Eva Knott 7:43 p.m., April 15
What's Wall Street Worth? Little, If Anything
John Cassidy of the New Yorker has an excellent piece in the Nov. 29 edition, titled "What Good Is Wall Street?" Cassidy answers the question with well-constructed logic: Wall Street is worth little. Wall Street will claim that it finances new business. But only 13% of Goldman Sachs's business is financing new business, while 63% is trading. Cassidy quotes a financial industry realist who says that most of what Wall Street does could be eliminated "without doing any damage to the economy." Up to 1980, compensation on Wall Street was roughly the same as in other industries. Now that compensation is up 60%, as the number of money-shufflers has risen from 5 million to 7.5 million. Although volume in credit default swaps, those poisonous derivates, has dropped steeply, the "insidious culture tat allowed Wall Street firms to peddle securities of dubious value to pension funds and charitable endowments remains largely in place," writes Cassidy. He wraps up this splendid piece: "For a long time economists and policymakers have accepted the financial industry's appraisal of its own worth, ignoring the market failures and other pathologies that plague it." He does NOT, however, touch on the obvious: most of those economists work directly or indirectly for the financial industry, and policymakers (Congress) are in the pocket of Wall Street.