William D. Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street as well as The Last Tycoons: The Secret History of Lazars Freres & Co., writes today in an opinion piece in The New York Times entitled "On Wall Street: All Reward, No Risk" that perhaps the biggest coup in the history of the street called Wall was perpetrated by investment bankers, who convinced the world that they were in fact the talent, risking their own a$$ets, as opposed to simply the agent, with none of their own bank on the line.
Cohan, who cites a recent Malcom Gladwell essay to support the crux of his compelling argument, explains that "unlike hedge-fund guys, investment bankers are not principals. They are agents. And they are at their best when they provide important services to their clients — such as advice on mergers and acquisitions or the capital their clients need to grow — and at their worst when they pretend to be principals, using other people’s money to make bets for their firms that they hope will be eventually reflected in their bonuses. And yet, somewhere along the line, bankers decided that they deserved to get paid like those quantifiable talents who put themselves or their capital at risk day after day."
Cohan goes on to say, "This is what mystifies me, since, as a group, investment bankers are the most personally and professionally risk-averse people I’ve ever met. After all, in what other business could they make so much money without putting any of their own money on the line? Outsized financial rewards should be reserved for those who take outsized financial risks with their own money or have outsized, demonstrable talent. Investment bankers, by and large, just do not make that cut."
Those who do make the cut are the "top private-equity titans, like Steve Schwarzman and Henry Kravis, or hedge-fund managers, like John Paulson and James Simons." According to Cohan, they are to finance as A-Rod is to baseball.