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Beyond Gordon Gekko
Discovering the Real Story of Wall Street's Impact
Dissecting the Markets
June 22, 2025
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Every morning, millions of people wake up to alarm clocks on their iPhones, grab coffee funded by venture capital, and drive to work on roads built with municipal bonds. Yet most of these same people would describe Wall Street as nothing more than a glorified casino—a den of greed that widens inequality and serves only the wealthy. This paradox fascinated me during my senior year of high school as I searched for new perspectives on the world around me.
After reading countless books on European colonization, green technology, and politics, I stumbled upon one that completely shattered my assumptions: Why Wall Street Matters by William D. Cohan. Unlike other books that reinforced what I already believed, this one forced me to confront an uncomfortable truth—that the very system I'd been taught to distrust might actually be the invisible foundation supporting everything I valued about modern life.
Since the 2008 Financial Crisis, Wall Street's reputation has been toxic. The mere mention conjures images of Gordon Gekko's "greed is good" philosophy, corrupt bankers in expensive suits, and a rigged system that benefits the few at the expense of the many. These aren't entirely unfair characterizations—Wall Street has its dark moments. But Cohan's brilliance lies in cutting through this emotional fog to reveal what Wall Street actually does, rather than what we imagine it does.
The book's central revelation is deceptively simple: the technologies we depend on, the homes we live in, the entertainment we enjoy, and the jobs that employ us all exist because Wall Street efficiently moves capital from those who have it to those who need it. This isn't just economic theory—it's the hidden machinery that makes modern abundance possible.
Without Wall Street's capital allocation system, we wouldn't have Disneyland, iPhones, or AI technology. Apple needed Wall Street to grow from a garage startup into one of the world's most valuable companies. Walt Disney needed Wall Street to transform his cartoon dream into the Magic Kingdom.
Innovation
Typically, when we think of financial companies like Morgan Stanley or Goldman Sachs, innovation isn’t something that comes to find. For fintech companies like Robinhood, SoFi, Upstart, Affirm, and more, yes, we think of those companies as innovators.
In the book, there was a chapter dedicated to this topic. Like the common consensus, we don’t think of banks as innovators because they all seem to do the same things, like maintaining deposits and using the deposit money to create loans, manage money for the wealthy, and underwrite on debt and equity offerings from companies.
Wall Street has been more innovative than that. One innovation worth mentioning is securitization, the financial practice where illiquid assets, like loans, are pooled together and transformed into marketable securities that can be sold to investors, was created in the 1970s. The concept was inspired by a banker named Lew Ranieri, who thought of buying mortgages from local banks, packaging them into a security, and selling it to investors eager for cash flow.
The securitization of mortgages helped lower the cost of mortgages for borrowers in many ways. Securitizations added liquidity to the mortgage industry and helped reduce the cost of capital. Plus, they helped reduce the risk lenders had in making mortgages because they’re able to offload the mortgage note to an investment bank.
Before securitizations, banks would issue a mortgage and keep the mortgage note on their balance sheet for 30 years. Getting new capital to create more mortgages was tough because banks needed to attract more deposits or raise more money through debt or equity offerings to create more loans. It was riskier for banks back then to create mortgages as more of their capital was tied up in these loans.
Another form of financial innovation in Wall Street’s history is junk bonds. Michael Milken, known as the “junk bond king,” discovered investors could make more money, on a risk-adjusted basis, by buying bonds issued by companies with a mediocre credit rating. Since there was a limited supply of these bonds (aka “junk bonds”) available, he persuaded those who didn’t have access to the capital markets before to issue junk bonds and have his firm underwrite them.
Besides giving companies a new way to raise funds outside of banks and capital markets, Milken also underwrote junk bonds for corporate raiders like T. Rowe Pickens and Carl Icahn, along with private equity firms like $KKR ( ▼ 1.59% ) and TPG.
Without Milken, many of the household names we know of today, like:
News Corporation
John Malone’s cable-television empire
Viacom
Time Warner Cable
Telemundo
KB Homes $KBH ( ▲ 1.72% )
Hasbro $HAS ( ▼ 1.79% )
Hilton $HLT ( ▲ 0.96% )
AMC Entertainment $AMC ( ▼ 2.39% )
7 Eleven
Danaher $DHR ( ▲ 1.53% )
Calvin Klein $PVH ( ▼ 0.09% )
Barnes and Noble
and many more household names we know of today
Even if Milken got greedy with his success and eventually got banned from Wall Street, his work on expanding the junk bond market continues to help companies today raise funds to build new factories, buy new products, and hire people for decent wages.
In the book, the financial innovation discussed in this chapter was the credit default swap. This derivative acts as an insurance policy that allows creditors to buy insurance against the chance that a loan or bond would default. This type of insurance can be bought by anyone, unlike life insurance or home insurance, which can only be bought by the people whose lives are being insured.
Unlike the other innovations, the credit default swap encouraged banks to take on more risk as they were able to transfer credit risk to a third party and free up more capital to create more loans. This innovation has also encouraged more speculation as outside investors would take bets against companies without having actual exposure to those companies.
Overall, the innovations that Wall Street has made to democratize capital have led to more people in more places globally having a chance to pursue their dreams. Without these innovations that Wall Street has created, we wouldn’t have credit cards, lower-priced mortgages, the great jobs we have, and the entertainment options we have today. Innovation on Wall Street has made the world more abundant today.
Conclusion
Reading Why Wall Street Matters didn't just change my understanding of finance—it fundamentally altered how I see the interconnected nature of modern civilization.
Cohan's book reveals that beneath our daily criticisms of Wall Street lies a profound dependency on its core function: the efficient movement of capital that transforms ideas into reality. From Lew Ranieri's mortgage securitization that made homeownership accessible to millions, to Michael Milken's junk bonds that funded the entertainment giants we love today, Wall Street's innovations have quietly woven themselves into the fabric of our lives.
Yes, the system has its flaws—credit default swaps can enable dangerous speculation, and greed can corrupt even the most beneficial innovations. But dismissing Wall Street entirely would be like condemning electricity because it can cause fires. The real challenge isn't to eliminate this financial machinery, but to understand it well enough to harness its power while guarding against its dangers.
As I've learned from Cohan's compelling analysis, our modern abundance didn't emerge by accident—it was built, one capital allocation decision at a time, by a system that, despite its imperfections, remains remarkably effective at turning human ambition into human progress.