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Wall Street "Money Never Sleeps" |
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15:07, June 16, 2009 |
Someone made the prediction after the eruption of the global financial crisis that the era of Wall Street was going to end. Such a scenario seems to be too pessimistic.
Recent conditions suggest that the financial industry in America is coming back to stability. US Treasury Secretary Geithner even believes that the U.S. financial system is starting to heal.
Up to Jun 11, the Dow Jones Index has rallied by 35% from its lowest point in 12 years which hit on March 9. Some large financial institutions regained confidence by raising new funds in capital markets and paying back government infusion of funds.
Although it is estimated that there is still a several hundred billion dollar loss in US financial institutions and at least 500 out of the 8000 banks will close, the concern for the systematic risk of the US financial system has been greatly reduced.
As Wall Street recovers, more people begin to have faith in its future. Professionals in the financial industry even claim that there is no intrinsic deficiency in the operational system of Wall Street. Wall Street will recover in a short time and several reconstructed financial institutions will obtain good opportunities for development.
Wall Street has dominated the global financial industry for nearly two centuries and has gone through numerous financial crises and economic recessions, including financial panics in 1857 and 1907, economic crisis in 1929 and 1987 "Black Monday" for the stock market.
More importantly, the US is still the biggest economy in the world. This determines that Wall Street's role as the global financial capital will not be replaced in quite a long time.
Generally speaking, "safer operational strategies, a new mixed operation system and a financial regulation system matching that system" is the expected future development of Wall Street.
However, the situation of Wall Street in the post-crisis era is largely dependent on the attitude of the US government, especially regulation authorities. Although President Obama has promised to update American financial system regulations, the public has noticed that the U.S., holding a firm belief in free market, is having a no more than strategic reform in its financial system regulation.
Due to concern that strict financial regulations would dampen the dynamics of the financial industry, the US does not carry out financial regulations as strictly as expected. In fact, a few radical ideas of financial regulations have already been abandoned.
What the US has actually been doing is infusing funds into financial institutions while avoiding nationalization, demanding more transparency in deals of financial derivatives while leaving room for over OTC financial derivative deals. The proposal of establishing a single institution of financial stability regulations may also be aborted.
According to media reports, a film company is planning to make "Wall Street" sequel which is temporarily named "Money Never Sleeps". It is worth noticing how Wall Street can continue its legend of wealth based on the old system. However, the public atmosphere and political situation no longer allows Wall Street to take unrestricted risks.
It is obvious that after this crisis the situation in the US financial industry is about to change. First of all, the proportion of financial industry in the US economy is going to decrease. Since financial regulations were loosened in the 1980s, US financial industry has been expanding continuously while the proportion of agriculture and manufacturing in the US economy have been decreasing all the time.
Before the crisis, financial institutions took up 1/4 of S&P 500 Index. Profits of financial enterprises used to take up as high as 40% of total profits of US enterprises. President Obama said that the situation that Wall Street dominates the US economy will be changed after the completion of financial reforms.
Secondly, Wall Street will reduce speculations and provide financial services in a system pursuing lower risk and lower returns on capital.
Thirdly, Wall Street will face more severe competition from other financial centers. Some observers think that global financial centers are moving toward the east. Although that statement may overstate the case, the tendency of multipolarization of global financial centers is irreversible.
By People's Daily Online
http://paper.people.com.cn/rmrb/html/2009-06/16/content_275144.htm
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