“Finance and the Good Society” Summary As Financial Planning students gearing up for a career in Financial Services, or further education to enter the world of Finance, it is interesting to see just how the majority of people view our intended career path. Rogues may appear, and many may link such words as greed, trickery, or recklessness with the financial industry, but as Robert J. Schiller points out in his book “Finance and the Good Society”, most of the financial sector is made up of good/intelligent people who are only trying to better our economy and advance society for the benefit of everyone, and not just the wealthy as a lot assume. We explore both the negative associations, but also the positive possibilities in the book, and it
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Starting with a CEO, he addresses the issue that there may be some who work in companies that are “too big to be allowed to fail”, and how some are willing to take huge risks because they bank on the government bailing them out. Moving to Investment Manager, Bankers and Mortgage Lenders, he doesn’t shy away from pointing out how investment banks through history shifted into unregulated shadow banking which increases client risk. Further he discusses Traders and Market Makers who have not utilized tools such as “prediction markets” in real estate that could have helped mitigate, if not avoid, the 2008 crisis. When speaking on Insurers, Financial Engineers, Lawyers and Financial Advisors (as well as a few other key areas), we can note a large connection between them all in that these services are not readily available to lower income individuals. Finally, Schiller also makes note that “because money conveys power, a ‘”sleaze”’ factor will inevitably emerge among those associated with finance.” With all of these negative factors combined, it is a little easier to see why everyday people do not put trust in the finance sector, and in fact are uncomfortable and even angry with it, and this anger could lead to some serious consequences that would backfire and minimize the good …show more content…
Looking back at CEO’s, instead of taking risks with a corporation, one solution is to pay CEO’s in tranches. That is to defer a good part of their wages for up to 5 years, and if the company needed to be rescued by the government or it fails completely, the rights to these deferred funds would be given up completely. For Investment Managers, Bankers and Mortgage lenders, a system of “preplanned workouts” is an option that could ease speculation by dealing upfront with how to handle a distressed mortgage (just one example. For Traders and Market Makers, using the “prediction markets” not only for real estate, but also consumer prices and GDP, is an essential tool that needs to be utilized to mitigate an issue before it happens (i.e. 2008 crisis). Looking at Insurers, Financial Engineers, Lawyers and Financial Advisors, ingenious market designs, derivatives, and government subsidization on the cost of legal and financial advice, are all tools that can mitigate risks (which would provide social value) and give everyone the chance to get the information they need to make smart/informed financial decisions. Going even deeper and looking at Regulators, and Policy Makers, Schiller addresses the fact that “’Fiscal policy makers’ need a better toolkit for addressing economic displacements.” Just as
Starting with a CEO, he addresses the issue that there may be some who work in companies that are “too big to be allowed to fail”, and how some are willing to take huge risks because they bank on the government bailing them out. Moving to Investment Manager, Bankers and Mortgage Lenders, he doesn’t shy away from pointing out how investment banks through history shifted into unregulated shadow banking which increases client risk. Further he discusses Traders and Market Makers who have not utilized tools such as “prediction markets” in real estate that could have helped mitigate, if not avoid, the 2008 crisis. When speaking on Insurers, Financial Engineers, Lawyers and Financial Advisors (as well as a few other key areas), we can note a large connection between them all in that these services are not readily available to lower income individuals. Finally, Schiller also makes note that “because money conveys power, a ‘”sleaze”’ factor will inevitably emerge among those associated with finance.” With all of these negative factors combined, it is a little easier to see why everyday people do not put trust in the finance sector, and in fact are uncomfortable and even angry with it, and this anger could lead to some serious consequences that would backfire and minimize the good …show more content…
Looking back at CEO’s, instead of taking risks with a corporation, one solution is to pay CEO’s in tranches. That is to defer a good part of their wages for up to 5 years, and if the company needed to be rescued by the government or it fails completely, the rights to these deferred funds would be given up completely. For Investment Managers, Bankers and Mortgage lenders, a system of “preplanned workouts” is an option that could ease speculation by dealing upfront with how to handle a distressed mortgage (just one example. For Traders and Market Makers, using the “prediction markets” not only for real estate, but also consumer prices and GDP, is an essential tool that needs to be utilized to mitigate an issue before it happens (i.e. 2008 crisis). Looking at Insurers, Financial Engineers, Lawyers and Financial Advisors, ingenious market designs, derivatives, and government subsidization on the cost of legal and financial advice, are all tools that can mitigate risks (which would provide social value) and give everyone the chance to get the information they need to make smart/informed financial decisions. Going even deeper and looking at Regulators, and Policy Makers, Schiller addresses the fact that “’Fiscal policy makers’ need a better toolkit for addressing economic displacements.” Just as