William Cohan talk, “Money & Power”

Why does Wall St. keep doing this to us?

this is NOT a “once in a hundred years” thing, as they like to say
it is par for the course, BUSINESS AS USUAL

Goldman-Sachs

has been around for a LONG time, 120+ years
in that time has been involved in MANY law suits, indictments, ponzi schemes, etc

Why are we at their mercy?
Why does this keep happening?

1. 1970 — 1st Wall St. investment firm went PUBLIC

before this, all firms were PRIVATE PARTNERSHIPS
i.e. the partners had their own full net worth on the line in the investments they made

Therefore, firms were PRUDENT about choices

1933 — Glass-Steagull Act (repealed 1999)

Banks had to choose commercial banking or investment baking
this separated the RISK TAKERS from the INVESTORS’ MONEY

After 1970, all the other big investment firms started going public
replaced the partners’ money with the public’s money

when the partners’ money was on the line, there was a “partnership culture”
(watch out for the money)

when gambling with the public’s money, created a “bonus culture”
(make as much $$$ as possible, take as many risks as needed)

2. How people get paid has changed

*** no other public companies pay 50¢-60¢ on the dollar to employees! ***
(rather than returning that money to the investors)

Publicly-traded Wall St. firms generate money for the EMPLOYEES not for the INVESTORS
Employees of Wall St firms are the most risk-averse people on earth because they NEVER take risks with their own money

3. Wall St. has become really good at financial innovation

when the MBAs
mathematicians
quants
— literal rocket scientists —
came to Wall St., Wall St. was forever changed

SECURITIZATION

package up all sorts of loans into a security and sell them around the world

good for a while, lowered interest rates, made it easier to get loans
BUT
then inflates a bubble and the bubble EXPLODES

e.g. mortgage-backed securities

—=+=—

William Cohan Daily Show appearance April 28th 2011
(+ additional content online, unaired extended talk part 1 | part 2)

in it he was wondering why no one was protesting what was happening on Wall St.
then a few months later, Occupy Wall Street happened

Cohan has criticism of the Occupy movement

— is disappointed in them a little, wishes they were educating people in how Wall St. works, how it can be changed
— feels they haven’t taken the time to learn about what they are protesting
— seems unlikely they can really change Wall St.’s behavior because they won’t take the time to educate themselves and speak the language that is spoken on Wall St.

[could we contact him for a lesson in how Wall St. works?]

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