Comments on: Financial Innovation?

By: bill

bill — Mon, 06 Jul 2009 02:28:57 +0000

To be fair, Juicy Whip was not actually hurting anyone. Your beverage apparently tasted just as good, it just wasn’t coming from the reservoir that was displayed.

Financial “innovation” of the past two decades that is harmful to end users might be more like Massengill’s Elixir Sulfanilamide.

By: Frank Pasquale

Frank Pasquale — Sat, 04 Jul 2009 02:05:28 +0000

Two thoughts:

Before the 1970s, “Trading in options and futures had been met with “instinctual hostility” for generations by the Securities and Exchange Commission (SEC). Speculation on stock options, in particular, had been held responsible for the Wall Street Crash of 1929; such derivatives markets were held by many regulators to be the moral equivalent of gambling. (One SEC chairman “compared options to ‘marijuana and thalidomide’.”)” [Joel Isaac's description of Donald MacKenzie's findings in An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, MA: MIT Press, 2006).]

But even if we accept this older view of financial innovation, we run into Juicy Whip and moral utility issues, eh?

By: Adam

Adam — Fri, 03 Jul 2009 17:05:11 +0000

I think you’re comparing apples and oranges. Bankers hours came from the fact that bankers spent a lot of time in the community, and made their money over time as the community prospered.

There’s no reason to think that innovative products are at odds with that. Farm futures were an innovation, as were reverse mortgages.

The key is for compensation to be tied to the period of risk plus a little for margin of error. Align bankers interests with a stable banking system. If they’d then like to work long hours, go ahead.