The New York Timeson Sunday led its front page with an article about stepped up Wall Street hiring as a sign of anticipated economic recovery. TARP bailouts helped limit bank job losses, but Street firms still have a long ways to go before they ramp up personnel counts to frothy 2007 levels at the peak of transaction mania. This all brings up a question not addressed by any of the recent financial reform legislation—do we want to return to the pre crash markets of quick fire real estate deals and trades where investors look for short-term opportunistic gains in appreciation over long-term investment results from husbanding property cash flows?

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

I was discussing the transaction reality with a Texas developer last week. He reasons that the economy would be better served if investors of all stripes—in companies, real estate, stocks and bonds-- were oriented to longer-term holding periods. Instead of concentrating on trading and short-term gains developers and owners would build businesses and projects with greater staying power. If a merchant builder orients to constructing a project 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 if he were to own it long-term and have to deal with the consequences of cheaper design. The private equity investor, who buys a company to restructure it and sell out in a few years, really isn’t interested in building employee loyalty or ensuring the entity has a growth plan that will extend much beyond his limited holding period. And for all the pr spin, R&D too easily takes a back seat to quarterly returns.