From the beginning of time, bankers have always played a vital role in society, and over time they have become ever more instrumental to the functioning of our economy. From investment banking services and finance, to wealth management and proprietary trading, the role of banks has expanded over the years to include a wide variety of vital activities that help create jobs, increase economic stability and ensure that key individuals and entities get the financing they need to continue growing the global economy.
Bankers received much criticism after the financial crisis of 07-08 when governments were forced to bail out various top tier financial institutions deemed too big to fail. But what the man on the street doesn’t understand is just how essential the activities of these investment banks really are, and the complex mechanisms by which bankers create jobs and uphold our standard of living.
Consider the role of banks in financing our government for example. In the USA, a select group of accredited banks called “primary dealers”, hold accounts with our public Federal Reserve bank, where they have exclusive access to large sums of credit at extremely favorable rates and terms. Primary dealer banks use this credit to buy government bonds with better rates, essentially making a risk free profit while providing essential funds to our government to be spent on welfare programs, humanitarian interventions in the Middle East and giving Obamacare to struggling undocumented citizens. What’s even better is that many of these banks have financial investments in the very government activities that they are financing, such as JP Morgan running food stamps, and many bank shareholders owning equity in military contracting companies like Lockheed Martin. So not only are these bankers keeping our government flush with credit – they are also profiting from the activities our government invests in, thereby stimulating economic growth and creating jobs.
Banks have also now branched into other businesses like proprietary trading and wealth management, where your hard-earned savings are used as collateral to make clever investments in sophisticated derivatives markets, helping to generate even more wealth and more tax revenue for our government! A win-win-win!
The financial industry is so dominant in our economy now, that it attracts a huge percentage of our best and brightest college graduates. Decades ago, top engineers and science graduates used to work in a range of industries from aviation and construction to biotech, but today they are lured into the lucrative world of finance, where their skills are put to far better use, creating clever derivatives, trading strategies and state of the art systems to manage the operations of investment banks. What would you rather have engineers work on? Building efficient electric cars and jet packs? Or trading systems which buy and sell securities? If you answered the former, you simply don’t understand how far reaching the benefits of trading are to society and economic growth.
There was a time when bankers were mainly responsible for lending to businesses, but their role in the economy is now far more sophisticated and important. Financial services now make up a much larger percentage of western economies than ever before, and if we want to continue enjoying the economic growth we’ve become accustomed to, our attitudes towards bankers simply have to change. We need to stop viewing them as evil monopolists, and start seeing them as the smart, talented and indispensable individuals that they truly are.