Today, many consider Wall Street evil, corporations greedy and bankers soulless.

Since the great recession, the entire financial system has become synonymous with wrongdoers. Meanwhile, Wall Street is synonymous with nontraditional financial institutions, or businesses that you wouldn’t consider your “normal” bank.

A mere mention of Wall Street or bankers brings up nightmarish memories or even bitter bile from many people personally affected by the crisis. The anger is quite understandable, but some of it is a bit misplaced.

Now, this isn’t some Gordon Gekko from Wall Street rant about “greed is good.” But, without Wall Street, the United States would not be where it is today.

The cynics will latch on to the last sentence, but I assure you it was placed there quite carefully. To address the metaphorical elephant in the room: The very financial system, Wall Street, that is responsible for so much growth also gets credit for a huge amount of destruction.

Wall Street is often blamed for the great recession, which can be summed up in a few sentences: The creation of financial products connected to mortgages – which were soon discovered to be subprime – helped fuel unprecedented lending to future homeowners. This excessive lending to people who could not adequately pay the money back caused many defaults on mortgages. This harmed banks – among others – which experienced liquidity crises.

A liquidity crisis occurs when a bank doesn’t have enough cash on hand to immediately pay depositors. Let’s just say that when a bank is doing badly, generally speaking, so are the people and companies who do business with it.

The above explanation is a severe simplification of all the forces at work. But, had those financial products not been created, then maybe we would have never had a recession.

OK, the elephant has been acknowledged.

It is important to point out that, yes, Wall Street has the power to do a lot of destruction, but it has also caused some positives. If you are a consumer who has shopped at a major corporation or made some monetary transaction utilizing anything other than strictly cash, you should thank Wall Street.

Wheat, corn and pork are a few of the very heavily consumed food products that cause farmers to rely on Wall Street. How? Forward and future are complex derivative products that help incentivize farmers to do their job by minimizing risk in an environmental crisis.

Could you imagine growing thousands of acres of food or paying for tons of grain for animals only to see a severe drought wipe away your earnings? These financial products in very simple terms allow large farmers to offset some of the costs during bad times.

Many major corporations are able to finance themselves heavily through some of Wall Street’s banks. Those pension funds are able to get very high levels of returns through those same firms that very easily get demonized.

Banks very often are there to provide a source of liquidity. It’s true that cash is the most liquid instrument, but when you don’t have it, the very presence of banks is why you are able to borrow and access credit.

Does this make what happened during the recession go away? Does it mean that financial institutions are too intertwined in the economy? Those are questions that can be debated until the cows-come-home. But at the end of the day, at this point, we need Wall Street to function.

Fran Walker is a senior finance and accounting major. Her column appears weekly. She can be reached at fwalke01@syr.edu.

Published on September 23, 2013 at 12:50 am