Monday, August 15, 2011

The rotten world of Wall Street

William D. Cohan explains: "... Since 1970, when financial companies began selling shares to the public, the industry has ensnared the rest of us in repeated crises of its own making. There was the crash of 1987 and the credit freeze that followed, the Asian crisis, the Mexican crisis, the Russian crisis, the collapse of Long-Term Capital Management, the Internet bubble and, most recently, the risky mortgage-related behavior that led to the Great Recession and brought us to the edge of economic devastation. As the past few weeks have shown, we are still suffering its aftershocks.

Capital Markets

At the time, each of these crises seemed existential and rendered the capital markets -- the engine room of capitalism --dysfunctional for long periods. The increasing rapidity and intensity of each of these events is directly correlated with the decisions by Wall Street companies to go public. The consequence is that Wall Street replaced its traditional partnership culture -- where stakeholders shared profit and losses -- with a bonus culture that encouraged accountability-free, asynchronous risk-taking with other people’s money. Rather than accept responsibility for these recurring crises, Wall Street’s defenders.
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