Wall Street Firms Will Revert to Pre-Crisis Model, Cohen Says


Well I am certainly convinced there was something wrong with the system. OK, so maybe they won’t be as leveraged and will likely not take as much risk on any given day or such a wide swath of products, but there still are some issues with the way the system is set up. The big one is how traders/bankers are incentivized and compensated. You swing for the fences on every pitch. I mean think about that: Your upside is 10s of millions of dollars, your downside is losing a job. Who wouldn’t take those odds? Hedge Funds actually aren’t much different. I mean think about some of GS traders that started funds every other week in like 2006 and 2007 with $1billion in capital before they opened the doors. 2-10 rule on a billion when you have a couple employees? Who cares what happens? You are making $20 million a year to open the doors and you probably lst a couple of years with subpar returns. Maybe get lucky and have a good year or two before going under. You’ll walk away a millionaire a few times over and investors are left holding the bag. So yeah I actually do see a problem with going back to Wall St. as it was…


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