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July 30, 2014

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Frances Coppola (@Frances_Coppola)

But "virtue" is itself a debased term. Try reading Ayn Rand - she talks about "virtue" all the time, but what she means is not remotely similar to ResPublica's definition. For her, a banker pursuing his own interests at the expense of his customers is virtuous.

Luis Enrique

great post.

Although in all industries I am sure you can find examples of people skimping or screwing over their customers, in some industries I think people are more inclined to do the right thing without obvious personal gain because even if they don't think their customers would observe and punish them doing wrong, there's a shared sense between firm and customer of what the right thing to do is (i.e. the civil engineering contractor actually wants to build a good bridge). Where does this exist in banking? In some parts of investment banking, bankers do want to give the right advice (I know people will scoff but I claim there are vestiges of caring about reputation in the industry) but in other parts of banking there is no right thing there is just making money.

gastro george

"This is an indictment ... of our times."

Twas ever thus.

"People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or some contrivance to raise prices." - Adam Smith

Socialism In One Bedroom

Before quoting Dan Ariely's study as the final say on the subject, as the gospel truth (lets all stop worshiping god and worship the scientists!), I would think critiquing it would be a better way to tackle this question than taking the 'great' mans word for it.

An Alien Visitor

Usually with serial criminals they throw them in prison and look to instill some virtue from within the prison system. Why are bankers different?

From Arse To Elbow

Virtue in philosophy is right behaviour, which means it is a social construct, not some eternal verity.

Bankers have always considered themselves to be part of a special club, with its own norms and standards. It should come as no surprise that those norms are self-serving.

Much of the current bleating about virtue is unthinking nostalgia for the days when banking was run by "the right sort", which just meant that market-rigging was hushed up for the sake of The City's reputation.

While bankers have power, they will avail themselves of the opportunities.

Alex

Chris, I think you may have missed a 7th possibility: a selection effect of who is attracted to the industry and their motivations. People who are interested in helping other people will be attracted to nursing or caring or teaching. People who want to build amazing things become civil engineers or architects. And so on.

For most industries, there is some element of either personal outcome-based motivation or people who enjoy the work and will take pride in doing it well. But finance as an industry is likely to attract people who are more than normally interested in money. I don't have an evidence base for this, but I would guess that people who have an above-average interest in money also have an above-average probability of cheating to gain money. This would be reinforced by your point (4). So even if we fired all the bankers and rebuilt the industry from scratch it would over time become naturally more corrupt just from attracting particular types of people.

rogerh

I reckon people start out doing an honest job but then as times get a bit tougher or a more aggressive management style sets in - going public say - then corners get cut, quality suffers. Also the younger workers (after learning the ropes) tend to get put to a rite of passage - to see how they handle a dubious situation. The intelligent and ambitious will usually take the hint and take a few tight curves. The failures don't survive.

Civil engineers cannot afford to cut (many) corners on the work, a fallen bridge is a dead giveaway but contract manipulations are where the action is. Only well seasoned techies get to see those.

Very hard indeed to speak up against this sort of thing, those seen as sissies will never get near the levers of power. Changing the corporate governance structure will require concerted legal changes and I am not sure the cure will not be worse than the disease.

Robert Salzberg

The 3 big reasons bankers have a tendency to cheat are:

1. Their customers are insured against losses by the FDIC.

2. The Fed gives them discounted loans.

3. They can loan out much more than they have, essentially creating money.

We should have learned bankers can't be trusted during the Great Depression, the S&L crisis, and the Great Recession or Liar Loan Lazy Days. Fool me once, shame on you, fool me twice, shame on me. Fool me 3 times…Errr, what's the third thing?

Luis Enrique

on second thought, there is of course often a right thing to do in banking: only offer loans to people that can afford to repay them. So the question of why this virtue was lost, is important.

Magpie

Well, maybe Prof. Ariely would like to try this experiment: visit Cuba **first** and go around the place, alone.

After that, he may freely choose any other Latin American capital city and go around the place, alone.

Just sayin'

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