A world without suckers
Michael Lewis notes that after fighting hard to make sure their proprietary-trading desks survived FinReg, the big banks are closing those desks down. That seems a bit odd, no? But fear not. "There are any number of explanations why Wall Street firms are all at once letting it be known they intend simply to walk away from what has been, until very recently, their single most lucrative line of work," writes Lewis. Here's my favorite:
A general malaise has come over the world of big-time financial risk taking. Everywhere you look, hedge funds are either closing or shedding employees or, most shockingly, cutting their fees. At the bottom of this new trend lies a deeper problem: a scarcity of suckers.
The proprietary trading business turns in part on one's ability to find the fool -- to find people willing to take the stupid side of the smart bets you are placing. One of the side effects of our seemingly endless financial crisis is to wash a lot of fools, many of them German, out of the game. It's as if a casino owner awakened one morning to find the tourists had all gone, and the only remaining patrons were pros counting cards.
Though I'm sorry to say that's not the one he finds most convincing.
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