Reconstructing Finance

Today the financial services industry in the rich world—sometimes just called “the banks”-finds itself, as Shakespeare put it, “in disgrace with fortune and men’s eyes.” What is remarkable is the degree to which “bankers” as a group just don’t understand their disgrace and its consequences. Nor do the leaders of the industry fully comprehend the fact that they accumulated outlandish riches not through any talent or industry on their part (though many displayed both in high degree), but through pure grace. John Brooks, who wrote beautifully about such things in the New Yorker 50 years ago, titled his book on the golden age of Wall Street Once in Golconda (Harper & Row, 1969), after a fabled city in India so wealthy that a man only had to go in one gate to pass out the other side rich. Such was Wall Street in the days of Harding and Coolidge. If you left Yale or Williams and joined a Wall Street firm, it was hard not to become extremely well heeled in the decade before the Crash of 1929. If you look at the physical reality of New York City and its suburbs, the wealth generated in that decade still lives in hundreds of prewar luxury apartment buildings and thousands of faux-Tudor mansions, a pattern repeated in large cities across the country where big killings in the market were turned into big real estate. If you went to the Street with the same pedigree in 1934 or after, you might do all right. But the gate to Golconda was shut. Luxury buildings and big houses largely ceased to be built around the financial centers.