Red-Blooded Risk: The Secret History of Wall Street

Finance People

Most of the people working in finance are processing information. Every purchase and sale, every paycheck, every transfer of funds generates one or more transactions, and there are additional transactions such as generating daily interest payments for every pool of money and supporting financial trading, including high-frequency trading. This amounts to hundreds of billions of transactions each day. A hundred billion is not a large number in modern information processing terms. The challenge is that the transactions are dispersed around the globe and are aggregated in many kinds of systems, not all automated. Each one presents an opportunity for fraud or theft. They also involve people, and people are very bad at security and make lots of errors.

Although you don't read a lot about this kind of finance, it is the area in which people have the most personal experience. Chances are you know more accountants, financial computer people, bank tellers, insurance adjusters, and loan officers than you do investment bankers. And you have almost certainly argued with one or more of them about a transaction.

The third part of finance is information hoarding. From 1900 to 1970, most financial information was hoarded by banks as a source of their power and profits. Banks knew which businesses were creditworthy and were able to get their money out first when there was a problem. They knew the operating results of companies as well as the company management did. They knew what ...