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Five Main Street Myths About Wall Street

Banker bashing is all the rage these days. Senior writer Dan Freed says haters from Main Street should at least have their facts straight.
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NEW YORK (TheStreet) -- There are lots of myths out there about Wall Street folk, so we're setting the record straight. After all, if you're going to hate the hot shots at Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. Report, you should at least get your facts straight.

Myth 1: Wall Street Preys on the Innocent

The debt difficulties of Greece provide a recent example of how this perception isn't quite right. Goldman Sachs and

JPMorgan Chase

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have gotten lots of bad press for working with the Greek government to help it mask its debts, and now the Greek economy is in deep trouble.

But these debt-masking efforts by Greek politicians were fairly minor in the grand scheme of things. Greece's debt levels were too high even if you erase the debts they hid with the help of

Wall Street

financial wizardry. There is also the fact that Greek politicians hired Goldman to help it mask its debts. If they were innocent, they wouldn't have done that.

Similarly, the loose lending standards that enabled people to buy homes they couldn't afford during the housing boom were not the sole fault of the bankers. For a story called "The Giant Pool of Money," which aired in May 2008, the public radio program "This American Life" found a guy named Clarence Nathan who took out a loan called a NINA, which stands for No Income, No Asset. This enabled Nathan, who earned $45,000 annually, to borrow $540,000 against his house.

"I wouldn't have loaned me the money," Nathan told his interviewer, Alex Blumberg.

Nathan may have been honest, but he was far from innocent.

Myth 2: Wall Street Executives Are Greedy

This is a myth? People on Wall Street not greedy? Even old Wall Street hands would seem to admit they are when they use that old saw about how the markets shift between fear and greed. One of

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Warren Buffett's

most important pieces of advice to investors is that they be greedy when others are fearful and fearful when others are greedy.

But ego seems to be a bigger factor than greed in many instances. When

The Blackstone Group

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co- founder and CEO Steve Schwarzman wanted to take his company public, he explained to his family that they would make bundles of money but be subjected to more public scrutiny, according to a 2007 article in

The Wall Street Journal


When one member of the family asked Schwarzman, "Do we need any more money?" Schwarzman's mother Arline interrupted him to say "You don't understand what drives him. Money is the measuring stick," Arline Schwarzman told the newspaper.

Myth 3: Wall Street Executives Are Criminals

Unless you count the alleged pot smoking of former

Bear Stearns

boss Jimmy Cayne, it is extremely difficult to prove that criminal activity had much to do with bringing about the financial crisis. That's because much of the shady activity by Wall Street firms was completely legal.

Take the $500 trillion odd over-the-counter derivatives market. It was kept free from regulation by the Commodity Futures Modernization Act of 2000. Think banks are too big and have too many conflicts of interest? You can thank the Financial Services Modernization Act of 1999. Accounting too murky for you? More than 99% of what you don't understand or find lacking in disclosure is in full compliance with existing accounting rules.

Yes, the

Securities and Exchange Commission

brought fraud charges against Goldman Sachs, but the case is civil, not criminal, and it appears to have far more to do with politics than substance.

The SEC's insider trading case against Raj Rajaratnam appears to have far more meat on the bone, and there will always be insider trading, but most top executives are too smart -- and too rich -- to get caught up in such schemes.

As for Ponzi schemer Bernie Madoff (above), he was a relative fringe player on Wall Street. Most savvy Wall Street firms knew enough to keep their distance from Madoff long ago. Though more of them probably should have turned their suspicions over to the SEC, this sin of omission isn't going to get anyone thrown in the clinker.

Myth 4: Wall Street is All About White Men

It certainly feels like white men run Wall Street, but that's getting less and less true all the time.


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boss Vikram Pandit (above) is one of many high-ranking Indians at big banks. And the man that most think is in line to succeed Pandit, Manuel Medina-Mora hails from Mexico.

Female executives are all over Wall Street, though it is true they have never made it to the top of a major bank. It is telling that of the 11

Ladies of the Financial Crisis

highlighted by

Business Insider

, only two currently work at a major investment bank. That's not because they were all fired, however. It's because many are now regulators, academics, or relatively minor players.

Myth 5: Wall Street Works on Wall Street


's offices actually


on Wall Street, most other financial services industry giants are not, and have not been for a long time.

Deutsche Bank

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occupies the former JPMorgan headquarters at 60 Wall Street, but JPMorgan is on Park Avenue and

Morgan Stanley

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is on Broadway, near Times Square.

Indeed, many of the top Wall Street banks are no longer even U.S.-owned. Deutsche,

Barclays Plc

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Credit Suisse

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, all headquartered in Europe, are among the world's most powerful investment banks.

The New York Stock Exchange is, of course, still located at the corner of Wall and Broad Streets, but that's more the philosophical home of the stock market, which people seem to like just fine. As long as it's going up of course.


Written by Dan Freed in New York