Question/Comment: Can you give any positive commentary to help reassure small investors that there is a reasonable chance to expect integrity when dealing with Wall Street?
Paul Solman: More than in the past, say? I don’t see why. Here’s an excerpt from a piece of ours right after the Enron scam in 2002:
“Stock scams like the ones that have made Enron a household name, are as old as the market itself.” Consider this poem: ‘Some in clandestine companies combine, erect new stocks to trade beyond the line, with air and empty names beguile the town and raise new credits first, then cry ‘em down, divide the empty nothing into shares, and set the crowd together by the ears.’ That’s Daniel DeFoe, of Robinson Crusoe fame, writing in the early 1700s.
Here’s the French artist Daumier [we reproduced a newspaper cartoon of his] in the mid-1800s, depicting a speculator in the stock market planting false rumors to manipulate prices. And we’re all old enough to remember the insider trading and junk-bond scandals of the late 1900s, starring Ivan Boesky, Mike Milken, and the like.”
There do seem to be cultural shifts in ethical standards – you aren’t as likely to screw your neighbors if you think it’ll send you to the underworld, for example — but the logic of capitalism is the pursuit of self-interest. And that means there’s always an incentive to pretend to integrity and then not follow through.