William D. Cohan - Why Wall Street Matters

T he conversation weve been having about Wall Street in this country for the past decade has become so utterly hyperbolic, supercharged, entrenched, and polemic that if youre like most people, amid all the outrage youve totally lost the thread of the discussion. Maybe you think the whole system is rotten to the core. Maybe you think, sure, theres greed, excess, and bad behavior on Wall Street, with nary a consequence for those responsible, but is the right answer to these problems to break up the big banks? Maybe thats about when you just checked out.

Even the phrase Wall Street conjures confusion. What are we talking about? The actual place? Just the very biggest investment banks, or the smaller ones, too? Does the term include hedge funds and private-equity firms? Are we talking about the entire New York finance community? Do we include the banks, hedge funds, and private-equity firms in the rest of the country? What about the financial system of the entire globe? What are we even referring to anymore? Most people havent a clue. William Faulkner once described the American South as less of a geographical place than an emotional idea. Is Wall Street simply an emotional idea?

The questions keep piling up. Maybe we can define what we mean by Wall Street, but even if we do, how should we feel about it? Should we be angry that Wall Street seems to be nothing more than a festering, open wound of rampant self-interest and malfeasance? Or should we be happy that Wall Street has become a convenient metaphor that politicians use to park blame for every bad economic thing that has befallen the country in recent years?

Or could it be that Wall Street is something altogether very different? Is Wall Street the left ventricle of capitalism, the brilliantly designed engine that powers innovation, job growth, and wealth creation and that has become the most sustained way by which billions of people the world over have been lifted out of poverty and given a chance at a better, more economically fulfilling life?

Is Wall Street a cause for celebration or denigration?

This is a fundamental question that has become so charged and shouted over that by now most people dont know how to answer it. Or dont dare to try. But if they are pressed, their instinct would likely be to agree with Jean-Jacques Rousseau, the eighteenth-century Enlightenment philosopher, who once said that finance is a slaves word, while the profession itself is nothing more than a means of making pilferers and traitors, and of putting freedom and the public good upon the auction block. The modern-day equivalent of this sentiment can be found in the musings of Bernie Sanders, the U.S. senator from Vermont and former Democratic presidential candidate, whose stump speeches during the 2016 presidential campaign condemned Wall Street relentlessly. Greed, fraud, dishonesty and arrogance, these are the words that best describe the reality of Wall Street today, he said in January 2016. And then he paid homage to one of the most recognizable cultural touchstones about modern Wall Street when he referred to the famous Greed is good scene in Wall Street, the 1987 Oliver Stone film, where Gordon Gekko, played with oleaginous glee by Michael Douglas, lectures Bud Fox, his young and aspiring apprentice (played by Charlie Sheen). So, to those on Wall Street who may be listening today, let me be very clear, Senator Sanders continued. Greed is not good. In fact, the greed of Wall Street and corporate America is destroying the fabric of our nationWe will no longer tolerate an economy and a political system that has been rigged by Wall Street to benefit the wealthiest Americans in this country at the expense of everyone else.

Senator Sanders used his growing political power to influence the antiWall Street rhetoric of the Democratic Partys 2016 platform. To restore economic fairness, the platform reads, Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again. We must tackle dangerous risks in big banks and elsewhere in the financial system. And to do this, the Democrats advocated breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy and an updated and modernized version of the so-called Glass-Steagall Act of 1933, which forced the separation of investment banking from commercial banking for the next sixty-six years, until its repeal in 1999. Plugging his new book, Our Revolution: A Future to Believe In, after the election of Donald Trump, Senator Sanders continues to lambast Wall Street. Hell, Wall Street has grown so unpopular that even the 2016 Republican Party platform called for the reinstatement of Glass-Steagall. Just think about that for a moment. Rest assured, Trumps victory does not necessarily mean that the populist anger directed toward Wall Street dissolves overnight.

So, is Senator Sanders correct? Is Wall Street actually rigged to benefit the rich in America at the expense of everyone else? Or is what Wall Street does in its many guisesand as we can see by all the questions just asked, there are a variety of different aspects to what gets lumped together as Wall Street these daysa monumentally important, utterly irreplaceable way that capital gets allocated in the most efficient, fairly priced manner from the people who have it to the people who want it?

How can it be, as the British economist, money manager, and writer Felix Martin observed, that high finance is at one and the same time something so completely mysterious and so utterly banal? To be sure, there are many crucial challenges facing the world todayamong them climate change, income inequality, suppression of human rights, nuclear proliferation, and political unrestbut our collective failure to decide whether Wall Street is a force for good or one for evil, whether it should be celebrated or dismantled, certainly ranks high among them and effectively precludes us from having a much-needed debate about what Wall Street does right, and should be encouraged, and what Wall Street does wrong, and should be eliminated.