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2016 Jotwell: J. Things We Like [1] (2016)

handle is hein.journals/jotwell2016 and id is 1 raw text is: 

Contracting for Ethical Banking
Claire A. Hill & Richard W. Painter, Better Bankers, Better Banks (The University of Chicago Press, 2015).

Saule T. Omarova

Claire Hill and Richard Painter's new book is the latest addition to their long line of work on the complex
interaction between law, economics, culture, and individual behavior in the fast-moving world of investment
banking. In this exceptionally well-written book, Hill & Painter target what they view as the fundamental
problem with today's Wall Street: the fact that bankers (a term that denotes mainly investment bankers and
other securities industry professionals) are allowed to behave in socially harmful ways, without suffering
meaningful personal consequences. Alas, the authors don't need to try very hard to convince us why this topic
is both timely and important. What seems to be a never-ending string of scandals involving large financial
institutions rigging prices, misleading customers, and helping clients cheat tax authorities and creditors provides
plenty of evidence to that effect. If, after all these ugly revelations, you still trust bankers' assurances that they
are doing God's work, you haven't been paying attention.

In the book, Hill & Painter explain why, in recent decades, Wall Street bankers so consistently failed the public
whose  money they purport to manage. While not necessarily breaking new ground in this well-trotted area, the
book does a great job of telling a rather impressively comprehensive story of how, in the course of the last few
decades, investment bankers gradually abandoned their professional ethos in favor of purely self-serving pursuit
of personal profit that is at the core of today's culture of irresponsible banking. Hill & Painter trace the
transformative changes in the business model of modern investment banking in the context of the increasingly
competitive, globalized, computerized, and impersonal marketplace. One of the central themes here is the loss
of bankers' unlimited personal liability as a result of mass conversions of investment banking firms from
partnerships to publicly traded corporations. Hill & Painter masterfully depict how this seemingly innocuous
change reshaped the structure and culture of Wall Street from the 1970s on. To this broad-brush picture, they
add nuance by dissecting some of the psychological factors driving individual investment bankers to disregard
society's interests and gamble with other people's money. I found that part of the book particularly enjoyable
and insightful.

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