Obama: Wrong That Wall St. Will Shrink (MS)(GS)

Wall St. is not going to be as big a player in the economy as it has been, if President Obama is right. He may not be.

Commenting on how much of the economy will be driven by the financial sector, Obama told The New York Times Magazine, “Part of that has to do with the effects of regulation that will inhibit some of the massive leveraging and the massive risk-taking that had become so common.”

The same kind of fate was predicted for Wall St. as The Great Depression ended. Glass-Steagall and a more powerful Federal Reserve were supposed to reign in the financial industry. Sidney Weinberg assumed the role of senior partner at Goldman Sachs (GS) in 1930 and it began its unparalleled climb to become one of the largest and most well-regarded investment banks in the world. Morgan Stanly (MS) was formed in 1935.

Obama may want to look back more than 20 years when he makes his comments about the financial sector.

Douglas A. McIntyre