Gillian Tett
36 μ£¥³¤ ¬μμ¬
Consider “Ãnance,” “credit,” and
“bank.” Today, those terms are usually
associated with abstract concepts
involving markets and money, but their
historical roots, or etymology, are rather
dierent. “Finance” originates from the
Old French word £ner, meaning “to
end,” in the sense o settling a dispute
or debt, implying that Ãnance is a
means to an end. “Credit” comes from
the Latin credere, meaning “to believe.”
And “bank” hails from the Old Italian
word banca, meaning “bench” or “table,”
since moneylenders used to ply their
trade at tables in the market, talking
to customers or companies. “Company”
also has an interesting history: it comes
from the Latin companio, meaning
“with bread,” since companies were, in
essence, people who dined together.
All o this may sound like a historical
curiosity, best suited to Trivial Pursuit.
But the original senses should not
be ignored, since they reveal historical
echoes that continue to shape the culture
o Ãnance. Indeed, thinking about the
original meanings o “Ãnance,” “credit,”
and “bank”—namely, as activities that
describe banking as a means to an end,
carried out with trust, by social groups—
helps explain what went wrong with
American Ãnance in the past and what
might Ãx it in the future.
FINANCE
I you want to understand the word
“Ãnance,” a good place to start is not with
words but with some extraordinary
numbers compiled by the economists
Thomas Philippon and Ariell Reshe on
a topic dear to bankers’ hearts: their pay.
After the crisis, Philippon and Reshe
set out to calculate how this had Áuctu-
ated over the years in the United States,
relative to what professionals who didn’t
work in Ãnance, such as doctors and
engineers, were paid. They found that in
the early twentieth century—before the
Roaring Twenties—Ãnanciers were paid
around 1.5 times as much as other edu-
cated professionals, but the Ãnancial
boom pushed this ratio up to almost 1.7
times. After the Great Depression hit,
it fell, and stayed around 1.1—almost
parity—during the postwar years. But it
soared again after a wave o deregula-
tion in the late 1970s, until it hit another
peak o 1.7 times as much in 2006—just
before the crash.
I you show these statistics to people
outside Ãnance, they sometimes blame
the latest uptick in bankers’ pay on greed:
pay rose when the markets surged, the
argument goes, because Ãnanciers were
skimming proÃts. I you show them to
Ãnanciers (as I often have), they usually
oer another explanation for the recent
surge: skill. Wall Street luminaries tend
to think they deserve higher pay because
Ãnance now requires greater technical
competence.
In truth, both explanations are
correct: as bankers’ pay has swelled, the
Ãnancial sphere has exploded in size
and complexity, enabling Ãnanciers to
skim more proÃts but also requiring
greater skill to manage it. In the United
States in the immediate postwar dec-
ades, the Ãnancial sector accounted for
between ten and 15 percent o all
business proÃts and around 3.5 percent
o ³²¡. Subject to tight government
controls, the industry was more akin to
a sleepy utility than a sphere o aggres-
sive proÃt seeking. By the early years
o this century, the economic footprint
o Ãnance had more than doubled: it
accounted for almost 30 percent o all