Twenty-Two Years Later, Is Greed Still Good?

When Oliver Stone released the Academy Award-winning Wall Street in December of 1987, financial markets had, just weeks before, fallen off a cliff.  The Dow Jones Industrial Average and S&P 500 had each lost nearly a quarter of their value as finance reeled in the shadow of Black Monday.  The archetypal film of 1980's excess had come a few weeks too late. Hollywood was behind finance.   It had become clear that movies, like magazine covers, were the ultimate contrarian indicators.

As Wall Street 2, reportedly subtitled Money Never Sleeps, begins taping this month in New York City,  the questison remains: Is greed still good? and What will the post-financial apocalyptic sequel look like?

In the 22 years since its release, Wall Street, has made a legend out of American finance and Gordon Gekko, the brash centillionaire who coined the films signature phrase "Greed is good."  (For his portrayal of Gekko, Michael Douglas won the Academy Award for Best Actor).

Stone recently told the New York Times, “I can’t tell you how many young people have come up to me in these years and said, ‘I went to Wall Street because of that movie.’ ”

But that Wall Street has changed.  The complexities of insider trading --a crime for which Gekko presumably gets convicted in the movie's epilogue-- are now dwarfed by the ubercomplexities of derivatives and securitization.  Hedge funds, private equity firms, and commodities markets have all grown up and the profiles of activist shareholders have only risen.  Finance has become significantly more global and technology has both spread the speed of -- and democratized access to -- information.

The themes of the first movie: greed, power, and the insidious corruption that can result from each, are timeless.  But Gekko was undoubtedly ahead of his time. Although he was the quintessentially 1980's corporate raider, in the mold of Carl Icahn, he also resembled some of the kings of the second gilded age.  Gekko is as much John Paulson or Steve Schwartzmann as he is Ron Perelman.  

Forbes satirized the modern day Gekko in its 2008 Fictional Fifteen, its annual ranking of the richest fictional characters:  

Corporate raider made initial fortune buying up, restructuring poorly managed companies; later opened pioneering hedge fund Gekko Partners. Widely credited on the street for creating collateralized debt obligations (CDOs); said to have shorted S&P 500 and banks near peak. Conspicuously seen celebrating at Manhattan restaurant the night Lehman Brothers  collapsed: "Greed is good ... for me, not them!" Despite swelling fortune, rumored to be lobbying U.S. government for billions in bailout funds.

Today's Bud Foxes are probably more apt to trade credit default swaps, value companies, or interrogate corporate executives than peddle stock to clients.  (Bud Fox, played by Charlie Sheen, is a young ambitious stockbroker and the original film'sprotagonist).  Eaten away by technological advancement, the modern stockbroker, at least the smile and dial, Boiler Room type broker, is largely a dying profession.   Shia LaBeouf has been cast in a Charlie Sheen type role, playing a young hedge fund trader engaged to Gekko's daughter.

In 1987 and now, there were many truths to the Greed is Good mantra.  In the original movie's famous speech, Gekko, speaking as the largest shareholder at the annual shareholder meeting of fictional Teldar Paper, shouts "[America's] trade deficit and its fiscal deficit are at nightmare proportions.  Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegie's, the Mellon's, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company!"

It was an eloquent and fiery defense of fiduciary responsibility that could easily be spoken by today's private equity titans.  And the economic conditions of which Gekko speaks, largely remain.

According to the Congressional Budget Office, 1987's $150 billion budget deficit ballooned to nearly $460 billion in 2008, but stayed proportionally flat at just over 3% of GDP.  It is projected to skyrocket to more then $1.5 trillion this year, more than 11% of GDP.

Meanwhile, the trade deficit has grown to nearly $700 billion dollars from roughly $150 billion in 1987. The trade deficit saw significant declines after 1987 into the early 90's before swinging upward sharply in the mid 90's.  (Trade deficits traditionally decrease during recessions as declines in imports outpace those in exports.)

"Wall Street was New York-centric. Today the markets are much more global, hence the title of the new film, Money Never Sleeps," Ed Pressman, the producer of both films, told the Telegraph in August of 2007.  "The new film will be based in New York, in London, in the United Arab Emirates and in an Asian country. We've pretty well worked out the interpersonal relationships between the characters. We're now talking about the business events."

But themes focusing on the globalization of finance will most likely be overshadowed by its recent collapse.  "The modern-day story will again center on Gordon Gekko , who has recently been sprung from prison and re-emerges into a much more tumultuous financial world than the one he once lorded over," according to Variety.  Fox reportedly fast-tracked the film to take advantage of the crisis.

The star studded cast, described as "one of the best..of 2010," includes Douglas reprising the role of Gekko.  In addition to LaBeouf, Josh Brolin will play the villain and manager of LaBeouf's hedge fund in a role turned down by Javier Bardem.  Susan Sarandon has signed on to play LaBeouf's mother.  Jim Cramer is also slated to make an appearance.  

NYU professor Nouriel Roubini and billionaire hedge fund manager Jim Chanos consulted on the film.  Chanos, of short selling fame, is one of finance's most prescient cynics and Roubini, labeled "Dr. Doom" by the New York times began warning of a market collapse as early as 2006.  If their involvement is any indication, expect a more cautious humble tale.