The 'Pack of Wild Dogs' Theory of Wall Street
It pains me greatly when politicians try to blame Wall Street for being greedy and for causing so many problems. I’ve come up with the ‘pack of wild dogs’ theory to illustrate how disingenuous it is for politicians to blame Wall Street for their own mistakes.
Let’s look a the characteristics of an actual pack of wild dogs. When you put a piece of meat in front of them, they single-mindedly pursue it, to the exclusion of all else. They are vicious, they are selfish, they are hungry, even their friends are expendable in the quest for that piece of meat. This is their instinct, this is what nature intends them to do, neither good nor bad, it just is.
The problem is if the piece of meat happens to be in the middle of your flower garden, the pack of dogs will destroy it in the pursuit of meat. If you wrap the meat around your cat (or your child), precious things get ripped apart. If you get close while they are feeding you will get bitten and possibly attacked. If you manage to leash them, they are leashed for as long as they want to be, then they escape and you will never catch them again.
On the other hand, if you can channel the pack of wild dogs to bring down a buffalo, your family will eat for an entire winter. If you can harness the pack of wild dogs to pull your dog sled, you can travel a thousand miles.
This is Wall Street.
This is not an insult in any way. Wall Street is not a single actor, it is tens of thousands of brilliant individuals, each of whom has a completely, utterly, separate goal of making money for him- or herself and their clients. When there is money to be made, it is self-organizing, cannibalistic and very, very smart.
And when I say “Wall Street” I don’t just mean the sharks in a small section of New York City, the “Wall Street” community I’m talking about is spread out across America. But we WANT Wall Street to be this way. We invest our savings in the financial instruments they manage, we want the most single-minded individuals possible making the greatest return on our investment.
Why do we expect them to be any different from what we require them to be? Why do politicians expect altruism from Wall Street?
Will they follow an esoteric plan that some clueless Congressman has managed to pass? No. Wall Street will relentlessly pursue profit, they have no other agenda, nor should they. Wall Street will not reach the goals of Congress unless the “meat” is in the right spot. And yes, if you put the “meat” in the wrong place they will destroy anything in their path, including your flowers, your cat or your child.
For some reason, politicians don’t understand this. Wall Street saw a piece of meat in new provisions of the Community Reinvestment Act. Congress and the White House expected only benefits. And of course Wall Street organized in a way that was unfathomable to Congress, beyond its understanding. Most of Wall Street made a great deal of money on mortgages, only a few were left holding the bag, and most of the losers got bailed out. Wall Street did their job, and a great many America people lost in the longer run.
Did we achieve the goal of more people buying houses? Yes, temporarily. But the cost was a major economic collapse. Liberals wanted more home ownership in the hands of the middle and lower classes. In the longer run, the hard earned money they invested in their houses just ended up in the hands of rich investors who hired people on Wall Street. Don’t blame Wall Street, they went after the meat Congress put in front of them. They have neither the ability nor the interest to control what happens beyond the profit of their clients.
And Congress still does not understand.
The point to all of this is Congress and the White House control the “meat” that Wall Street goes after in many cases. They do unimaginable damage by not understanding the nature and the power of Wall Street and the free enterprise spirit of America.
I’ve called America’s free enterprise the most powerful engine for change in the world. You can work with it or try to work against it. But if you are a politician and don’t understand it, you are in deep trouble. And it seems few of them do.