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Wall Street Entrepreneurs
The interrelationships between governments and markets in international finance are indeed complex. The international community has to veer round to some controlled and deliberate move to 'disintegrate' the international economy and curb the fluidity and volatility of international money flows causing extreme fluctuations in exchange rates and detracting from the benefits of international trade in goods and services. Cooperative crisis management would be the toughest challenge for the international financial community in the coming decade.
A breed of financial entrepreneurs thriving on the deregulated environment and free market ethic have over the past three decades broken down the segmented market structure of the post-war era and transformed Wall Street beyond recognition. The process of transformation was not premeditated; it did not come about through deliberate planning or design, but through innovative exploitation of market opportunities. While the new trading practices and a dazzling variety of derivative products have made the financial markets more efficient, improving their depth, liquidity and risk distribution, serious concerns have started emerging about the behaviourial pattern of the leading market players.
Market dynamics is not purely the creation of the invisible hand. Its quality is affected substantively by the culture of the visible market players. They are not independent of the world outside of finance. They make critical judgments that join money and credit with myriad economic activities. Their behaviourial responses to achieve corporate objectives, their perception of risk and the culture of risk-taking are critical determinants of the character of the financial market. How do the players behave? We have an interesting memoir [Henry Kaufman, On Money and Markets: A Wall Street Memoir, McGraw – Hill, 2000; pp 388 +ix.] from a Wall Street insider whose words were lapped up by the market in the 1970s and 1980s. Henry Kaufman grew up with Salomon Brothers, the leading investment banking institution of Wall Street. The dissection and analysis of his experience with forensic skill and its presentation with dispassionate objectivity provide striking insights into the motivational pulls of leading market players. Though they are operating in a competitive market ambience, where beating the market is the name of the game, they are expected to be responsible risk-takers, balancing entrepreneurial impulses with fiduciary responsibilities. How are they measuring up to those expectations? We discuss some of the systemic issues of critical concern that kaufman’s memoir throws up.
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