five questions with william d cohan

Five Questions with William D. Cohan

Date: June 24, 2020


“Dodd-Frank occurred because people – including many of our elected representatives – don’t understand how Wall Street really works.” – William D. Cohan

William David Cohan is The New York Times best-selling author of three non-fiction books, including his most recent hits, Why Wall Street Matters and Wall Street: Money and Power: How Goldman Sachs Came to Rule the World. A former senior Wall Street M&A investment banker for 17 years, he is a contributing editor at Vanity Fair, and writes a weekly opinion column for BloombergView. He also writes for The Financial Times, Bloomberg BusinessWeek, The Atlantic, the Washington Post and the New York Times Magazine.

In your most recent book, “Why Wall Street Matters,” and in a number of interviews, you’ve contended that regulation – Dodd-Frank in particular – went too far and is now stifling the flow of funding to smaller businesses. At the same time, there has been a feeling that the Justice Department did not go far enough in terms of prosecuting criminal cases after the financial crisis. What is behind this juxtaposition?

These are not mutually exclusive ideas. Both things can be true. It is a verifiable fact that the Justice Department, under Obama, failed to meaningfully hold Wall Street traders, bankers and executives responsible for the wrongdoing that occurred on Wall Street in the years leading up to the 2008 financial crisis. Why it failed to do this is one of the biggest unanswered questions of the crisis and its aftermath. As for Dodd-Frank, it’s a piece of legislation, which in my view, occurred because people – including many of our elected representatives – don’t understand how Wall Street really works. If Congress just focused on incentives and how people on Wall Street are rewarded, then writing a short piece of legislation to change the behavior on Wall Street wouldn’t be so difficult. I wrote Why Wall Street Matters as much for people in Congress (and the White House) as for the American people. I can only hope and pray that a few more of them read it.

Many readers of this newsletter are consumers, consumer advocates or regulators, many of whom have been harsh critics of Wall Street’s practices. What role does Wall Street play in their daily lives, and more specifically, what did Wall Street have to do with the movie, Beauty and the Beast?

Wall Street is integral to our lives. There are so many things we take for granted — the iPhone, stocked supermarket shelves, gasoline for our cars, heat for our homes, and so on — that would not be even remotely possible without the capital that Wall Street provides. Without Wall Street money, the Walt Disney Company wouldn’t be able to make a $100 million Beauty and the Beast movie. It would simply be inconceivable that Disney would spend that kind of money on one movie if it didn’t have access to Wall Street capital. So instead of trying to pretend that Wall Street is evil and responsible for every bad thing that happens in the world, let’s focus instead on fixing what is wrong with Wall Street and celebrating what it does right. That will be much more productive in the long run.

Before you became one of the country’s top financial writers and a best-selling author, you worked on Wall Street as a mergers and acquisitions specialist. Did you always have an itch to be a writer or was there something that caused you to change careers?

I had been a journalist before I worked on Wall Street. I am a 1983 graduate of the Columbia Graduate School of Journalism. Before that, I worked briefly for the Winchester Star, outside of Boston, and then the Washington County Post, in Salem, New York, where I was the editor and their only reporter.

After Columbia, I worked at the Raleigh Times, in Raleigh, North Carolina, as the education reporter for two years, where I won back-to-back statewide investigative reporting awards for revealing corruption in the school system. So I had a background in journalism, although I never thought I would return to journalism after I went to Wall Street.

“Why Wall Street Matters” is under 200 pagesm, and a great, quick read. Dodd-Frank is over 700 pages, and is anything but. Thoughts?

Well obviously, one is a book that people will hopefully want to buy, and the other is a piece of legislation, which is like a camel (a horse written by committee). Even worse, it was written by the two men who received some of the largest donations from the financial services industry. The original Glass-Steagall Act, which everyone waxes poetic about these days, was only 35 pages long. What we need is smart regulation that ties behavior on Wall Street directly to compensation. Dodd-Frank is a bureaucratic nightmare, although certain aspects are important to keep: higher capital requirements, lower leverage requirements and mandating that derivatives be traded on exchanges. As long as we change Wall Street’s compensation system as part of the bargain, most of the rest of it can be junked as far as I am concerned.

The term “Wall Street” broadly describes investment banking, asset management, etc., but also connotes that New York City is the industry’s global headquarters. Is New York City still the financial capital of the world, and is there risk that its competitiveness is being undermined?

Yes, Wall Street is still the global center of finance; in fact now as much as ever. Wall Street has never been stronger, as a relative matter, in the wake of the financial crisis. European and Asian banks are in disarray. Wall Street is both the intellectual and economic capital of finance and I don’t see that changing anytime soon.