By Amanda Gordon, Bloomberg News
Organizers of the annual gala for the Museum of American Finance said they were glad it hadn’t been scheduled for Monday, when the Dow plunged 1,175 points. Instead, on Tuesday at Cipriani Wall Street, guests opined on the stock market with a day’s perspective.
Ken Griffin said the drop was a "modest correction in what has been a fairly frothy stock market," and it’s "probably constructive" because it will change how investors behave.
"A little less growth frenzy, and a little more need to protect, tends to be good in the long run," Griffin said in an interview. "To the extent this takes some of the wind out of the speculative frenzy, that’s good for the economy."
The founder of Citadel, a hedge fund with $27 billion in assets under management, and Citadel Securities, the New York Stock Exchange’s largest designated market maker, also interpreted what went down just after 3 p.m., when the Dow dropped 800 points in 10 minutes.
"Somebody appears to have come in with a very large sell program, or a number of players came in with large sell programs," Griffin said. "When that happens, you will scare away buyers momentarily. And we saw that play out. It takes buyers a bit of time to step in and say, ‘I’ll take the other side to this.’ "
But why get stuck on split seconds in a roomful of financial historians and their devotees. The museum’s collections include a 1792 U.S. Treasury bond, a stock ticker from 1897, and Depression-era scrip (though it dives into current trends too: the Winklevoss twins will appear on a panel to talk about about bitcoin later this month).
"This is the time, more than ever, for the museum," said Glenn Kaufman, a trustee. "If you know your financial history, you can put what’s going on right now in context: It’s intriguing, more than disorienting."
"I’ve studied the 200 years of history of markets," said Richard Sylla, the museum’s chairman, who next month publishes a compilation of Alexander Hamilton’s writings on finance, credit, and debt. So what would Hamilton say?
"His general view would be, yes, these markets sometimes have sinking spells, there are people who are too enthusiastic or too pessimistic," Sylla said. "But most of the time, the markets do a great job of allocating capital."
Two living former Treasury secretaries -- Robert Rubin, now an adviser at Centerview Partners, and Tim Geithner, president of Warburg Pincus -- were also on hand (and Griffin’s dinner companions).
"In our administration, when markets had big moves, I used to say to people: markets, in the short term, are psychological," Rubin said. "You’ve got to focus on the long term. And markets go up and markets go down."
Sometimes government intervention is required to right things. In part for his response to the 2008 financial crisis, Geithner received the museum’s Whitehead Award for Distinguished Public Service and Financial Leadership.
Geithner’s remarks drew chuckles, and some sighs, as he contrasted the culture of his government service to what he sees today.
"The most important challenges in economic policy are about how to make sense of what works in the long run, what is politically possible," Geithner said. "It’s also about how to prevent policy from being bent to the service of only private interests or ideological extremists. Measured against these tests, our political system today looks terrible, troublingly inadequate to the challenges of this messy, dangerous world."