Much of what investment bankers do is socially worthless

In "What Good Is Wall Street?" a long, thoughtfully argued piece in the New Yorker, John Cassidy makes the case that "Much of what investment bankers do is socially worthless" -- it doesn't "provide liquidity" or "price risk," it merely extracts farcical rents for the relatively utilitarian task of moving money around:

Most people on Wall Street, not surprisingly, believe that they earn their keep, but at least one influential financier vehemently disagrees: Paul Woolley, a seventy-one-year-old Englishman who has set up an institute at the London School of Economics called the Woolley Centre for the Study of Capital Market Dysfunctionality. "Why on earth should finance be the biggest and most highly paid industry when it's just a utility, like sewage or gas?" Woolley said to me when I met with him in London. "It is like a cancer that is growing to infinite size, until it takes over the entire body."

From 1987 to 2006, Woolley, who has a doctorate in economics, ran the London affiliate of GMO, a Boston-based investment firm. Before that, he was an executive director at Barings, the venerable British investment bank that collapsed in 1995 after a rogue-trader scandal, and at the International Monetary Fund. Tall, soft-spoken, and courtly, Woolley moves easily between the City of London, academia, and policymaking circles. With a taste for Savile Row suits and a keen interest in antiquarian books, he doesn't come across as an insurrectionary. But, sitting in an office at L.S.E., he cheerfully told me that he regarded himself as one. "What we are doing is revolutionary," he said with a smile. "Nobody has done anything like it before."

What Good Is Wall Street?

(via Futurismic)