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Best of the Blogs, Financials: Bank Scandal Fallout Affects Recruiting


Plus, why banking might be in the process of shrinking.

This column highlights the most interesting and useful business and financial commentary on financials from around the Web.

Bloomberg View
Link: Big Banks Are Hazardous to US Financial Health
"The recent trading losses at JPMorgan Chase & Co. (JPM) and scandals over money laundering at HSBC Holdings Plc (HBC) and Standard Chartered Plc (SCBFF) have prompted even financial-industry insiders to ask whether these complex global organizations are too big to manage.

"The continued downward spiral in Europe raises a similar question: Are some banks too big to save, meaning their collapse could dramatically worsen the euro crisis (as happened in Ireland in the fall of 2008 and is happening now in Spain and Greece)?"

Link: Is Banking Losing Its Appeal?
"Could it be that the stampede of Oxbridge graduates clamoring to work 100-hour weeks in Canary Wharf is slowing? Perhaps four years of banking crises, scandals and enthusiastic 'banker bashing' is having a real effect on the industry's appeal?

"Banks have long paid graduates considerably more than law firms and corporates, so these latest increases indicate that they're having to do even more to counter reputational damage and attract top talent. While banks can be criticized for many things, failing to adapt quickly to suit their own interests is not one of them."

The Telegraph
Link: Investment Banks Raise Starting Salaries to Attract Graduates Put Off by Scandals
"Salaries for new recruits have been raised to around between £45,000 and £50,000 a year at the top investment banks – a 5pc rise from last year in reflection of the 'reputational issues' around City firms.

"The rise is on top of a big jump in starting salaries at the banks last year as the 'social stigma' of working for a bank rises again."

"Jon Terry, partner at PricewaterhouseCoopers who advises all the top banks on pay levels, said: 'There is no doubt that 'banker bashing' and the scandals at the banks are impacting graduate decisions about going into the City. The importance of reputation seems to have gone up tremendously. Investment banks are generally paying around 5pc more this year, even though investment banking graduates are paid far more than other graduates.'"

The iBanker
Link: Aladdin's Lamp in the Mystical Land of Investment Banking
"When you join an investment bank, part of the social contract you sign up to with the institution requires you to undergo a twisted form of house arrest. The bank will keep a very close eye on your movements and whereabouts going forward. Though you may continue to enjoy 'freedom of movement', the way you interpret that very notion will fundamentally change in time. The single most essential element in this affair is the handheld device you're given shortly after you are bestowed a seat and computer. Generally referred to as a 'mobile' or 'cell', you'll occasionally encounter alternate nicknames for it. You were given an 'earring,' some people would joke. Others had their own name for it. The day it was thrust into my hands the benefactor called it a lamp."

We Can't Grow Ourselves Out of Debt, No Matter What the Fed Does
"Money is created as interest-bearing debt: it only comes into being when someone promises to pay back even more of it. Therefore, there is always more debt than there is money. In a growth economy that is not a problem, because new money (and new debt) is constantly lent into existence so that existing debt can be repaid. But when growth slows, good lending opportunities become scarce. Indebtedness rises faster than income, debt service becomes more difficult, bankruptcies and layoffs rise.

"The problem that we are seemingly unable to countenance is the end of growth. Today's system is predicated on the progressive conversion of nature into products, people into consumers, cultures into markets and time into money. We could perhaps extend that growth for a few more years by fracking, deep-sea oil drilling, deforestation, land grabs from indigenous people and so on, but only at a higher and higher cost to future generations. Sooner or later – hopefully sooner – we will have to transition towards a steady-state or degrowth economy."
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