Wall Street in Perspective

I entered Wall Street in 1956. Banker's Trust, then Ball, Burge & Krause in Cleveland. Reynolds Securities, Oppenheimer, Drexel and Dean Witter. The old Wall Street was privately owned. The top tier of ownership made up to 30% on their equity--the middle group ranged up to 15%. They were risk adverse. Leverage over 3-to-1 was considered speculative. Mike Milken introduced cash flow equity. But, he too was risk adverse.

Merrill Lynch demanded negotiated rates. The old timers cashed in and fled. Public ownership followed. A young breed of business schoolers replaced the old timers. Greenspan made cheap money available. The new group arbitraged the spread between government money and what the market would bear. New and unintelligible products replaced traditional investing.

The youngsters made millions--far beyond the modest profits of prior bankers. Ponzi ruled. The government provided the tulips.

Then, like dancing school, the music stopped and with one chair short, a domino effect crashed the market. Each day another entity caught short. Short sellers ruled. Hedge funds turned to commodities--the riskiest of all investments. That bubble burst. The government called in markers. Bernanke/Paulson faced Greenspan's profligacy. His double speak was revealed. Where will it end?

Perhaps reality has brought us new leadership. The 2008 election may be the most important in our lifetime.