The (High)Way to Fix Wall Street

I’ve got a new idea for how to handle Wall Street.  Well, actually, it’s an old idea…

As you may know, our federal government is working on legislation to regulate Wall Street to prevent repeats of the recent market collapse.  In this week’s issue of the New Yorker, James Surowiecki makes the case that regulating Wall Street will not be enough to prevent history from repeating itself.  Surowiecki points out that as recently as 2002 Wall Street had another meltdown, and that, as a result of that disaster, new regulations were put in place.  Those regulations did curtail some shady practices, but that financial crisis and the subsequent regulations also had a couple of unintended effects that Surowiecki argues primed the country for our more recent financial crisis…

  1. Investors who had lost a bunch of money when the tech bubble burst were feeling desperate to make it back and were therefore willing to make risky bets.
  2. All the disclosures that the post-2002 regulations require may give people a false sense of security.  “They must be playing by the books,” we say to ourselves, too quick to discount problematic conflicts of interest because they have been disclosed and we assume are therefore benign.

Surowiecki points out that Wall Street imploding and screwing up our lives is a consistent pattern.  It happened in 1929.  After the depression, people were slow to trust the market again.  But by the 1960s the East Coast version of the Las Vegas Strip was open for business again.  That time it only took 20 years to implode.  And only about ten years to build back up, as the tech bubble was robust by the late nineties.  We know what happened just a few years later in 2002 when the tech bubble popped.  This time it took less than five years for investors to go all in on subprime lending, etc…  And now here we are…  With Wall Street executives emboldened by the massive bailouts they received, well-rested from corporate retreats in resorts, with nothing to lose, ready to sell us another chance to forget our troubles and send some money their way.

Of course I support further financial reform legislation, but Surowiecki’s piece has me more convinced than ever that the reform will not solve the problem.  Here’s where my new idea comes in…

What do people in power do when they have a street/neighborhood that’s bothering them?

Look no further than a few miles north of Wall Street to the South Bronx where several decades ago the Cross Bronx Expressway was constructed to make it easier for people from the suburbs to get to/from Manhattan.  The road could have been built a block south, but then it wouldn’t have served the dual purpose of carving up African-American, Puerto Rican and Jewish communities and guaranteeing low property values in perpetuity (for more on this check out Robert Caro’s The Power Broker or Highway Robbery: Transportation Racism & New Routes to Equity by Bullard, Johnson and Torres)…

Last night I saw a documentary called “Faubourg Treme: The Untold Story of Black New Orleans” about the famous Treme neighborhood in New Orleans.  Like the South Bronx, Treme was a racially diverse neighborhood with a high rate of Black homeownership and strong community and culture.  And like the South Bronx, the community was devastated by a concrete dagger stabbed through its center.  One of the main thoroughfares of Treme, North Claiborne Avenue, which at one time was lined with grass and enormous Oak trees, was paved over and covered by Interstate 10.

I’ve heard similar stories from other cities around the country.

So why don’t we try it on Wall Street?  We could connect the New Jersey Turnpike with the FDR Drive on the east side of Manhattan.  This would make it much quicker for travelers headed northeast.  We could even add an exit in the financial district for commuters (see Figure 1.1 below).

Figure 1.1:

The people of the South Bronx and Treme have been resourceful and resilient despite having central thoroughfares of their communities covered in concrete.  So maybe once their buildings are torn down and they live in the shadows of a six lane highway, Wall Streeters’ll bounce back with a much needed new approach to financial underwriting…  But I have a feeling that it takes heart, soul and concern for other human beings to be able to turn calamity into creativity and culture.  If so, our friends on Wall Street–and, tragically, all of the rest of us, given that we always seem to foot their bill–will be in big trouble.

1 Response to The (High)Way to Fix Wall Street

  1. Rafi May 14, 2010 at 9:43 pm | Permalink |

    Nice idea…
    Or how about higher taxes on the super-wealthy…. wait, didn’t we used to have that? Or what about some actual justice, throw these fools in prison instead of promoting them / appointing them to government positions?

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