Would the world be happier without it ?
Hard to answer. Wall street is where the New York Stock Exchange is, and because every kind of Financial activity is to be found in that area it came to pass that Wall Street stood for FINANCE, much like the CITY OF LONDON stands for Finance. No Wall Street is not a Municipality with its own Mayor, like the City of London is. Wall Street in finance-speak is all about F i n a n c e. It is Goldman Sachs, Morgan Staley, CITI et al. Wall Street is Banking and Investments. It creates Investment opportunities and Investment instruments. It employees the best and the brightest from America’s top Business schools as well as Mathematicians who help create “tools” strategies and “products”. Wall Street is useful in that it provides the Capital companies need, for whatever reasons, as well as advice when companies, or Pension Funds are considering moves involving finance. Wall Street is Mergers, Acquisitions, friendly or hostile Take Overs, Insurance, Hedge Funds and of course the Rating Agencies like S&P, MOODY’S, FITCH and some lesser known. Wall Street is Portfolio Management for individuals and institutions with Trading as one of its big income generators. It is trading that provides bulky profits and it is trading that brought Wall Street down in 2008 triggering the crisis on Main street. Wall Street, however is all too powerful to ignore so the US Government came to its rescue.
Wall Street trades in conventional and in NEW products, like Bonds consisting of Home Mortgages “packaged” and sold as Bonds. When the Banks, which had extended mortgages to people who could not afford them and the mortgages were not serviced, began foreclosures the value of the Bonds consisting of mortgages started melting and that set the stage for the general melt down of the “new” financial products, the result is known. Bear Sterns was the first to go, followed by Lehman Brothers. The others were lucky. Uncle Sam was alarmed at the sight of the avalanche and came to their rescue because they were considered too big to fail. Their loss would create an unmanageable (?) crisis (for whom?). There were other composite “products” as well which even the traders did not quite understand, but which they traded none the less. They came to be known as TOXIC financial “products. The losses from these compounded the problems for Wall Street whose games made people talk about the Wall Street Casino Economy. The US taxpayers kept Wall Street alive with the money loaned to the Banks and soon Wall Street was safe and back to its old ways that had brought about its near downfall and the crisis on Main Street. It repaid the loans and the interest on them, so the taxpayers got back their money with a profit. Wall Street was free to resume its games.
Main Street is the reflection of the Economy, the physical Economy, the real Economy, not the invisible paper Economy of Wall Street, which creates colossal sales and profits, however with a disproportionately small impact on the physical Economy. The executives of the Wall Street institutions are the best paid in the world, basically because their bonuses for making huge profits for their companies are outlandish. The physical, the real Economy creates and trades what people see and use. It creates employment and income for the Government. By contrast Wall Street creates an insignificant number of employment positions, compared to the physical Economy. It generates an immensely huge income for itself, but not a proportionately huge income for the Government, because it enjoys some Tax benefits. It creates and trades little of what people see and use. Main street suffers from a downturn of the Economy, not necessarily so with Wall Street, which trades in Foreign Debt as well as in American “values” and of course it trades and invests Globally.
Main street connects with Wall Street to raise capital, for whatever reason, to hedge its bets with “futures”, like Airlines do with fuel, to administer its pension funds, to buy insurance of every kind and of course for advice on strategic moves involving equities and money. The contribution of Wall Street to New ventures, like those springing out of Silicon valley via the Venture capital and Private placements routes to a listing in the N.Y.S.E is also very significant in terms of financial advice and handling.
Main street and Wall Street coexist happily, except when Wall Street feverishly engages in its casino-like moves. It is then that Wall Street comes to the verge of catastrophy, which can extend to Main street and when this happened in 2008 the Government rescued Wall Street much to the chagrin of millions of Americans who had lost their homes and those who were loosing their jobs as the crisis on Main street was spreading. They did not get a bail out like Wall Street did.
But Wall Street has not learned the lesson and it is back to its old antics, only this time there will be a revolution if the Government comes to its rescue again. Too big to fail is no longer “insurance” and Wall Street will face reality.