During the financial crisis in 2008, JPMorgan Chase (NYSE: JPM ) CEO Jamie Dimon's daughter asked her father what was going on. "Well, it's something that happens every five to seven years,'' he said he told her.
How much truth is there to his statement?
Wall Street has a deep history of boom and bust. Throughout all economic conditions, all political administrations, and all regulatory environments, it finds a way to get itself into trouble. When there's so much money dangling in your face, otherwise admirable people do stupid things.
Last week I asked David Cowen, CEO of the Museum of American Finance and a financial historian, what he thought of Wall Street's boom-bust cycle. Here's what he had to say. (A transcript follows.)
David Cowen: "There's an old adage: It's greed and fear on Wall Street. And we've seen the cycle over and over. Here at the museum just last night, we had a play that was based on the events of what was called The Panic of 1857, triggered -- the match that set the powder keg off was actually a bank failure, and that bank failure was in large part by embezzlement by their cashier, which is kind of an Enron-Lehman rolled into one. And so no, human nature hasn't changed so very much. I look at these as cyclical, and we've seen it all before and sadly probably will see it again."