Ah, pity the poor investment bankers, for it seems their already maligned reputation has taken an even bigger battering recently. First, Britain impose a “windfall tax” of 50% on bonuses. Then the world’s most respected reserve banker, Paul Volcker, last week observed that the “only useful thing banks have invented in 20 years is the ATM’. The man credited for defeating inflation in 1979-80 noted “you can innovate as much as you like, but do it within a structure that doesn’t put the whole economy at risk”.

If that wasn’t bad enough, a British left-wing think tank released a study claiming that “rather than being ‘wealth creators’, these city bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse. While collecting salaries of between £500,000 and £10 million, leading city bankers to destroy £7 of social value for every pound in value they generate.” (In fairness, bankers were found to be less destructive than advertising executives, who destroy £11 of value for every £1 they create by their encouragement of “high spending and indebtedness” or tax accountants, who allegedly destroy £47 for every £1 they create.)

(By contrast, the report, by a group called New Economic Frontiers, found that “for every £1 they are paid, childcare workers generate between £7 and £9.50 worth of benefits to society” due to them “release[ing] earnings potential by allowing parents to continue working [and unlocking] social benefits in the shape of the learning opportunities.”)

The study was a little harsh on bankers — some bankers do provide great value for society. If it weren’t for investment bankers, there would be minimal merger activity. Mergers and acquisitions create great value for lawyers, bankers themselves, tax specialists, taxi drivers, printers (someone has to produce the hefty takeover documents that no one reads), Australia Post and most importantly, the forgotten executives who receive more money for managing larger companies (executive wages are almost solely dependant on the size of the company being managed —  hence Gail Kelly’s enthusiasm for Westpac’s over-priced acquisition of St George). Other important groups who benefit are opportunistic hedge funds (who are able to make a windfall profit by “shorting” the purchaser and buying the “target”) and banks who lend money to raiders at high interest rates. Not forgetting real estate agents in Toorak or Double Bay, who have S-Class Mercedes leases to pay off.

And investment bankers allow companies to raise equity — this ensures the survival of our most loved businesses (even if it would be better for everyone if these businesses collapsed and we replaced by healthy, well-run entities). It also allows those companies to continue to pay their executives (who destroyed company’s balance sheet in the first place) millions to remain ensconced in their highly paid roles. Bankers’ key roles in facilitating private placements also ensures that lazy and incompetent fund managers, who are struggling to beat a passive index fund, can report stellar gains at the expense of irrelevant small shareholders (who probably don’t even realise that their holding has been heavily diluted).

Lest we forget the valuable impact traders have on the economy — ensuring that assets are correctly priced. Just like last year when oil reached $US147 per barrel or when the Australian stock market hit 6800. The traders did a sterling job of “price discovery” and made the market more efficient for everyone.

(In fairness, the claim by New Economics Frontiers that bankers destroy £7 of value appears at best a highly inaccurate guess by an organisation virulently opposed to finance and many aspects of private ownership. The study based the figure on the increased debt allegedly “caused” by bankers and an alleged 5% “loss of economic capacity”. The claims appeared to be a convoluted way to criticise bankers without having to resort to any real fact-based criticism).

That said, it is difficult to determine any real value that the average banker provides to society, especially in comparison to their rampant paypackets. As Jordan Belfort wryly recalled in The Wolf of Wall Street, “it’s a fucked up racket being a stockbroker. I mean, don’t get me wrong: the money’s great and everything , but you’re not creating anything, you’re not building anything … the truth is we’re nothing more than sleazoid salesmen, not of us has any idea what stocks are going up!”

In other news, the great Ben Bernanke, the banker’s banker (and the current boss of the Federal Reserve), was just awarded the honour of Time Magazine’s person of the year — alongside other greats such as Adolf Hitler, Joseph Stalin and Ayatollah Khomeini. While (the first two of) those well-known dictators were responsible for the slaughter of millions, Bernanke has been responsible for the slaughter of the US dollar through quantitative easing and lax monetary policy in an attempt to re-inflate a credit-funded consumer spending bubble. The honour came less than a week after Bernanke was described as “the definition of the moral hazard” at a confirmation hearing by republican Senator Jim Bunning.

And that’s not even the worst of it — it was revealed yesterday that the great Goldman Sachs, doer of God’s work, is being sued by one of its own shareholders. The Security Police and Fire Professional Retirement Fund alleges that Goldman’s compensation policies “blindly reward” executives with an “extravagant compensation bonanza”. The lawsuit does not appear entirely unjustified — shortly before the sub-prime crash Goldman CEO Lloyd Blankfein was paid $US68 million for one year’s work. Shortly after, Goldman’s received a $10 billion loan from US taxpayers and another $13 billion (indirectly) after AIG’s collapse.

Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, by Adam Schwab will be published by John Wiley & Sons in March 2010.