The New York Timeson Sunday led its front page with anarticle about stepped up Wall Street hiring as a sign ofanticipated economic recovery. TARP bailouts helped limit bank joblosses, but Street firms still have a long ways to go before theyramp up personnel counts to frothy 2007 levels at the peak oftransaction mania. This all brings up a question not addressed byany of the recent financial reform legislation—do we want to returnto the pre crash markets of quick fire real estate deals and tradeswhere investors look for short-term opportunistic gains inappreciation over long-term investment results from husbandingproperty cash flows?

Of course, Wall Street firms and many real estate middlemen(brokers, lawyers, advisors) make their livings off transactionvolumes. The more trades the more fees and cuts of theaction. Where owners just buy and hold, many middlemen are largelycut out. Fewer deals mean fewer jobs and lower incomes so themarkets orient toward generating big transaction volumes.

I was discussing the transaction reality with a Texas developerlast week. He reasons that the economy would be better served ifinvestors of all stripes—in companies, real estate, stocks andbonds-- were oriented to longer-term holding periods. Instead ofconcentrating on trading and short-term gains developers and ownerswould build businesses and projects with greater stayingpower. If a merchant builder orients to constructing aproject that he plans to flip out of as soon as it’s leased up,he’ll be more likely to cut corners and go more commodity than ifhe were to own it long-term and have to deal with the consequencesof cheaper design. The private equity investor, who buys a companyto restructure it and sell out in a few years, really isn’tinterested in building employee loyalty or ensuring the entity hasa growth plan that will extend much beyond his limited holdingperiod. And for all the pr spin, R&D too easily takes a backseat to quarterly returns.