On Saturday, thousands of protestors flooded the streets of New York City's financial district to voice opposition to what they described as rampant corporate greed. In response, police were forced to erect barricades and allow entry only to those who could prove that they worked or lived in the area. The “Occupy Wall Street” protest was organized through social media tools such as Twitter and Facebook with a mission of replacing “corporatocracy” with democracy, dubbing the area as the “financial Gomorrah of America.” One Vietnam war veteran went so far as to describe “people on Wall Street” as “blood-sucking warmongers.”

The tendency for the public to oversimplify and characteristically cluster all financial services firms in the New York City area overlooks the vital role that such companies play in driving the world economy forward. Of course, the eminent source of outrage is wholly evident; activist groups such as Code Pink decry the role that banking institutions played in the 2007 subprime mortgage collapse and the wealth gap that remains pervasive in the United States. Indeed, exotic financial instruments such as collateralized debt obligations and structured investment vehicles were partly responsible for the cascading effect of mortgage defaults and the ultimate destabilization of the stock market. Considering the widespread implications of the market collapse to those not involved in fixed income trading or financial products, it seems natural to blame the architects of these devices.

However, investment banks, brokerage firms, and asset management companies play a key role in supporting the positive growth of industry and job creation. In 2009, the financial services industry contributed approximately six percent to total U.S. GDP and accounted for 16.4 percent of New York State's GDP. This statistic is understandable when considering the ultimate goal of multinational investment banks and securities firms such as Goldman Sachs and J.P. Morgan: to raise capital in order to support strategic business growth.

This business development ultimately increases jobs and assists in economic advancement. Access to investors is crucial to being able to grow production capacity within different industries. Without Google's 2004 initial public offering, the firm would have been unable to raise the necessary funding to expand rapidly and thereby enable the public to easily access information. Also, Facebook, the tool that protestors used to so easily come together against the financial industry, represents the benefits that a firm can achieve from financial services. Facebook's venture capital investments allowed the company to increase distribution beyond colleges and ultimately led the online connection of a generation. In January, Facebook's capital raising through Goldman Sachs allowed the company to hire more employees and even further expand its reach with the public. When businesses have more to invest, everyone becomes better off because the company can use that capital to optimize its operations. Therefore, without the very financial services firms that protestors are criticizing, their attempts to mobilize would have been difficult.

In addition to the domestic operations of investment banks, the international investments made by Wall Street firms can ultimately lead to economic development in third world countries. Foreign direct investments in countries such as India can allow even the poorest areas of the region to benefit from more effective water companies. Securities brokerage firms that provide capital to such companies should not be scolded but rather appreciated for the positive role that these institutions play in empowering communities. By providing the money necessary to promote progress within these nations, securities firms ultimately contribute to the growth of the world economy.

Financial services firms are also one of the largest sources of community development domestically. Many firms such as American Express, Goldman Sachs, Morgan Stanley, JP Morgan, and many others have promoted growth in small businesses throughout the United States, ultimately resulting in community development and job growth. These financial services firms are also committed to empowering women and diversity groups through staff recruitment and various events that allow historically disadvantaged groups access to lucrative employment opportunities. The idea that these companies are solely focused on increasing firm-wide profits and are immune to the concerns of their community is misinformed.

Ultimately, the anger of protestors arises from a fundamental misunderstanding of the various ways in which financial services institutions can benefit the world economy. The proclivity to lump all individuals who work on Wall Street and label them as “blood-sucking” as these protestors have is unfair and overlooks the positive role that these companies play in each of our lives.

Saieed Hasnoo ’12, The Crimson’s associate business manager, is an economics concentrator in Currier House.