Kathleen E Lo Pinto Vignolini of Long Branch, N.J., asks:
I thought that the stock market was always "publicly" owned. Was the switch from private to public ownership a gradual or quick change? How, or rather who, fostered the change?
William Cohan responds:
I am sorry if I confused you. What I was referring to was that Wall Street firms went from being private partnerships owned by their partners to public companies listed on the stock exchanges, where - you are right - all public companies are listed and traded.
The problem for Wall Street firms going public was that in the process they transferred the risk of their business to the new shareholders and felt liberated to take huge risks, in return for a huge bonus, that they would receive with no accountability long before any problems developed with the revenues they had generated.
Back in the old days of private partnerships, the partners had shared liability with one another so that if one partner did something stupid and cost the firm money all the partners would suffer in their wallets. And that guy would probably be fired, straight away. That kind of accountability was sent packing when the firm's went public.