'IF you want to be ethical, join the clergy."
That's what a cynical Wall Streeter told Robert Sobel, a business
historian at Hofstra University.
Of course, such a statement slanders the many investment bankers,
brokers, bond dealers and others in finance who maintain a great
deal of integrity in their dealings.
Nonetheless, there is a widespread suspicion among professors of
business ethics and other observers that the standard of ethics has
deteriorated on Wall Street. The bond-buying scandal that prompted
the resignation of three top officials at Salomon Brothers Inc. Aug.
18. has reinforced such opinions. Salomon, the world's
fourth-largest underwriter of securities, has admitted repeatedly
violating Treasury rules against buying more than 35 percent of a
Treasury issue of securities at an auction.
Several theories are offered to explain the rash of scandals that
have rocked the financial community in recent years, symbolized by
such names as Michael Milken, Ivan Boesky, and Dennis Levine.
One theory is that financial booms, such as occurred in the
1980s, draw in greedy, ruthless types willing to cut corners.
"Every long boom in which there is a lot of money to be made in
securities transactions has some odor connected to it," says Robert
Fogel, professor of American institutions at the University of
Chicago's Graduate School of Business. There were major scandals in
other boom eras - the 1920s and 1880s, for example.
During the last decade, Wall Street employment grew by 30 percent
as investment bankers, lawyers, and others helped finance and plan
the restructuring of perhaps one-quarter to one-third of United
"A lot of those people came from the provinces," says Mr. Sobel,
who wrote an authorized history of Salomon Brothers covering the
years 1910 to 1985. These newcomers sometimes "lack a moral
compass." As a result, in some firms a culture of toughness has
developed where making a profit overrides consideration for others,
In the early 1960s, the typical American financier was likely a
WASP and belonged to a country club. His father was possibly in the
business, having managed to survive the hard times in the 1930s. The
rules of the game were gentlemanly, with ostracism facing those who
broke the rules. Gradually the securities industry become more
diverse. Jews, Italians, even a few blacks and women won positions
of power. …