Something's Gotta Change

Bewildered is a good term to describe the sentiment many Americans have toward Wall Street.  Four years after the collapse of Wall Street, we continue to hear about millions of investor dollars being gambled using arcane, casino-type investment vehicles such as “over the counter synthetic derivatives” and “credit default swaps.”  Even the names sound false.  It’s easy to understand our rampant mistrust.

Said one candid observer, a Wall Street banker himself, “These are recurring events that have to do with the fact that banks don’t want to lend money.  They want to trade opaque, illiquid securities that are not well understood, and I’m not sure banks should be doing that.”

JP Morgan’s recent loss of $2 billion picked at the scab that many of us have over the 2008 economic collapse. Millions of us lost 30, 40 even 50 percent of our retirement savings and walked on the stage of years of job uncertainty.  Yet, the Wall Street fraternity of a few hundred traders continues to trade using investment vehicles that have nothing to do with real world assets . . . that are opaque, illiquid and not well understood. 

On second thought, “bewildered” is too mild of a term.  Anger is more like it.

Four U.S. banks control almost 95 percent of the marketplace for derivatives: JPMorgan, Citibank, Bank of America and Goldman Sachs.  As shepherds of trillions of dollars in consumer deposits, they are insured by federal taxes through the FDIC.  But their presence at the roulette table has little relationship to conventional lending and borrowing.  Far from holding any interest in serving their customers (which is at the heart of most American businesses), these folks are chasing seven-figure bonuses and the thrill of a jackpot pay-off.

I may be in the minority, but I doubt it when I say that the chief motivation of U.S. business cannot be purely profit.  Wall Street gives decent, product-solid, service-oriented and customer-focused businesses a black eye by casting America’s reputation as greed with a capital G.  In light of all these firms continue to get away with, you wonder if it’s time we call the U.S. financial system on the carpet for a thorough performance review.