The news is filled with stories of Wall Street and banker
misconduct — and rightly so. Interest rate rigging, phony interest
rate bids, defrauding investors, irresponsible lending, wildly —
and I mean WILDLY — oppressive practices towards credit card
borrowers. All of these things have happened.
They are betrayals of the duty of trust that Wall Street owes
America for the privilege of handling America’s money. Wall Street
owes America a huge amount for allowing so many of Wall Street’s
practitioners to become rich. They should not forget it.
But let’s also not forget that America and the world owe Wall
Street a great deal as well, and that usually gets forgotten.
Wall Street has perfected a system in which the ordinary
investor can own a piece of the corporate structure in the whole
world. Usually, if the investor is even a little bit careful, these
investments can be made at extremely low cost, with minimal fees.
Usually, if the investor is even a tiny bit prudent, the
investments can be made with sufficient diversification in cash and
bonds and in various industries of various sizes and in companies
with high and low capitalization so that even in bad times, the
investor’s risk is limited.
The investor in Peoria can with a click of a mouse button get
her investments diversified from Beijing to Bangalore and Brazil.
The access to investment opportunities is stupefyingly good and
usually at low cost.
Just as important, Wall Street has made it possible for
investors to have instant liquidity. The investor can get his
proceeds out within a matter of minutes. Again, the cost is usually
minimal. This is an innovation that has never existed until Wall
Street made it possible. We owe Wall Street for that liquidity,
which takes some doing.
Because stocks fluctuate substantially, they pay off at a much
higher rate of return than almost any other investment over long
periods. This means that the prudent investor can gain access to a
high yielding investment with extreme ease and if he is so
positioned mentally and financially, can hold on to those
investments and their dividends until time allows them to show
their superior returns.
This is an extraordinary benefit to people planning for
retirement and an extreme benefit to any careful saver/investor
over long periods.
Wall Street has also made it convenient for industry all over
the world to raise money for startups (now some of this is done by
venture capital and private equity), for expansion of existing
entities, and for modernization.
Wall Street has facilitated making mortgages available to be
offered to home buyers on a scale and with an ease that would have
been unimaginable only a few decades ago. By pooling together
mortgages, then selling pieces of those pools, money can be made
available to buyers who would otherwise have been shut out of
owning a home. To be sure, when this is done irresponsibly, the
results can be disastrous. But when done carefully, the results can
allow families to own homes for a lifetime.
I spent a large part of my life investigating and reporting on
Wall Street misconduct. I know it really exists. I know that some
extremely venal people work on The Street and some whose respect
for law is minimal.
But I also know that Wall Street has made some contributions to
saving, investing, retirement, and home ownership without which
life as we know it would not be possible.
