Editor's Note: In his new book, "Guardians of Prosperity: Why America Needs Big Banks," analyst Richard X. Bove explains why financial disaster will ensue if it becomes impossible for big banks to fill their role in the economy. The following passage is "Chapter Fourteen: The Return of the Charging Bull."
Bowling Green is a small park in lower Manhattan at the foot of Broadwaya tiny oasis of green surrounded by the massive real estate of Wall Street. The oldest public park in New York City, it has come to represent both the beauty and the vitality of the area.
In the wake of the 1987 crash, the Italian-American sculptor Arturo Di Modica sculpted a massive bronze charging bull as a sign of "the strength and power of the American people." The work was not commissioned.
The artist made it on his own, then personally trucked the 7,100-Pound bull down to Wall Street and illegally left it there. It became so beloved that it was permanently located in the Bowling Green park. There, more than two decades later, it would be draped with protest signs when Occupy Wall Street protesters took over the park.
The contrasting symbolism of the charging bull and the Occupy crowd says a lot about the way our financial centers reputation has fallen. It is not just due to the crisis of 2008, although that ramped up the pressure. It results from more than two decades of assault on the financial industry by politicians, law enforcement, and the media.
There was a time when New York was the envy of America, and Wall Street a place of pride. My family came to this country in the 1860s, settled in the "City," and thrived. My father loved New York almost as much as he loved his family. But times have changed, and New York is no longer what it once was. Major industries do not look first at locating in New York before going elsewhere in the United States; they probably do not even consider New York at all. More alarming, banks no longer want to be located in what was once the mecca of their industry. The reason is that the capital of modern finance is no longer a friendly place for banks to do business. People want the charging bull corralled. They want him quieted.
Yet what is needed is the opposite. We have a choice to make: Will we be powerful or will we be small? Will we merely be a nation that plays it safe, or will we embrace our heritage of taking great risks to achieve great results?
A Great Nation Built on Risk
Think about it. Do you avoid risk by emphasizing safety and soundness, or do you avoid risk by embracing risk? The United States is the most successful political, economic, and financial enterprise the globe has ever seen. It has this position because it has always embraced risk:
When the Pilgrims set out for Plymouth Harbor in 1620, they were embracing risk.
When George Washington went to war against the greatest military power in the world, he was embracing risk.
When Thomas Jefferson bought Louisiana from Napoléon, he was embracing risk.
When Abraham Lincoln fought to keep the nation together, he was embracing risk.
When Theodore Roosevelt built the Panama Canal, he was embracing risk.
When Dwight Eisenhower built the national interstate system, he was embracing risk.
When Lyndon Johnson launched his Great Society and set out to build twenty-six million housing units, he was embracing risk.
This list goes on and on. Embracing risk is not solely a political matter. It is also financial, as most people recognize. The risk might be as big as funding the creation of the Internet, or it might be as small as granting a loan to buy a car. The success of this nation is based on embracing risk, not running away from it.
Is This Safe and Sound?
Even if we needed to take a more cautious approach, the irony is that the actions of the president and Congress have not achieved that either. The result is almost the opposite. Consider whether safety and soundness are increased by any of the following:
- forcing all Americans to pay higher prices so that the misusers of banking services pay less
- pushing bank account holders out of the banking system and into the shadow banking system
- forcing more Americans to rent rather than buy their homes because they cant get loans
- leaving small businesses unable to get loans to grow their companies, and favoring big companies at their expense
- discouraging innovation through insurmountable bank rules
- taking liquidity out of the system and driving up commodity prices through restrictive trading rules
- closing down funding sources to the private sector
- eliminating a healthy system comprised of big and small banks in favor of a monoline system we know does not work
- increasing the size of the unregulated financial system under the guise of increasing regulation
- advocating a return to nineteenth-century banking standards, which produced extreme financial cycles
This is not right. These actions reduce safety and soundness in the system. They diminish our stature and undermine our potential. They cause us to forget our history of bold moves and bullish financial principles.
I urge us to remember that America is the charging bull, not the trembling victim who cowers in its wake.
Reprinted from GUARDIANS OF PROSPERITY by Richard X. Bove with permission of Portfolio, a member of Penguin Group (USA) LLC, A Penguin Random House Company. Copyright (c) Richard X. Bove, 2013.