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Wall Street's dot-com scapegoat - Buddy, can you spare a paradigm?

Published: 04 May 2004 11:21 BST

So did the avarice of established sober businesses, who threw financial caution to the winds, abandoned all cost controls, believed in the snake oil of the new paradigm, and threw away millions and millions of dollars of their investors' money. Time Warner AOL, anyone?

The entrepreneurs also did their bit -- that is, those who were more interested in getting rich quick than in taking the time to build great companies that offered real value to real people.

In fact, there is far too much shame and blame to go around -- which is why we need that comforting headline about Mr Quattrone.

The pin-stripe world's reason for existing is to allocate capital to ideas - from a new factory building widgets to the latest album from Britney Spears. Got a great idea? Then there's a suit with a chequebook you should meet.

The financial establishment goes to extraordinary lengths -- and spends millions on advertising -- to convince the rest of the business world and the general public that it assigns capital to ideas with foresight, wisdom, probity, and the best interests of everyone concerned front and centre.

This is the Big Lie of the banking world.

The reality is that during the dot-com boom Wall Street bankers slung money about like a crazed porn star on coke.

Thousands of bad companies got money they didn't need to do things that didn't matter. (Some of it actually stuck, and we got a few decent companies out of it: Amazon, e-Bay, Google. That's about a trillion dollars each, which seems like an awful lot of money for three Internet success stories.)

After this fantastic display of incompetence and failure, what happens?

Wall Street rings its hands, the Federal Government promises that it must never happen again, and there are a couple of show trials to ensure that a scapegoat banker does two years of soft time. In other words -- absolutely nothing happens.

Wall Street is shocked, shocked, to discover that there is gambling in its casino. Or as Lex puts it, with extraordinary naivety, a business like Credit Suisse First Boston emerges, "with its franchise intact".

That's the point of the whole Wall Street franchise. It always emerges intact. Give it another generation, and we, the investing public, will have grown some more wool, and the technology investment bankers will be ready to give us all another fleecing. It's not hard to spot: just look for someone selling a new paradigm.