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Wall Street: The View from Here

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Wall Street is a buttress of Americana. Its charter (loosely) is to make something out of nothing, or at least, pump money into our economy by wheeling and dealing. So why is it such a surprise to us when we find Wall Street gambling with our assets?

We should know by now that greed and pride step into the ring whenever money enters the equation. Perhaps we have forgotten that this is an unfortunate by-product of human civilization, and have grown comfortable in our now-wealthy, powerful nation. Miles’ Law holds—”Where you stand depends on where you sit.”

As the middlemen (more eloquently, financial advisors), these firms deal almost exclusively B2B. In this high-stakes game, you lose your reputation, you lose your clients, and your money goes out the door. It’s rare for even those at the very top to think about how their institutions can benefit industry. And why should they? It’s a dog-eat-dog world, and if each executive, managing director, or analyst fails to generate significant profit for his respective firm, then it’s his head (and paycheck) on the chopping block.

So it makes sense for the government to be the one pondering this case, figuring out how it will make the dogs work toward the common good rather than in self service—which leads us to the current Goldman Sachs debacle. When the SEC charged the global investment bank with misleading mortgage investor ACA Capital Management in synthetic CDO transactions late last week, the straw broke the camel’s back. The government finally decided that its laissez-faire approach to financial regulation has been sorely inadequate. As of yet, we haven’t seen the SEC’s full hand, and after the Bear Stearns hedge fund managers (Ralph Cioffi, Matthew Tannin) were acquitted last November, it’s likely we won’t until the commission goes forward with the prosecution, but at least now we’re getting somewhere.

Where does that leave us, the employees of industry, the private investors who gain most of our knowledge of Wall Street from reporters and the Internet? Surely we are not well-equipped, without at least interacting with such financial institutions, to bear the full burden of due diligence. Caveat emptor; life’s not fair. Our lesson should be the same as those who deal directly with the Street. If you decide to stay in the game, when it comes to buying low and selling high, don’t forget about the third option in your playbook. “If you would be wealthy, think of saving as well as getting.” (Benjamin Franklin)

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About didihe

  • http://viclana.blogspot.com/ Victor Lana

    I wonder if in the Wall Street sequel if a contrite Gordon Gekko will tell the world, “Greed is not good.”

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    “Where does that leave us, the employees of industry, the private investors who gain most of our knowledge of Wall Street from reporters and the Internet?”

    The above statement pretty much disqualifies what could have been a good article. Who are the investors you speak of? If it’s you, then you’re obviously condoning the abuses by participating in the game.

    Indeed, it’s way too cavalierly an attitude towards the culture of corruption which had permeated the entire business climate, something you appear to take for granted as a kind of inevitability, something we must put up with if acquiring personal wealth ought to be our undisputed priority – you do refer to savings rather than investing – that for some reason sounds hollow to me.

    How about the wealth of nations in the extended sense of the word, a sense which ought to extend to all the Third World countries which, for some unfathomable reason, are omitted from your equation? Is it because they don’t count? Because the well-being of Americans comes first and foremost, may the devil take the rest?

    Don’t you see the world as becoming more and more interconnected in all kinds of ways, that what affects us affect all?

  • didihe

    Thanks, Robert, for your comments. In response to your questions…

    It was not my intention to condone the abuses–just merely playing devil’s advocate. Regardless of what we would’ve liked to happen, these abuses have already occurred. So wouldn’t you agree that if we are going to participate (in this scenario) as an investor, that we should come up with a risk-mitigation strategy that takes into account past and possible future abuses?

    To your point about the wealth of nations… Here, I am using “Wall Street” solely in the context of the United States, which explains why I have not explored Third World or other countries in this article. Although, yes, I do agree with you that the world is becoming more interconnected–and interdependent, may I add. This will indeed eventually affect us all in different ways, which is why I feel it’s even more important for us to become as well-informed as we possibly can (financially and otherwise) so that we can roll with the punches when/if another injustice occurs.

    Best,
    didihe

  • didihe

    Roger*, not Robert. My mistake.

  • http://ruvysroost.blogspot.com Ruvy

    didihe,

    I rather enjoyed your article. I was not discomfited, as was another posting here, over your leaving out the third world in your article. Nor was I bothered by the apparent cavalier attitude towards the corruption of the American business culture. Considering that you appear to be writing about the United States alone, I’m guessing that you also reside there. So, it is reasonable to expect you to not be too bothered by the attitude of corruption. That is not a criticism, just an observation. I can be wrong, and apologize if I am.

    Besides, when you deal with Indians, Russians, Nigerians, Arabs and Israelis, you realize that the corruption of the American business culture is not that bad at all. It’s just that when American accountants lie about multi-billion dollar firms, the consequences are far greater than of some Nigerian lying about an oil well, or some Israeli selling you a defective vacuum cleaner.

    So long as Israeli accountants use Israeli or Canadian accounting rules to describe Teva, the huge Israeli pharmaceutical conglomerate, for example, I can feel safe investing. The minute they start using America’s GAAP, I have to put my money under the mattress instead.

    But I think this Goldman-Sachs thing will go a lot farther than it would appear to at present. It strikes me that there is a “double down” on the part of the Obama régime, and when I see more articles on this going into more detail here, I’ll express my views more fully.