The headlines are filled these days with comments, criticisms and expositions about Wall Street and the workings of Wall Street and the people who work there. To read the media of all stripes one could easily conclude that Wall Street is a monolithic institution run by a few dozen people. There is this constant drum beat about the conflicts and discord and disconnect between Wall Street and Main Street. Those allusions are inaccurate at best and deceiving at the worst.
Yes, there is a Wall Street in Manhattan. It got its name because it in the mid 17th century there was a wall built there for protection from the Indians and the English. Yes, the NYSE is located there and it is also true that many investment bankers and brokers work there or near there in Manhattan. But “Wall Street” as the term is used nowadays is really a reference to the entire universe of buyers, sellers and traders in the stock, bond and investment instrument markets around the US and the world. The NYSE and NASDAQ play a very important function in regulating the activities of traders and as a clearing house for transactions so they can be monitored and the record of transactions is clear. But there is no group of a few dozens or even a few hundred people who sit around and make grand strategies about the course and direction of our entire economy and make money regardless of what is happening on Main Street. Nothing could be farther from the truth.
Wall Street today is diverse geographically. Sure there is a high concentration still in Manhattan but that has changed dramatically in the last couple of generations and is accelerating with the advances in communications–computers. Now there are major players located around the country and the world. Warren Buffet is a heavy hitter by any measure and he doesn’t hang out on Wall Street. Wall Street today is the loose group of thousand and indeed probably a few millions who make investments in companies and commodities from around the world. Los Angeles, Chicago, Connecticut, Dallas, London, Singapore, Hong Kong, Sydney, Paris and all points in between are Wall Street.
The alleged big Fat Cats sitting around making decisions on the economy that affect all of us are like the old Pogo comment about meeting the enemy and they is us. Harvard and all the Ivy league schools and other major universities have billions upon billions of dollars in investments. They are part of that Fat Cat crowd. The major pension funds from public employees control untold billions. Calpers alone in California has more to invest than most nations of the world. All the firefighters, policemen, teachers and other public employee unions have zillions in funds they invest on a daily basis. Every union with a Fortune 500 company has millions or billions they control. They are the Fat Cats of Wall Street. Yes, each individual member doesn’t control billions but they group sure does. Same is true of the investment bankers. They are advisers for the most part. To castigate Wall Street is like a dog chasing its tail. At the other end of that blast of invective is Main Street. All of these funds, trusts, unions and endowments have boards, trustees, and administrators to control that wealth and to try and make it grow. Indeed when it doesn’t grow they have hell to pay from the criticism they receive from the funders of the respective fund of money. Those people who manage all that money are the Fat Cats of Wall Street.
It is always so tempting to identify an enemy as the cause of troubles. I am NOT defending any particular investment house, I have no special love for Goldman Sachs or Citigroup, but they are only some of the participants in the game on Wall Street. When we talk about regulating Wall Street remember that you are talking about regulating yourself. Yes, there needs to be rules of the game. The most important of which is disclosure of data in a timely fashion so we are all dealing with the same information. Calpers controls as much or more money than many of the hedge funds. They are not babes in the woods. Their paid staff get a lot of money to make wise investments. No one holds a gun to their head to buy anything. They can always decide to invest every nickel in Treasuries or CD’s but the outcry from that with their retirees would be tremendous. Yeap there have been some outright crooks like Madoff and there has been since time long gone–Jacob cheated his brother Esau out of his inheritance remember. Criminal laws are for the law breakers but regulation affect us all. Careful how you regulate.
Before we start making the Fat Cats wear a Scarlet Letter we best take a look around and truly assess how many of us would have to be wearing the same badge. We may not be important players like the presidents of some of the investment banks but we are players and collectively we, through our various organizations that invest for our behalf, are part of the Fat Cat crowd. Main Street is Wall Street. They are symbiotic and form a financial symmetry that benefits us all.
Next time you are angry at the Fat Cats remember that it was J P Morgan who personally loaned the Government 65 million in gold to stave off complete collapse in the Panic of 1893. He did this at the request of the government. www.olcranky.wordpress.com