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 to 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)