This is interesting:
Gutfreund did violence to the Wall Street social order — and got himself dubbed the King of Wall Street — when in 1981 he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation, a decision that can now be seen as the first pebble kicked off a cliff that triggered the avalanche that has engulfed Wall Street……(…)…..This was yet another consequence of turning Wall Street partnerships into public corporations:
OK, clearly, I\’ve cut a lot out.
But let us, just for the sake of argument, accept the analysis.
What would be the solution?
The analysis is that once those doing the gambling are no longer doing so with their own money but with that of others they are not sufficiently restrained in said gambling.
The solution would therefore be that the gambling should be done with taxpayers\’ money? Nationalisation of the banks?
That doesn\’t seem to solve the problem.
We should ban the gambling? Not actually possible and even if it were we do still want that to continue: for it\’s how we move risk around, something we most definitely do want to do.
No, we want to make people go back to gambling with their own money. So the solution is:
More hedge funds. More private equity. More people having their own wealth tied up in the trades that they\’re doing.
That is, exactly the opposite of everyone is shouting should happen.