Wall Street Has Proven That Trust Can Be Rebuilt
Financial markets offer a case study of how regulation, transparency and verification can help build trust — and even restore it when it collapses.
Americans still invest in the stock market, even after Occupy Wall Street.
Photographer: Timothy A. Clary/AFP/Getty
America’s financial industry has long had trust issues. Never mind the Great Financial Crisis of 2007-08; mistrust of the markets dates back to at least 1929, if not the Dutch East India collapse of 1769. But this history has an upside: Financial institutions have a lot of experience creating systems to build, maintain and restore trust — and have learned lessons that can be applied across the economy.
When it comes to finance, says Nobel laureate Robert C. Merton, there are two essential components of trust: People need to believe their counterparty is acting honorably, and that it is competent. He likes to say that he trusts his children to act in his best interest, but not to operate on his knee. And he would trust a doctor to operate on his knee, but not if he had a side hustle selling body parts.