The End of Wall Street?

In a recent column, the International Herald Tribune’s Roger Cohen makes the case that with the financial sector in turmoil, jobs at GoldmanSachs and JPMorgan might lose their appeal for bright young things coming off the Ivy League assembly line, fueling a renewed interest in public service. To Cohen, that “rediscovery of the public sphere” is an end in itself, since he associates periods in American history when the public sector had prestige with prosperity, international prowess and high morale. (I’m somewhat inclined to agree, but that’s beside my present point).

I believe a renewal of the public sector as a high prestige career for the nation’s brightest would go a long way to preventing future crises like this one. Unlike the recession after 9/11, or the oil crises of the 1970s, the current collapse is the direct result of human malfeasance, not the consequence of external forces. The nation’s brightest minds went to Wall Street, armed with the Michael Douglas belief that greed is good, and more than enough Ivy League education to find the legal and accounting loopholes that allowed them to make absurdly leveraged deals and endorse Swiss cheese loans. Meanwhile, regulators slept at the switch.

But even if they had tried, what could the regulators have done? John McCain may have spoken out of turn when he trashed Chris Cox, SEC Chairman, this week. But in principle, I sort of agree with him. The people who staff our regulatory agencies mean well, but they are just not as sharp as the people they are meant to regulate. And that’s because smart young people don’t want to take jobs in government.

I sent Cohen’s piece around to friends, and one set of comments from a U.Penn senior really hit home. He’s applying for those finance jobs, despite the current hiring freeze, because 1. it pays more and 2. working for the government is beneath his SAT score. Public service he says “isn’t something the smartest people need to do. It’s something most people can do.” So long as smart kids think that public service is for dummies, we’ll have dumb public policy.

What’s the solution? My mother, a nonprofit activist, had some good ideas. Sweeten the deal for government employees with better pay, subsidized housing or discounted college tuition for their kids. “Even if it meant higher taxes, it would surely be cheaper having smart regulators than a 700 billion dollar bailout later.”

I’m finally old enough to admit it: Mama knows best.