I think this misses two essential points and they are points that, unless Wall Street (by which I mean the people in finance in midtown Manhattan who run the place) faces up to, that will doom them to being curbed and constrained much more violently than they probably need to be.
First, Jordan Belfort was a crook. The article refers to him as an outlier, which, in a way he was, but I think it's more correct to refer to him as an early-adopter, to borrow the technology phrase. Stratton Oakmont was an out of control cesspool of unbridled self-interest and self-serving, which, in its day, did make it an outlier. But as the nineties progressed and the 'aughts' began, more and more of the large firms' business and almost ALL of their proftis were derived from proprietary trading. More and more, they BECAME the counterparties their clients traded against. This led to the charming sight of Street firms creating and selling crap they knew would fail to feed the increasing demand for such crap. Not once did they step back and say 'Whoa! This is dangerous crap; maybe you shouldn't buy it!' They merely held their noses, created more crap, and sold it to their credulous (and some of the biggest, most sophisticated players in the game were, in fact, the most credulous) clients. The Street firms that got hurt were the ones that had 'created' new crap and hadn't been able to offload it by the time the fecal matter hit the rotating device (or the few that were dumb enough to eat their own cooking.)
This leads to and overlaps the second point. Blankfein is quoted as saying "As the guardian of the interests of the shareholders and, by the way, for the purposes of society, I'd like them to continue to do what they are doing." I think that, up until May Day, the Street firms were the guardians of the interests of shareholders and society, but the change from fixed commissions so radically changed the tenor of Wall Street and ushered in the era of fee-driven profits and proprietary trading, that they ceased being shepherds and became wolves. The end of Glass-Stegal, while central to all of this, really just let them prey on a wider and more diverse flock of sheep.
Until Wall Street (and I'll include the supporting press in this) faces up to the facts and, hopefully voluntarily, cleans up its act, all the moaning in the world about unfairness is just going to be the whining of a little boy caught with a slingshot and a broken window (except the slingshot may be more a thermonuclear device...). Stop whining and fix the system or it will be fixed for you. And that fixing is likely to be a lot more 'unfair' than Scorsese and DiCaprio pointing out a few picturesque flaws.
Read more: http://www.entrepreneur.com/article/230601#ixzz2pvbjk1Vm
No comments:
Post a Comment