Cohan Explains the Wall Street Animal

By Mikel Chavers

Bad decisions, greed, almost insane attention to profits and financial innovation gone wrong led to the collapse on Wall Street.

Every Wall Street firm was investing in the latest financial fad—mortgage-backed securities.

The firms would “tie a nice little bow around them and get the credit rating agencies to bless them,” bestselling author William Cohan said at a plenary session Sunday. “Everyone who touched them made money.”

The only problem was, no one paid attention to the high risks of the products.

“It just became a big party … and nobody likes anybody that takes away the punch bowl,” Cohan said.

And pretty soon, it all caught up to them. When the housing market started to fail and people couldn’t make their mortgage payments, the mortgage-backed securities weren’t paying the huge profits anymore.

Bear Stearns, an investment bank and brokerage firm, was the first to go. It went bankrupt and was sold in March 2008 to JP Morgan Chase for much less than what it was once worth.

And just like that, Cohan explained the Wall Street animal. He hopes the animal will never be allowed to make the same mistakes. But even Cohan—a 17-year veteran on Wall Street—is skeptical.

“This is a cycle that repeats itself and we have to take the opportunity to get rid of it.”