivry, Bradley Keoun, Phil Kuntz, Bloomberg Businessweek, Nov. 27, 2011

The Doom Loop

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The Bank of England’s Andrew Haldane on banking, risk and how to bring social and financial equity back into the system:

“Consider the effects of the too-big-to-fail problem on risk-taking incentives. If banks know they will be bailed out, those holding their debt will be less likely to price the risk of failure for themselves. Debtor discipline will therefore be weakest among those institutions where society would wish it to be strongest. This encourages them to grow larger still: the leverage cycle isn’t merely repeated, but amplified. The doom loop grows larger. The biggest banks effectively benefit from a disguised, and growing, state subsidy. By my estimate, for UK banks this subsidy amounts to tens of billions of pounds per year and has often stretched to hundreds of billions. Few UK government spending departments have budgets this big. For the global banks, the subsidy can reach a trillion dollars – about eight times the annual global development budget.”

Published: Feb 17, 2012
Length: 12 minutes (3,101 words)

Silicon Valley Cashes Out Selling Private Shares

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Vince Thompson doesn’t appear in any accounts of Facebook’s early years. Few of the more than 2,000 employees at the company even know his name. The AOL veteran’s brief stint as Facebook’s first official ad-sales chief lasted less than six months. Even so, when Thompson left the company in early 2006, he exercised his options to buy Facebook stock, as is the custom in Silicon Valley, and took a sizable chunk of shares with him. About 18 months later he moved to Los Angeles and started consulting for media clients such as TVGuide.com on how to tap new sources of revenue, and he began to think about how to create one for himself. He set out on a quest, talking to friends in the New York investment banking world about an unorthodox idea: selling a portion of his Facebook shares, packaged with those of a colleague who left Facebook shortly after he did.

Author: Brad Stone
Source: Businessweek
Published: Apr 21, 2011
Length: 16 minutes (4,102 words)

The Real Housewives of Wall Street

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If you want to get a true sense of what the “shadow budget” is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall’s haul doesn’t seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn’t seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches. Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley’s investment-banking division.

Source: Rolling Stone
Published: Apr 13, 2011
Length: 12 minutes (3,088 words)

How a Big U.S. Bank Laundered Billions from Mexico’s Murderous Drug Gangs

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Martin Woods was set apart by his modus operandi. His speciality, he explains, was his application of a “know your client”, or KYC, policing strategy to identifying dirty money. “KYC is a fundamental approach to anti-money laundering, going after tax evasion or counter-terrorist financing. Who are your clients? Is the documentation right? Good, responsible banking involved always knowing your customer and it still does.” When he looked at Wachovia, the first thing Woods noticed was a deficiency in KYC information.

Source: The Guardian
Published: Apr 3, 2011
Length: 16 minutes (4,224 words)