Dreaming of Goldman

For students at a university that for so long has dreamed of Wall Street, the recession should serve as a wake-up call.

More than a few classmates openly tell others that they intend to work for financial firms for the first few decades out of college and then cash out to live their real dream. (My favorite post-retirement plan was owning a vineyard.) This plan is based on the notion that one should endure a sort of “life gap” — a period of pursuing financial security before realizing happiness.

Far be it from me to judge the best way to live a life. Their plan seems just as legitimate as any other I have heard. However, it assumes the existence of a level of stability in the economy that those who have been watching the news for the past two years would be wary of assuming. Many people (rich and poor) who spent their lives working and saving saw their retirement funds dwindle as the economy tanked. Others were unceremoniously fired from firms and jobs they had believed were permanent.

You are still more likely to get rich by working for a financial firm than you are by working as a high school teacher. But the lesson of the recession is that there simply is no failsafe way to get rich. Deferring your real dreams (which actually matter) to accumulate money (which just appears to matter) may only result in a pink slip and a worthless severance package.

But the lessons of the past two years extend beyond the fact that nothing is guaranteed in life. The most recent twist in our country’s economic nightmare — the Securities and Exchange Commission’s charges against Goldman Sachs — should give further pause to those who fancy themselves Wall Street-bound.

I’m not an economist, but I don’t think I need to be in order to understand the SEC’s case. The charges claim Goldman Sachs led clients to believe that a financial product was high quality while simultaneously betting that the product was low quality. Like a cliche used-car salesman, it sold its clients a lemon. When the housing market collapsed, Goldman got rich and its clients went belly-up.

Goldman’s case represents an extreme example of how bankers can use complicated math to prevent others from noticing the fraud they are committing. But the recession shows how bankers who are only doing their job can help distribute toxic assets that cause the financial ruin of millions. The downturn has already bankrupted Iceland and is threatening Greece. The traders who hurt our economy aren’t bad people, but they did bad things.

Most of my classmates would like to live a life that leaves the world a better place for their children and grandchildren. Many students who are attracted to Wall Street do seem very interested in money, but they also believe in the invisible hand of capitalism. Businesses not only create the jobs that so many desperately need, but they also fund the free services that help the underserved and neglected.

But this does not mean that all activities that expand liquidity are good. This point might be easily missed because the people who invented and supported these trades became quite wealthy. And most people who (mis)understand economics believe that it teaches that people get rich because they do valuable work. What the recession shows is that people can earn a lot just by convincing others that their work is valuable, even if it isn’t.

This gap — the difference between what people think and what is actually true — allowed traders and analysts to do harm to our economy while believing that they were actually doing good. As long as they kept getting paid higher and higher bonuses, it made sense for them to believe that their work was valuable. But this perception was wrong.

So, to my classmates who dream the Wall Street dream, or to those who are willing to defer their own dreams while working on Wall Street, I say only this: Mind the gap.

Adam Bradlow is an anthropology major from Potomac, Md. He can be reached at abradlow@princeton.edu.