What good do bankers and insurance agents actually do?

My major in school was Computer Science … then a part of the Electrical Engineering department. I was doing everything I could think of to extend my student deferment and stay out of VietNam at the time, so I accumulated so many credits in the Economics department that I could have graduated there instead. In hindsight, maybe I should have. It seems like you don’t have to be very good at your job to pull down the really, really big bucks in that business.

The news today features a gentleman named Robert Benmosche, who is stomping his feet and threatening to take his ball and go home if the bad ol’ feds don’t let him pay his bankers and insurance agents in AIG (80% owned by the US government) whatever he damn well pleases. He’s pictured above at his Adriatic estate where he insisted on working from “home”. By the way, Mr. Benmosche is the highest paid of the TARP troop of executives right now at over ten million dollars! At last report, he had graciously changed his mind and is staying on at AIG.

The CEO of banking firm Goldman Sachs recently said, “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle. We have a social purpose.”

That’s something I studied at school! Here’s Wikipedia’s take on “Productive and unproductive labour”:

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The classical political economists, such as Adam Smith and David Ricardo (regarded) human labour as the mainspring of wealth, and therefore they regarded the economical use of labour as highly important.

Within an enterprise, for example, there were many tasks which had to be performed, such as cleaning, record and bookkeeping or repairs, which did not directly contribute to producing and increasing wealth. … Part of the population consumed wealth but did not create it. To maximize economic growth, therefore, “unproductive costs” which consumed part of the total national income rather than adding to it should be minimized; productive labour had to be maximized.

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The chairman of the Financial Services Authority in England, the country of Smith and Ricardo, gets it. He called what bankers do, “socially useless activity” and said they are “accounting for too much of British output and taking away too many of the country’s brightest graduates.”

If you think of the economy as an engine, then construction workers, farmers, and factory workers are the pistons. They produce the wealth. Bankers and insurance agents are at best like the oil in the engine. You’ve got to have some or the engine won’t work but it really doesn’t do anything to push the car forward. Come to think of it, “oily” and “banker” do seem to go together.

Mr. Benmosche is upset because he says that it’s necessary to pay multi-million dollar rewards to retain the “talent” at AIG. This would be the same kind of talent that lost so much money, so fast, that the US taxpayer has propped them up with over $180 billion dollars … so far.

I don’t believe him. I think he’s either grossly deluded or simply a liar. (I’d bet on “liar”.) When the oil in an engine gets dirty, most people drain it out and get rid of it.