I know all the Friedmanist laissez-faire, free marketeers will jump all over my shit about this, but the current financial crisis, and every crisis prior, certainly makes a strong case about tighter regulation of Wall Street. Here’s the recipe: 1 part great wealth creation phenomenon and 1 part Wall Street greed yields a huge serving of crisis. Make no mistake, the Internet bubble wasn’t created by technology companies or entrepreneurs. It was created by greedy financiers and Wall Street. Don’t get me wrong — I certainly hope to have a ridiculous pay day with Wall Street’s help (I had a Wall Street pay day before, but the bubble burst before my section 144 stock was free to trade), which is precisely
why I would like more effective oversight to prevent another bubble from bursting in my face.
The Internet bubble would never have been were it not for Wall Street, in my opinion. It would have been an extended, sustainable period of prosperity that awarded innovation (not the “let’s sell $1 bills for 95 cents and make it up in volume” kind of innovation that was improperly awarded during the bubble). The current sub-prime mortgage crisis is another example of a bubble created where none existed. The rose colored glasses on Wall Street were all too willing to give AAA ratings to mortgage backed securities that really were absolute crap. The “greater fool theory” is all too real a phenomenon in the apparent zero-sum game that is Wall Street finance (it doesn’t need to be). The problem is, we’re running out of fools. Additionally, our entire financial system gets downgraded as you can rest assured the fools who got bitten once won’t be back to the trough any time soon. Meanwhile, our currency weakens and more of our debt is in foreign hands.
It seems we repeat history all too often and never learn anything from it. Sorry Gordon Gecko, greed isn’t that great after all.