AIG, those supreme shitheads who over-leveraged bad loans via credit default swaps, just reported THE BIGGEST QUARTERLY LOSS IN HISTORY: $61 BILLION.
The government's response? Give them a FOURTH installment, this one to the tune of $30 Billion.
Between the worship of emptiness embodied so perfectly in the ascendancy of TMZ and the crescendo of EM08, this country's done.
I'm a man without a corporation. ~Paddy Chayefsky
Monday, March 02, 2009
Monday, February 23, 2009
Down to This
We here in Cali can take down the States and the world in a way few can. Bigger than most countries, we've gone from $4 Bil to now $42 Bil in debt under Arnie's watch. This is what we booted Grey Davis out for?
Questions:
1. How is it that Retardicans get the image of "fiscally conservative"? Everything they touch economically blows up. (Answer: They are superior in terms of marketing.)
2. How does Arnie hold his job??? This is perhaps the most troubling, because in the private sector, the board would have been up his ass and booted his butt out a long time ago. (Answer: This is bizarro world, where "The Governator" rules.)
California, once a dream state, strives to get back its groove
As it has slid, the state's citizens have begun to focus on its core dysfunctions.
By Daniel B. Wood | Staff writer of The Christian Science Monitor
from the February 23, 2009 edition
Los Angeles - Perhaps more than any state in America, California represents the end of the rainbow. Generations of fortune-seekers have seen it as a place of almost magical light and color where they could obtain, if not a big pot of gold, at least a good living in a climate where oleander bushes and innovation thrive equally as well.
That storied vision, fading for some time, is now in danger of disappearing altogether.
From drought to high taxes, from overcrowded classrooms to overflowing prisons, California confronts a perfect storm of troubles – one that elected officials here seem unable to navigate with any surety, as last week's herculean effort to simply produce an annual budget demonstrated to all of the nation.
But even as California's woes multiply, compounded by the broader recession, there are stirrings of reform in the land. Longtime observers of political and business trends here see a somnolent giant awakening and realizing that it is wrapped in something of a political straitjacket.
For one thing, state voters, who flocked to the polls in the last election, have begun to tackle election reforms, which many say are crucial if government is to function more effectively.
"Californians are finally sick of all this. There's never been such conversational currency with the intricacies of government by the average citizen," says Barbara O'Connor, director of the Institute for the Study of Politics and Media at California State University, Sacramento. Noting that California voters in November approved redistricting reform to help end political gridlock, Ms. O'Connor says, "The era of the disengaged voter is over."
Activism is bubbling up in two formal moves to recast government, echoing the move by state Sen. Abel Maldonado (R), who finally cast the vote that broke the long budget deadlock after winning assurances of support for an election reform he says is needed to bring more moderates into office.
One is a bid to amend California's constitution.
"This state has a crisis everywhere you look.... California has slipped from first or best in country to the worst," says John Grubb, spokesman for the Bay Area Council, which spent the past year building a coalition to push for a constitutional convention that would craft a new California constitution. Political, economic, and citizens groups are slated to meet in a first-time summit Tuesday in Sacramento.
"The thing that drives this coalition is the great fear of the status quo – that we could be stuck like this forever," says Mr. Grubb. "People desperately want change, and we feel that a constitutional convention is probably the most foolproof way to get the reforms we need in the quickest amount of time."
Another group, California Forward, has been holding focus groups across the state for nearly a year to find bipartisan, citizen-driven solutions to end the structural problems that plague the state.
"The reality is we can't exist this way anymore. We can't just keep plugging a hole until the next year," says Jim Mayer, executive director of California Forward, which includes leaders from business and labor, on the left and right, from around the state. The group was co-chaired by Leon Panetta, before President Obama tapped him to head the Central Intelligence Agency.
"There is a huge gap between the innovation that is out there and the government. The ideas never get translated into policy in California," Mr. Mayer adds. "California has to step back and reinvent its government to meet the challenges of this state and the ambitions of its people."
The challenges are daunting.
Contributing to lawmakers' fight to close a $42 billion budget deficit – the largest budget gap by any state in American history – is a litany of other problems: crumbling infrastructure, water shortages, prison overcrowding, gang crime, traffic congestion and smog, illegal immigration, and sliding school performance.
Some California watchers say the state's political rules also handicap the government that serves the nation's biggest population, at 34 million, and its most diverse.
Those include the often-used citizen referendum process, which allows ballot initiatives to spring from the grass roots but which, some say, has also had the effect of limiting officials' budgetary options. Term limits for elected officials may also contribute, making it difficult for new and relatively inexperienced officeholders to understand the needs of a mammoth government that oversees 58 counties, 480 cities, 1,050 K-12 school districts, and 72 community college districts.
"California has a governance structure that is too rigid, not just in regard to fiscal spending but in political matters as well," says Mark Baldassare, executive director of the Public Policy Institute of California. On a ballot measure, he says, "a 50 percent vote can get ... embedded in the constitution both tax and spending requirements that are difficult to maintain and don't have much flexibility."
The state's tax system, which relies heavily on personal income and capital gains has proved to be unstable again and again, he adds. Political districts drawn by the party in power, moreover, create too many "safe" seats that allow candidates and legislators to forgo learning the art of compromise. Instead, they dig in, and gridlock ensues.
In several lists and indexes comparing states' performance, the Golden State seems to have some leaden weights around its ankles.
It's never done particularly well on the one that rates tax favorability for businesses, but now it comes up 48th for fiscal year 2009, according to the Tax Foundation. Next-door neighbors Nevada and Oregon are among the best 10 in terms of business tax climate, which is an incentive for businesses to locate or relocate nearby. As for taxes on individuals, the state has the highest sales tax in the nation, and its income-tax rate ranks toward the top, too.
Moreover, a California Faculty Association report last month warned that the state "is on course to wreck its own economy" because of failure to invest in higher education, and a US Chamber of Commerce "State-by-State Report Card on Educational Effectiveness" gives California an F on academic achievement.
In December, California had the fourth-highest jobless rate of states in the US, at 9.3 percent, according to the US Bureau of Labor Statistics.
California Forward wants to establish a network of regional, private-public partnerships to pursue long-term recovery from the current economic challenges.
One example is prisons, says Mayer. A panel of three federal judges found Feb. 9 that overcrowding in state prisons has deprived inmates of their right to adequate healthcare and ruled that the state must reduce its prison population. California's 33 prisons were designed for 84,000 inmates but now hold 158,000.
"Our state's prison budget has been growing faster than any other outlay for a decade, not because of the prison system itself, but because of costs," says Mayer. In 2001, California spent $26,556 per inmate, ranking 23rd in the nation. By 2005, costs per inmate had increased to $34,150, sixth in the nation. By contrast, 31 states reduced costs.
The Bay Area Council, in its bid to hold a constitutional convention, hopes to limit ideas to four categories: budget reform, election reform, more local control of locally collected funds, and the establishment of an oversight commission to examine and make recommendations on the function and viability of every state agency.
"It's modeled on the very popular Texas system," says Grubb. "They will investigate every state agency and make suggestions on whether or not it should be continued, disbanded, or merged in some other form with another agency. We feel this is a great way to get better efficiency out of government."
Although some sociologists and writers predict continued decline for Californians' quality of life, historian Kevin Starr, who has writen seven volumes about the state, has described California as an open-ended experiment in "global ecumenical civilization." "The state is increasingly difficult ... and aware of enormous challenges that are forcing its citizens and institutions to struggle mightily," he said in a 2004 interview with the Monitor. "The typical American dreamer can no longer merely say, as he once did, 'The solution is that I have come to California.' The ante has been upped."
Questions:
1. How is it that Retardicans get the image of "fiscally conservative"? Everything they touch economically blows up. (Answer: They are superior in terms of marketing.)
2. How does Arnie hold his job??? This is perhaps the most troubling, because in the private sector, the board would have been up his ass and booted his butt out a long time ago. (Answer: This is bizarro world, where "The Governator" rules.)
California, once a dream state, strives to get back its groove
As it has slid, the state's citizens have begun to focus on its core dysfunctions.
By Daniel B. Wood | Staff writer of The Christian Science Monitor
from the February 23, 2009 edition
Los Angeles - Perhaps more than any state in America, California represents the end of the rainbow. Generations of fortune-seekers have seen it as a place of almost magical light and color where they could obtain, if not a big pot of gold, at least a good living in a climate where oleander bushes and innovation thrive equally as well.
That storied vision, fading for some time, is now in danger of disappearing altogether.
From drought to high taxes, from overcrowded classrooms to overflowing prisons, California confronts a perfect storm of troubles – one that elected officials here seem unable to navigate with any surety, as last week's herculean effort to simply produce an annual budget demonstrated to all of the nation.
But even as California's woes multiply, compounded by the broader recession, there are stirrings of reform in the land. Longtime observers of political and business trends here see a somnolent giant awakening and realizing that it is wrapped in something of a political straitjacket.
For one thing, state voters, who flocked to the polls in the last election, have begun to tackle election reforms, which many say are crucial if government is to function more effectively.
"Californians are finally sick of all this. There's never been such conversational currency with the intricacies of government by the average citizen," says Barbara O'Connor, director of the Institute for the Study of Politics and Media at California State University, Sacramento. Noting that California voters in November approved redistricting reform to help end political gridlock, Ms. O'Connor says, "The era of the disengaged voter is over."
Activism is bubbling up in two formal moves to recast government, echoing the move by state Sen. Abel Maldonado (R), who finally cast the vote that broke the long budget deadlock after winning assurances of support for an election reform he says is needed to bring more moderates into office.
One is a bid to amend California's constitution.
"This state has a crisis everywhere you look.... California has slipped from first or best in country to the worst," says John Grubb, spokesman for the Bay Area Council, which spent the past year building a coalition to push for a constitutional convention that would craft a new California constitution. Political, economic, and citizens groups are slated to meet in a first-time summit Tuesday in Sacramento.
"The thing that drives this coalition is the great fear of the status quo – that we could be stuck like this forever," says Mr. Grubb. "People desperately want change, and we feel that a constitutional convention is probably the most foolproof way to get the reforms we need in the quickest amount of time."
Another group, California Forward, has been holding focus groups across the state for nearly a year to find bipartisan, citizen-driven solutions to end the structural problems that plague the state.
"The reality is we can't exist this way anymore. We can't just keep plugging a hole until the next year," says Jim Mayer, executive director of California Forward, which includes leaders from business and labor, on the left and right, from around the state. The group was co-chaired by Leon Panetta, before President Obama tapped him to head the Central Intelligence Agency.
"There is a huge gap between the innovation that is out there and the government. The ideas never get translated into policy in California," Mr. Mayer adds. "California has to step back and reinvent its government to meet the challenges of this state and the ambitions of its people."
The challenges are daunting.
Contributing to lawmakers' fight to close a $42 billion budget deficit – the largest budget gap by any state in American history – is a litany of other problems: crumbling infrastructure, water shortages, prison overcrowding, gang crime, traffic congestion and smog, illegal immigration, and sliding school performance.
Some California watchers say the state's political rules also handicap the government that serves the nation's biggest population, at 34 million, and its most diverse.
Those include the often-used citizen referendum process, which allows ballot initiatives to spring from the grass roots but which, some say, has also had the effect of limiting officials' budgetary options. Term limits for elected officials may also contribute, making it difficult for new and relatively inexperienced officeholders to understand the needs of a mammoth government that oversees 58 counties, 480 cities, 1,050 K-12 school districts, and 72 community college districts.
"California has a governance structure that is too rigid, not just in regard to fiscal spending but in political matters as well," says Mark Baldassare, executive director of the Public Policy Institute of California. On a ballot measure, he says, "a 50 percent vote can get ... embedded in the constitution both tax and spending requirements that are difficult to maintain and don't have much flexibility."
The state's tax system, which relies heavily on personal income and capital gains has proved to be unstable again and again, he adds. Political districts drawn by the party in power, moreover, create too many "safe" seats that allow candidates and legislators to forgo learning the art of compromise. Instead, they dig in, and gridlock ensues.
In several lists and indexes comparing states' performance, the Golden State seems to have some leaden weights around its ankles.
It's never done particularly well on the one that rates tax favorability for businesses, but now it comes up 48th for fiscal year 2009, according to the Tax Foundation. Next-door neighbors Nevada and Oregon are among the best 10 in terms of business tax climate, which is an incentive for businesses to locate or relocate nearby. As for taxes on individuals, the state has the highest sales tax in the nation, and its income-tax rate ranks toward the top, too.
Moreover, a California Faculty Association report last month warned that the state "is on course to wreck its own economy" because of failure to invest in higher education, and a US Chamber of Commerce "State-by-State Report Card on Educational Effectiveness" gives California an F on academic achievement.
In December, California had the fourth-highest jobless rate of states in the US, at 9.3 percent, according to the US Bureau of Labor Statistics.
California Forward wants to establish a network of regional, private-public partnerships to pursue long-term recovery from the current economic challenges.
One example is prisons, says Mayer. A panel of three federal judges found Feb. 9 that overcrowding in state prisons has deprived inmates of their right to adequate healthcare and ruled that the state must reduce its prison population. California's 33 prisons were designed for 84,000 inmates but now hold 158,000.
"Our state's prison budget has been growing faster than any other outlay for a decade, not because of the prison system itself, but because of costs," says Mayer. In 2001, California spent $26,556 per inmate, ranking 23rd in the nation. By 2005, costs per inmate had increased to $34,150, sixth in the nation. By contrast, 31 states reduced costs.
The Bay Area Council, in its bid to hold a constitutional convention, hopes to limit ideas to four categories: budget reform, election reform, more local control of locally collected funds, and the establishment of an oversight commission to examine and make recommendations on the function and viability of every state agency.
"It's modeled on the very popular Texas system," says Grubb. "They will investigate every state agency and make suggestions on whether or not it should be continued, disbanded, or merged in some other form with another agency. We feel this is a great way to get better efficiency out of government."
Although some sociologists and writers predict continued decline for Californians' quality of life, historian Kevin Starr, who has writen seven volumes about the state, has described California as an open-ended experiment in "global ecumenical civilization." "The state is increasingly difficult ... and aware of enormous challenges that are forcing its citizens and institutions to struggle mightily," he said in a 2004 interview with the Monitor. "The typical American dreamer can no longer merely say, as he once did, 'The solution is that I have come to California.' The ante has been upped."
Saturday, February 21, 2009
Petered Out
I think it's crystal clear now that between politicians, economists, pundits, business people, and scholars, that no one has a grip on EMO8; no one knows anything in terms of what to do. The ones who are at least honest and say so are to be noted.
What's also evident is that after throwing unprecedented amounts of good money - again, let's be honest; YOUR/MINE/OUR money - after bad and sinking us further into EMO8, incompetence is ruling the day like never before. It's The Peter Principle Gone Wild!
Welcome to Bizarro World, where a kid in East Los steals a bike and they haul him into the joint, but Bernie Madoff sits in a penthouse.
Consider; most Americans are completely unaware that in terms of the mortgage crisis we are barely a third of the way through it, if that. See footnote #4 of this article. This is a perfect example of how "the system" is failing; mass media's reluctance, fear or just ignorance of the facts is a dis-service, to say the least. Ironically, I first learned of this from a mass-media merchant; CBS's 60 Minutes.
But I just love experts, for instance, blowhard shithead and celebrated ex-GE CEO Jack Welch said the most astounding thing on Charlie Rose about a week ago. He said, in relation to the topic of extravagant bonuses for (investment) banking execs:
I own an investment bank... I've written about it in books. [These are the qualifiers, establishing his cred to make the judgments he does.] ...I had to hold my nose to pay the bonus, but if I didn't pay it, the people were gonna go. (see below vid or go here to approximately 23:45 )
The implication is that "the best" would leave. "The best" defined as Welch himself later defines it, as people who "chose to make money." They didn't choose to cure cancer, or to go into public service, he continues pointedly while looking across the table at an in-the-know smirking Chuck Schumer...
Now, on Welch's and "our" system's warped level it makes sense, after all, it's useless to argue with the reality of, yes, these people chose to make money. The problem is the logic of them leaving, and then Welch being stuck with a buncha shleps who, by his own logic, do not want to make money!
Let's go with that for a moment and expand it to the market in general. Most Americans go to a job they do not like, even hate and at the least are indifferent about; they do it because they need income, no more or less. Statistics for cardiac arrests bear this out; one day before or on that most favorite day of Monday, more incidents occur than on any other day. While incompetence does indeed run rampant, statistically there have to be competent people, doing jobs they have no investment in.
Welch seems to think that "his" formula is the only one for success. By simple logic, it's just not true. His implication is that just because someone chose to make money that somehow they are best suited for the task, and that he would therefore hold his nose and pay them their bonuses. The obvious and simple refutation is that Wall Street has been paying them market rates and extravagant bonuses... AND THEY'VE COMPLETELY JACKED UP EVERYTHING TO HISTORIC PROPORTIONS.
Everyone loves to point out how incompetent government is, and for the most part I agree. But as we can see, the private sector's incompetence has run amok.
In a disjointed segue, and as proof of Bizarro World's dominance, isn't it weird how the debacle of Enron, Andersen, Worldcom, Global Crossing, Tyco, Adelphia... now seems like ancient history?
Bunuel asked; "Where is the kindness and intelligence that will save us?"
I have some thoughts on that, but it's coming down the line.
What's also evident is that after throwing unprecedented amounts of good money - again, let's be honest; YOUR/MINE/OUR money - after bad and sinking us further into EMO8, incompetence is ruling the day like never before. It's The Peter Principle Gone Wild!
Welcome to Bizarro World, where a kid in East Los steals a bike and they haul him into the joint, but Bernie Madoff sits in a penthouse.
Consider; most Americans are completely unaware that in terms of the mortgage crisis we are barely a third of the way through it, if that. See footnote #4 of this article. This is a perfect example of how "the system" is failing; mass media's reluctance, fear or just ignorance of the facts is a dis-service, to say the least. Ironically, I first learned of this from a mass-media merchant; CBS's 60 Minutes.
But I just love experts, for instance, blowhard shithead and celebrated ex-GE CEO Jack Welch said the most astounding thing on Charlie Rose about a week ago. He said, in relation to the topic of extravagant bonuses for (investment) banking execs:
I own an investment bank... I've written about it in books. [These are the qualifiers, establishing his cred to make the judgments he does.] ...I had to hold my nose to pay the bonus, but if I didn't pay it, the people were gonna go. (see below vid or go here to approximately 23:45 )
The implication is that "the best" would leave. "The best" defined as Welch himself later defines it, as people who "chose to make money." They didn't choose to cure cancer, or to go into public service, he continues pointedly while looking across the table at an in-the-know smirking Chuck Schumer...
Now, on Welch's and "our" system's warped level it makes sense, after all, it's useless to argue with the reality of, yes, these people chose to make money. The problem is the logic of them leaving, and then Welch being stuck with a buncha shleps who, by his own logic, do not want to make money!
Let's go with that for a moment and expand it to the market in general. Most Americans go to a job they do not like, even hate and at the least are indifferent about; they do it because they need income, no more or less. Statistics for cardiac arrests bear this out; one day before or on that most favorite day of Monday, more incidents occur than on any other day. While incompetence does indeed run rampant, statistically there have to be competent people, doing jobs they have no investment in.
Welch seems to think that "his" formula is the only one for success. By simple logic, it's just not true. His implication is that just because someone chose to make money that somehow they are best suited for the task, and that he would therefore hold his nose and pay them their bonuses. The obvious and simple refutation is that Wall Street has been paying them market rates and extravagant bonuses... AND THEY'VE COMPLETELY JACKED UP EVERYTHING TO HISTORIC PROPORTIONS.
Everyone loves to point out how incompetent government is, and for the most part I agree. But as we can see, the private sector's incompetence has run amok.
In a disjointed segue, and as proof of Bizarro World's dominance, isn't it weird how the debacle of Enron, Andersen, Worldcom, Global Crossing, Tyco, Adelphia... now seems like ancient history?
Bunuel asked; "Where is the kindness and intelligence that will save us?"
I have some thoughts on that, but it's coming down the line.
Wednesday, January 28, 2009
Trashmen
Follow the money.
As EM08 continues to throw up all over us, new stories of shitheads behaving like, well, shitheads, are now a regular occurrence. Meanwhile, Barack, congress and everyone else with a hand in determining more money down the drain are worrying me to no end. I heard our president saying that it was urgent we act swiftly.
But urgency is part of the problem that just compounded EM08.
Back in November I said that Barack should use David Cay Johnston, the one "economist" who I think makes sense. It was Johnston, before the bank theft, who posed the one key question on Lou Dobbs' show; "Let's say we give the banks this $700 billion. But what if things get worse?"
And worse they have.
What a shitstorm, and like William Goldman said about Hollywood, "No one knows anything."
Op-Ed Columnist
Wall Street’s Socialist Jet-Setters
By MAUREEN DOWD
Published: January 27, 2009
WASHINGTON
As President Obama spreads his New Testament balm over the capital, I’m longing for a bit of Old Testament wrath.
Couldn’t he throw down his BlackBerry tablet and smash it in anger over the feckless financiers, the gods of gold and their idols — in this case not a gilt calf but an $87,000 area rug, a cache of diamond Tiffany and
Cartier watches and a French-made luxury corporate jet?
Now that we’re nationalizing, couldn’t we fire any obtuse bankers and auto executives who cling to perks and bonuses even as the economy is following John Thain down his antique commode?
How could Citigroup be so dumb as to go ahead with plans to get a new $50 million corporate jet, the exclusive Dassault Falcon 7X seating 12, after losing $28.5 billion in the past 15 months and receiving $345 billion in government investments and guarantees?
(Now I get why a $400 payment I recently sent to pay off my Citibank Visa was mistakenly applied to my sister-in-law’s Citibank Mastercard account.)
The “Citiboobs” — as The New York Post, which broke the news, calls them — watched as the car chieftains got in trouble for flying their private jets to Washington to ask for bailouts, and the A.I.G. moguls got dragged before Congress for spending their bailout on California spa treatments. But the boobs still didn’t get the message.
The former masters of the universe don’t seem to fully comprehend that their universe has crumbled and, thanks to them, so has ours. Real people are losing real jobs at Caterpillar, Home Depot and Sprint Nextel; these and other companies announced on Monday that they would cut more than 75,000 jobs in the U.S. and around the world, as consumer confidence and home prices swan-dived.
Prodded by an appalled Senator Carl Levin, Tim Geithner — even as he was being confirmed as Treasury secretary — directed Treasury officials to call the Citiboobs and tell them the new jet would not fly.
“They woke up pretty quickly,” says a Treasury official, adding that they protested for a bit. “Six months ago, they would have kept the plane and flown it to Washington.”
Senator Levin said that the financiers will not be able to change their warped mentality, but will have to be reined in by Geithner’s new leashes. “I have no confidence that they intend or desire to change,” Levin told me. “These bankers got away with murder, and it’s obscene that close to nothing is being asked of financial institutions. I get incensed at the thought that a bank that’s getting billions of dollars in taxpayer money is out there buying fancy new airplanes.”
New York’s attorney general, Andrew Cuomo, always gratifying on the issue of clawing back money from the greedy creeps on Wall Street, on Tuesday subpoenaed Thain, the former Merrill Lynch chief executive, over $4 billion in bonuses he handed out as the failing firm was bought by Bank of America.
In an interview with Maria Bartiromo on CNBC, Thain used the specious, contemptible reasoning that other executives use to rationalize why they’re keeping their bonuses as profits are plunging.
“If you don’t pay your best people, you will destroy your franchise” and they’ll go elsewhere, he said.
Hello? They destroyed the franchise. Let’s call their bluff. Let’s see what a great job market it is for the geniuses of capitalism who lost $15 billion in three months and helped usher in socialism.
Bartiromo also asked Thain to explain, when jobs and salaries were being cut at his firm, how he could justify spending $1 million to renovate his office. As The Daily Beast and CNBC reported, big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a “Roman Shade” for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a “custom coffee table” for $16,000, an antique commode “on legs” for $35,000, and a $1,400 “parchment waste can.”
Does that mean you can only throw used parchment in it or is it made of parchment? It’s psychopathic to spend a million redoing your office when the folks outside it are losing jobs, homes, pensions and savings.
Thain should never rise above the level of stocking the money in A.T.M.’s again. Just think: This guy could well have been Treasury secretary if John McCain had won.
Bartiromo pressed: What was wrong with the office of his predecessor, Stanley O’Neal?
“Well — his office was very different — than — the — the general décor of — Merrill’s offices,” Thain replied. “It really would have been — very difficult — for — me to use it in the form that it was in.”
Did it have a desk and a phone?
How are these ruthless, careless ghouls who murdered the economy still walking around (not to mention that sociopathic sadist Bernie Madoff?) — and not as perps?
Bring on the shackles. Let the show trials begin.
A version of this article appeared in print on January 28, 2009, on page A31 of the New York edition.
As EM08 continues to throw up all over us, new stories of shitheads behaving like, well, shitheads, are now a regular occurrence. Meanwhile, Barack, congress and everyone else with a hand in determining more money down the drain are worrying me to no end. I heard our president saying that it was urgent we act swiftly.
But urgency is part of the problem that just compounded EM08.
Back in November I said that Barack should use David Cay Johnston, the one "economist" who I think makes sense. It was Johnston, before the bank theft, who posed the one key question on Lou Dobbs' show; "Let's say we give the banks this $700 billion. But what if things get worse?"
And worse they have.
What a shitstorm, and like William Goldman said about Hollywood, "No one knows anything."
Op-Ed Columnist
Wall Street’s Socialist Jet-Setters
By MAUREEN DOWD
Published: January 27, 2009
WASHINGTON
As President Obama spreads his New Testament balm over the capital, I’m longing for a bit of Old Testament wrath.Couldn’t he throw down his BlackBerry tablet and smash it in anger over the feckless financiers, the gods of gold and their idols — in this case not a gilt calf but an $87,000 area rug, a cache of diamond Tiffany and
Cartier watches and a French-made luxury corporate jet?
Now that we’re nationalizing, couldn’t we fire any obtuse bankers and auto executives who cling to perks and bonuses even as the economy is following John Thain down his antique commode?
How could Citigroup be so dumb as to go ahead with plans to get a new $50 million corporate jet, the exclusive Dassault Falcon 7X seating 12, after losing $28.5 billion in the past 15 months and receiving $345 billion in government investments and guarantees?
(Now I get why a $400 payment I recently sent to pay off my Citibank Visa was mistakenly applied to my sister-in-law’s Citibank Mastercard account.)
The “Citiboobs” — as The New York Post, which broke the news, calls them — watched as the car chieftains got in trouble for flying their private jets to Washington to ask for bailouts, and the A.I.G. moguls got dragged before Congress for spending their bailout on California spa treatments. But the boobs still didn’t get the message.
The former masters of the universe don’t seem to fully comprehend that their universe has crumbled and, thanks to them, so has ours. Real people are losing real jobs at Caterpillar, Home Depot and Sprint Nextel; these and other companies announced on Monday that they would cut more than 75,000 jobs in the U.S. and around the world, as consumer confidence and home prices swan-dived.
Prodded by an appalled Senator Carl Levin, Tim Geithner — even as he was being confirmed as Treasury secretary — directed Treasury officials to call the Citiboobs and tell them the new jet would not fly.
“They woke up pretty quickly,” says a Treasury official, adding that they protested for a bit. “Six months ago, they would have kept the plane and flown it to Washington.”
Senator Levin said that the financiers will not be able to change their warped mentality, but will have to be reined in by Geithner’s new leashes. “I have no confidence that they intend or desire to change,” Levin told me. “These bankers got away with murder, and it’s obscene that close to nothing is being asked of financial institutions. I get incensed at the thought that a bank that’s getting billions of dollars in taxpayer money is out there buying fancy new airplanes.”
New York’s attorney general, Andrew Cuomo, always gratifying on the issue of clawing back money from the greedy creeps on Wall Street, on Tuesday subpoenaed Thain, the former Merrill Lynch chief executive, over $4 billion in bonuses he handed out as the failing firm was bought by Bank of America.
In an interview with Maria Bartiromo on CNBC, Thain used the specious, contemptible reasoning that other executives use to rationalize why they’re keeping their bonuses as profits are plunging.
“If you don’t pay your best people, you will destroy your franchise” and they’ll go elsewhere, he said.
Hello? They destroyed the franchise. Let’s call their bluff. Let’s see what a great job market it is for the geniuses of capitalism who lost $15 billion in three months and helped usher in socialism.
Bartiromo also asked Thain to explain, when jobs and salaries were being cut at his firm, how he could justify spending $1 million to renovate his office. As The Daily Beast and CNBC reported, big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a “Roman Shade” for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a “custom coffee table” for $16,000, an antique commode “on legs” for $35,000, and a $1,400 “parchment waste can.”
Does that mean you can only throw used parchment in it or is it made of parchment? It’s psychopathic to spend a million redoing your office when the folks outside it are losing jobs, homes, pensions and savings.
Thain should never rise above the level of stocking the money in A.T.M.’s again. Just think: This guy could well have been Treasury secretary if John McCain had won.
Bartiromo pressed: What was wrong with the office of his predecessor, Stanley O’Neal?
“Well — his office was very different — than — the — the general décor of — Merrill’s offices,” Thain replied. “It really would have been — very difficult — for — me to use it in the form that it was in.”
Did it have a desk and a phone?
How are these ruthless, careless ghouls who murdered the economy still walking around (not to mention that sociopathic sadist Bernie Madoff?) — and not as perps?
Bring on the shackles. Let the show trials begin.
A version of this article appeared in print on January 28, 2009, on page A31 of the New York edition.
Tuesday, January 27, 2009
Shove It
Via Robin on the Stern Show, I learned about teen embedding. When I showed my daughter several stories about teen embedding - where teens have self-mutilated by putting objects such as paper clips and crayons under their skin - she just shook her head in dismay. Google "teen embedding" and you'll see the stories.
It's not so much that teens are fucked up these days, that's normal; I think it's an expression of these times. It may as well be self-amputation, which also occurs. People are shocked but let's not forget that the practice of trepanation has been around a long time. So it's clear that humans have long self-mutilated.
The difference maker is that humans also have large brains; we evolve. Things such as social constructions like racism are systems that have come under scrutiny and we process through them, however imperfectly, yet we continue to make moves, both symbolic and real.
As an old fart, Ive regaled my daughter about what it was like to be alive in the crucible of the 60's and 70's. And I think I've been honest with her when I say that hippies were full of a bunch of goofy shit, but they also got up off their asses and helped stop an insane war, bounce a criminal out of the presidency and fought hard for civil rights and women's rights.
We also were fortunate to have a very active base of activist athletes and artists (film, music and literature in particular) who were plugged in and pumping out messages that spoke to us on the level of the social-political hurricane swirling around us. Without the slightest hint of romance, I can say that there was something in the air.
Today, my daughter finds her generation full of ennui, entitlement and a complete lack of awareness of history. I was talking to one of her friends who's in his 20's and I asked him if he knew who Robert Oppenheimer was, or J. Edgar Hoover, or what the New Deal was. It was shocking, but not surprising that he didn't know, much less showed any interest.
Thing is, it's really not all their fault; education here is a travesty. Kids come out of college and have absolutely no working knowledge of financial systems, much less political systems, and how history has shaped them and impacts the world, and thus their lives. Everyone, via dumbya's boneheaded "No Child Left Behind" program, teaches to rote memorization and test taking, and our kids come out of it beaten up, bored to death, uninspired and automatonic. The drop out rate is appalling in the hood; in East LA, it's probably over 30%, and I guarantee you if that were happening in Beverly Hills or Malibu, parents would be storming their respective city halls and heads would be rolling. But because it's disenfranchised brown mudpeeps, it's a non-subject.
It's tragic, really, when you hear someone such as a western European speaking English and their command is superior to that of a lot of our kids. And while everyone stresses reading as a fundamental skill, and indeed it's important, writing is a lost art. Forget it, it's gone, left to the few.
My father, in his last days, taught cons in medium security; his goal was to bring them up to high school equivalency. He had a wide range in ages, from 18 to old vets, lifers, and one day he asked me what I thought was the average literacy rate of his students. I thought about somewhere in high school. He then told me one of the most shocking things I've ever heard, that it was probably around 5th grade level, if that. Many were illiterate, others, functionally so. Of course, they were all black and brown.
In the midst of EM08, which is distracting everyone by continuing to throw up all over us, there is an American travesty that's been in the works for decades. Thing is, we know what to do. Programs such as "Head Start" which worked with pre-schoolers, have all but shown conclusively that they work well. Too many studies have shown that kids benefit by learning other languages and art, such as music - their academic achievement rises and they grow up to be healthier, more well-adjusted people.
Instead, we have bred generation after generation of disenchanted young people, and embedding is but one way they seek to feel, to live, or reach out for something. Talk about sustainability; these kids are a "resource" of the most precious kind, and we're wasting it like there's no tomorrow.
Churchill had a great quote about how crazy we are: "America always makes the right decision after they've exhausted every other possibility." I'm not sure in this case, because as George Carlin points out, the owners of this country want education dumbed down real good. George said, "It's called 'The American Dream,' because you have to be asleep, to believe it."
Truly.
It's not so much that teens are fucked up these days, that's normal; I think it's an expression of these times. It may as well be self-amputation, which also occurs. People are shocked but let's not forget that the practice of trepanation has been around a long time. So it's clear that humans have long self-mutilated.
The difference maker is that humans also have large brains; we evolve. Things such as social constructions like racism are systems that have come under scrutiny and we process through them, however imperfectly, yet we continue to make moves, both symbolic and real.
As an old fart, Ive regaled my daughter about what it was like to be alive in the crucible of the 60's and 70's. And I think I've been honest with her when I say that hippies were full of a bunch of goofy shit, but they also got up off their asses and helped stop an insane war, bounce a criminal out of the presidency and fought hard for civil rights and women's rights.
We also were fortunate to have a very active base of activist athletes and artists (film, music and literature in particular) who were plugged in and pumping out messages that spoke to us on the level of the social-political hurricane swirling around us. Without the slightest hint of romance, I can say that there was something in the air.
Today, my daughter finds her generation full of ennui, entitlement and a complete lack of awareness of history. I was talking to one of her friends who's in his 20's and I asked him if he knew who Robert Oppenheimer was, or J. Edgar Hoover, or what the New Deal was. It was shocking, but not surprising that he didn't know, much less showed any interest.
Thing is, it's really not all their fault; education here is a travesty. Kids come out of college and have absolutely no working knowledge of financial systems, much less political systems, and how history has shaped them and impacts the world, and thus their lives. Everyone, via dumbya's boneheaded "No Child Left Behind" program, teaches to rote memorization and test taking, and our kids come out of it beaten up, bored to death, uninspired and automatonic. The drop out rate is appalling in the hood; in East LA, it's probably over 30%, and I guarantee you if that were happening in Beverly Hills or Malibu, parents would be storming their respective city halls and heads would be rolling. But because it's disenfranchised brown mudpeeps, it's a non-subject.
It's tragic, really, when you hear someone such as a western European speaking English and their command is superior to that of a lot of our kids. And while everyone stresses reading as a fundamental skill, and indeed it's important, writing is a lost art. Forget it, it's gone, left to the few.
My father, in his last days, taught cons in medium security; his goal was to bring them up to high school equivalency. He had a wide range in ages, from 18 to old vets, lifers, and one day he asked me what I thought was the average literacy rate of his students. I thought about somewhere in high school. He then told me one of the most shocking things I've ever heard, that it was probably around 5th grade level, if that. Many were illiterate, others, functionally so. Of course, they were all black and brown.
In the midst of EM08, which is distracting everyone by continuing to throw up all over us, there is an American travesty that's been in the works for decades. Thing is, we know what to do. Programs such as "Head Start" which worked with pre-schoolers, have all but shown conclusively that they work well. Too many studies have shown that kids benefit by learning other languages and art, such as music - their academic achievement rises and they grow up to be healthier, more well-adjusted people.
Instead, we have bred generation after generation of disenchanted young people, and embedding is but one way they seek to feel, to live, or reach out for something. Talk about sustainability; these kids are a "resource" of the most precious kind, and we're wasting it like there's no tomorrow.
Churchill had a great quote about how crazy we are: "America always makes the right decision after they've exhausted every other possibility." I'm not sure in this case, because as George Carlin points out, the owners of this country want education dumbed down real good. George said, "It's called 'The American Dream,' because you have to be asleep, to believe it."
Truly.
Tuesday, January 20, 2009
On This Day
With Barack's first official day here, there's a small flame being lit in America, and it has the feeling of what the 60's/70's felt like, however remotely.
Here's hoping Barack's first day is the start of a new, positive beginning for everyone, not just us Americans. The talking's over, now it's doing.
Onward...
Theory's alright, but practice is supreme.
--David Hilliard
Here's hoping Barack's first day is the start of a new, positive beginning for everyone, not just us Americans. The talking's over, now it's doing.
Onward...
Theory's alright, but practice is supreme.
--David Hilliard
Wednesday, January 07, 2009
Shithead of the Month
So my friend, Angry Black Woman, went on a trip and had ID theft committed and all of her money was stolen. Here's the jerkoff who took the money.
Shithead of the Month
Shithead of the Month
Tuesday, December 30, 2008
Another State
The economic hammering is creating cracks everywhere I look. What's happening is frightful; I just got through speaking with my cousin who lives in another state, and he said that unemployment has hit 10% and is rising like flood water. Some analysts project that it's already at 10% nationwide and is probably a lot higher when you factor in those who've given up. Robin Quivers of the Stern Show said last month that families were now consolidating by providing extra rooms to other family members, a trend which has been on the upswing for a while and shows no sign of abating. If things are bad with no end in sight in in the States I can't imagine what people in other countries must be going through with the great sucking down of everything that America has created.
Believe it or not, there is a possible silver lining; if this shitstorm gets America to finally wake up. But there's still plenty of the storm to weather.
Economic Death and Millionaire Taxes
By David Sirota
For most of us, Benjamin Franklin’s words in 1789 still apply: “Nothing is certain but death and taxes.”
However, millionaires, by definition, are not most of us. While they can’t stave off the grim reaper, they can convince lawmakers to shield them from the taxman and balance budgets on the backs of everyone else.
That’s what’s going on in revenue-starved states right now: governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy.
Nowhere is this class war more pronounced than in New York—the home of the financial thieves who killed the economy. Having halved its top tax rate over the last three decades, New York today faces a $15.4 billion deficit. In response, Gov. David Paterson (D) might have asked his state’s Gordon Gekkos to pay higher taxes, especially considering the idea’s popularity in polls and the news that Wall Street’s elite are still swimming in money. Indeed, according to CBS News, the allegedly beleaguered financial industry is so flush with cash it plans to dole out $14 billion in executive bonuses this year.
Yet, far from forcing robber barons to pay their fair share, Paterson told the New York Times that taxing millionaires is “the last place you want to go.” Instead, he proposes to punish Joe and Jane Six-pack by hiking the taxes and cutting the programs that disproportionately impact them. Specifically, he wants to increase sales taxes, college tuitions and licensing fees and slash education and low-income health programs.
Paterson defended his proposals by telling PBS’s Bill Moyers “that when you tax the wealthy in the downturn of an economy, you have an automatic link of a loss of job opportunities and then a loss of population.” The rationale sounds intelligently pragmatic—until you peruse the relevant data.
When New Jersey recently raised taxes on the wealthy, Princeton University researchers found that most of those who later left the state moved to places with higher taxes, meaning there is no causative link between levies on the rich and residential flight. Likewise, when New York temporarily raised high-income taxes after 9/11, the state added 127,000 jobs, meaning no link exists between higher taxes on the rich and job loss.
During times of surpluses, governors could get away with the unsubstantiated nonsense Paterson is peddling. But now, 43 states confront shortfalls, and because states cannot run deficits, the dollars and sense of these arguments matter. Lawmakers must choose what policy will create the best chances for economic recovery: spending cuts or tax increases, and if the latter, on whom?
The answer isn’t rocket science. As Nobel prize-winning economist Joseph Stiglitz says, “Reductions in government spending on goods and services (are) likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”
That’s because government cuts automatically decrease the consumptive spending programs that broadly stimulate the economy whereas tax increases, when aimed at the wealthy, more often impact funds socked away in savings. “The more that the tax increases (are) focused on those with lower propensities to consume (i.e., the rich),” Stiglitz notes, “the less damage is done to the weakened economy.”
Incredibly, Paterson acknowledges how destructive his budget is, admitting that his own “education cuts are draconian, the health care cuts are prohibitive [and] the taxes that are being levied…are not fair.”
So why would he—or any governor—nonetheless try to legislate such idiocy? Because millionaires are the ones who finance gubernatorial candidacies, and their campaign contributions buy tax protection. The result is what another New York royalist promised.
“Only the little people pay taxes,” said Leona Helmsley—a doctrine that will exacerbate this recession if states keep making it true.
David Sirota is a senior editor at In These Times and a bestselling author whose newest book, "The Uprising," was released in May 2008. He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network -- both nonpartisan organizations.
Believe it or not, there is a possible silver lining; if this shitstorm gets America to finally wake up. But there's still plenty of the storm to weather.
Economic Death and Millionaire Taxes
By David Sirota
For most of us, Benjamin Franklin’s words in 1789 still apply: “Nothing is certain but death and taxes.”
However, millionaires, by definition, are not most of us. While they can’t stave off the grim reaper, they can convince lawmakers to shield them from the taxman and balance budgets on the backs of everyone else.
That’s what’s going on in revenue-starved states right now: governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy.
Nowhere is this class war more pronounced than in New York—the home of the financial thieves who killed the economy. Having halved its top tax rate over the last three decades, New York today faces a $15.4 billion deficit. In response, Gov. David Paterson (D) might have asked his state’s Gordon Gekkos to pay higher taxes, especially considering the idea’s popularity in polls and the news that Wall Street’s elite are still swimming in money. Indeed, according to CBS News, the allegedly beleaguered financial industry is so flush with cash it plans to dole out $14 billion in executive bonuses this year.
Yet, far from forcing robber barons to pay their fair share, Paterson told the New York Times that taxing millionaires is “the last place you want to go.” Instead, he proposes to punish Joe and Jane Six-pack by hiking the taxes and cutting the programs that disproportionately impact them. Specifically, he wants to increase sales taxes, college tuitions and licensing fees and slash education and low-income health programs.
Paterson defended his proposals by telling PBS’s Bill Moyers “that when you tax the wealthy in the downturn of an economy, you have an automatic link of a loss of job opportunities and then a loss of population.” The rationale sounds intelligently pragmatic—until you peruse the relevant data.
When New Jersey recently raised taxes on the wealthy, Princeton University researchers found that most of those who later left the state moved to places with higher taxes, meaning there is no causative link between levies on the rich and residential flight. Likewise, when New York temporarily raised high-income taxes after 9/11, the state added 127,000 jobs, meaning no link exists between higher taxes on the rich and job loss.
During times of surpluses, governors could get away with the unsubstantiated nonsense Paterson is peddling. But now, 43 states confront shortfalls, and because states cannot run deficits, the dollars and sense of these arguments matter. Lawmakers must choose what policy will create the best chances for economic recovery: spending cuts or tax increases, and if the latter, on whom?
The answer isn’t rocket science. As Nobel prize-winning economist Joseph Stiglitz says, “Reductions in government spending on goods and services (are) likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”
That’s because government cuts automatically decrease the consumptive spending programs that broadly stimulate the economy whereas tax increases, when aimed at the wealthy, more often impact funds socked away in savings. “The more that the tax increases (are) focused on those with lower propensities to consume (i.e., the rich),” Stiglitz notes, “the less damage is done to the weakened economy.”
Incredibly, Paterson acknowledges how destructive his budget is, admitting that his own “education cuts are draconian, the health care cuts are prohibitive [and] the taxes that are being levied…are not fair.”
So why would he—or any governor—nonetheless try to legislate such idiocy? Because millionaires are the ones who finance gubernatorial candidacies, and their campaign contributions buy tax protection. The result is what another New York royalist promised.
“Only the little people pay taxes,” said Leona Helmsley—a doctrine that will exacerbate this recession if states keep making it true.
David Sirota is a senior editor at In These Times and a bestselling author whose newest book, "The Uprising," was released in May 2008. He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network -- both nonpartisan organizations.
Monday, December 29, 2008
Fish Bite
I'm an admirer of Professor Stanley Fish's, and have to post this. It speaks to the way huge corporations now dominate our lives with the bullshit they mete out and get away with on the basis of their power. As a consumer, it's the near-end result of being dominated by the biggest bullies in business history.
At the end of his piece there's a comments section, and I threw up my lot, typos and all, about the bad decision "we've" made in letting corporate America conglomerate down to this unprecedented power. In the above paragraph above (That's a joke for you, Professor Fish), I said, "As a consumer, it's the near-end result of being dominated by the biggest bullies in business history." I said "near-end" for a reason; because what we're currently witnessing in the financial sector is, in one sense, the endgame of huge financial corporations -- benignly called "institutions" by some -- running amok. They, their lobbyists, their armies of lawyers they deploy, and the politicians who are in their back pockets don't care about you, me, us at all, as George Carlin said. That means it's gonna get a lot worse and a lot uglier, for instance, as those "Alt-A" and "option ARM" mortgage loans, approved by the ratings companies, reset.
And I hope you understand that although I think this is the endgame, it means for this phase. What the hell comes next is either one of or a combo of three things, as I see it:
1. A "cooling down period," where auto CEOs will drive hybrids and go on photo ops, then a return to "business as usual" when they feel like it.
2. More conglomeration.
3. A makeover, but not an overhaul. This means that cosmetics will be applied but the basic fundamentals of big capital, distinct and differentiated here from capitalism, will still be there.
There's actually a fourth choice which is true capitalism, which would be a revolution, but that's not going to happen and I wouldn't bet on it. The reason and historical evidence are pretty overwhelming if you ask me, but if you take the example of yet another crisis in our laps, healthcare, there are very good reasons why if I had to bet I'd say that we will never enjoy a single-payer plan. Of course it's money, and I've talked about it before, but succinctly, the healthcare industry's owned by three huge sub-industries: HMOs, pharmaceutical and insurance companies, any of which is a huge presence on the Hill via lobbyists and armies of lawyers. With all three of them acutely interested in maintaining the status quo, forget it, it's like me trying to play Kobe Bryant. So, if I had to bet I'd say it's going to be number three, the cosmetic makeover, which equates to business as usual.
Anyway, without further ramblings, here's a great deconstructionist speaking plainly about a huge corporation.
Oh, and sorry for the bad title pun, Professor Fish. You've probably heard them all.
From the NY Times Opinion page
December 28, 2008, 10:00 pm
The Return of the Old Grouch
When you live in two places and decamp from one to the other every six months or so, there are any number of things that have to be done. (I know that at least 50 readers will want to rebuke me for complaining about problems only the privileged can have, but perhaps we can agree to get past that.) Closing the house, switching the mail, storing the porch furniture, suspending cable service, draining the pipes. But the one that gives me a headache even before I attempt it is the phone call to AT&T, or, rather, the 20 phone calls to AT&T.
The first obstacle, of course, was getting through to someone. The prompts did not correspond to any of my concerns, but finally, after pressing a number of zeros, I was rewarded with the voice of a live person who said, “With whom do I have the pleasure of speaking with?”
Visions of Lily Tomlin’s Ernestine the telephone operator danced in my head, but I bit my tongue and made my simple request.
“I’ve been away for some time and my services were reduced. I’d like to have them restored to what they were when I left in June.”
It turned out that this was not possible. Even though I had paid to retain my phone number, I was going to be treated as a new customer, which meant that I would have to answer a bunch of questions and decline services I had never had. After much back and forth I signed up for a package that included voice mail.
I should have quit when I was (somewhat) ahead, but I couldn’t resist returning to the greeting, with its double and ungrammatical “with.” I explained that the second “with” was superfluous, as the second “to” would be if the offending question had been, “to whom am I speaking to?”, or the second “about” if the question had been “about what are you worrying about?”
Somehow that didn’t make much of an impression on her. She said that her instructions were to greet callers in that way and that she would continue to do so. I replied that it was scandalous that a multi-billion-dollar world-wide telecommunication corporation would order its employees to commit an egregious (and comical) grammatical error millions of times a day.
She said, “I’m sorry you feel that way.”
I lost it. It has nothing to do with feelings, I ranted. It is a factual matter as to what is and is not syntactically correct.
She changed the subject by informing me that the social security number I had given when she asked for it was not the number she had on record. I asked her to change it, but she pleaded incapacity: “No, I can’t do that. I’ll connect you to the department where they can.”
That was a promise made subsequently by five other people as I was repeatedly transferred to someone who told me, “No, I can’t do that.” Everyone I talked to assured me that within seconds I would be talking to the right person. My last interlocutor took pity on me, and although he too was not the right person, he knew someone in his division who was and said he would talk to him directly. When he came back, it was to tell me that the social security number on record was in fact the one I had given him. The whole thing had been a wild goose chase.
I was more exasperated than relieved, and I made the mistake of re-raising the “with-whom-do-I-have-the-pleasure-of-speaking-with” matter. He listened and suggested that I make a complaint. You mean call another 800 number, I wailed. No, he replied, I’ll do it for you, just tell me what you want to say. I went through the nature of the error, but when I talked about the unseemliness of a major corporation managing to sound pompous and ignorant at the same time, he interrupted me and said that he would not transmit that kind of language. I thought about pointing out that this was a complaint, not a love letter, but I just gave up.
This epic was not over. When I got to Florida after a three-day drive I found that I didn’t have voice mail. I called and was told that there was no record of my having placed an order. I was assured that the matter would be taken care of in 24 hours. It wasn’t. I called back the next day, but a mechanical voice informed me that there was no service on Sunday. (Don’t people make phone calls on Sundays and pay for them?) Finally, on Monday, I reached someone who assured me that I would have voice mail the next day, and he turned out to be right.
But by that time I was beyond caring. I told him that I had decided to write a column about my AT&T adventures and that, in fairness, I thought I should talk to someone in the corporate structure. He said that he would put me through to the right department, but when someone picked up, she identified herself as “Directories.”
What?, I asked.
I’m in advertising, she replied. We send out telephone directories. Do you want one?
I explained what I was trying to do, and she laughed. I laughed, too, the best moment of the experience.
Every weeknight on MSNBC, Keith Olbermann, who never met an exaggeration he didn’t like, names that day’s “Worst Person in the World” (it’s usually Bill O’Reilly). In the same spirit, I hereby nominate AT&T as the worst company in the world. I admit that my evidence for this judgment is scant and anecdotal, but I stand by it anyway.
About Stanley Fish
Stanley Fish is the Davidson-Kahn Distinguished University Professor and a professor of law at Florida International University, in Miami, and dean emeritus of the College of Liberal Arts and Sciences at the University of Illinois at Chicago. He has also taught at the University of California at Berkeley, Johns Hopkins and Duke University. He is the author of 10 books. His new book on higher education, "Save the World On Your Own Time," has just been published.
At the end of his piece there's a comments section, and I threw up my lot, typos and all, about the bad decision "we've" made in letting corporate America conglomerate down to this unprecedented power. In the above paragraph above (That's a joke for you, Professor Fish), I said, "As a consumer, it's the near-end result of being dominated by the biggest bullies in business history." I said "near-end" for a reason; because what we're currently witnessing in the financial sector is, in one sense, the endgame of huge financial corporations -- benignly called "institutions" by some -- running amok. They, their lobbyists, their armies of lawyers they deploy, and the politicians who are in their back pockets don't care about you, me, us at all, as George Carlin said. That means it's gonna get a lot worse and a lot uglier, for instance, as those "Alt-A" and "option ARM" mortgage loans, approved by the ratings companies, reset.
And I hope you understand that although I think this is the endgame, it means for this phase. What the hell comes next is either one of or a combo of three things, as I see it:
1. A "cooling down period," where auto CEOs will drive hybrids and go on photo ops, then a return to "business as usual" when they feel like it.
2. More conglomeration.
3. A makeover, but not an overhaul. This means that cosmetics will be applied but the basic fundamentals of big capital, distinct and differentiated here from capitalism, will still be there.
There's actually a fourth choice which is true capitalism, which would be a revolution, but that's not going to happen and I wouldn't bet on it. The reason and historical evidence are pretty overwhelming if you ask me, but if you take the example of yet another crisis in our laps, healthcare, there are very good reasons why if I had to bet I'd say that we will never enjoy a single-payer plan. Of course it's money, and I've talked about it before, but succinctly, the healthcare industry's owned by three huge sub-industries: HMOs, pharmaceutical and insurance companies, any of which is a huge presence on the Hill via lobbyists and armies of lawyers. With all three of them acutely interested in maintaining the status quo, forget it, it's like me trying to play Kobe Bryant. So, if I had to bet I'd say it's going to be number three, the cosmetic makeover, which equates to business as usual.
Anyway, without further ramblings, here's a great deconstructionist speaking plainly about a huge corporation.
Oh, and sorry for the bad title pun, Professor Fish. You've probably heard them all.
From the NY Times Opinion page
December 28, 2008, 10:00 pm
The Return of the Old Grouch
When you live in two places and decamp from one to the other every six months or so, there are any number of things that have to be done. (I know that at least 50 readers will want to rebuke me for complaining about problems only the privileged can have, but perhaps we can agree to get past that.) Closing the house, switching the mail, storing the porch furniture, suspending cable service, draining the pipes. But the one that gives me a headache even before I attempt it is the phone call to AT&T, or, rather, the 20 phone calls to AT&T.
The first obstacle, of course, was getting through to someone. The prompts did not correspond to any of my concerns, but finally, after pressing a number of zeros, I was rewarded with the voice of a live person who said, “With whom do I have the pleasure of speaking with?”
Visions of Lily Tomlin’s Ernestine the telephone operator danced in my head, but I bit my tongue and made my simple request.
“I’ve been away for some time and my services were reduced. I’d like to have them restored to what they were when I left in June.”
It turned out that this was not possible. Even though I had paid to retain my phone number, I was going to be treated as a new customer, which meant that I would have to answer a bunch of questions and decline services I had never had. After much back and forth I signed up for a package that included voice mail.
I should have quit when I was (somewhat) ahead, but I couldn’t resist returning to the greeting, with its double and ungrammatical “with.” I explained that the second “with” was superfluous, as the second “to” would be if the offending question had been, “to whom am I speaking to?”, or the second “about” if the question had been “about what are you worrying about?”
Somehow that didn’t make much of an impression on her. She said that her instructions were to greet callers in that way and that she would continue to do so. I replied that it was scandalous that a multi-billion-dollar world-wide telecommunication corporation would order its employees to commit an egregious (and comical) grammatical error millions of times a day.
She said, “I’m sorry you feel that way.”
I lost it. It has nothing to do with feelings, I ranted. It is a factual matter as to what is and is not syntactically correct.
She changed the subject by informing me that the social security number I had given when she asked for it was not the number she had on record. I asked her to change it, but she pleaded incapacity: “No, I can’t do that. I’ll connect you to the department where they can.”
That was a promise made subsequently by five other people as I was repeatedly transferred to someone who told me, “No, I can’t do that.” Everyone I talked to assured me that within seconds I would be talking to the right person. My last interlocutor took pity on me, and although he too was not the right person, he knew someone in his division who was and said he would talk to him directly. When he came back, it was to tell me that the social security number on record was in fact the one I had given him. The whole thing had been a wild goose chase.
I was more exasperated than relieved, and I made the mistake of re-raising the “with-whom-do-I-have-the-pleasure-of-speaking-with” matter. He listened and suggested that I make a complaint. You mean call another 800 number, I wailed. No, he replied, I’ll do it for you, just tell me what you want to say. I went through the nature of the error, but when I talked about the unseemliness of a major corporation managing to sound pompous and ignorant at the same time, he interrupted me and said that he would not transmit that kind of language. I thought about pointing out that this was a complaint, not a love letter, but I just gave up.
This epic was not over. When I got to Florida after a three-day drive I found that I didn’t have voice mail. I called and was told that there was no record of my having placed an order. I was assured that the matter would be taken care of in 24 hours. It wasn’t. I called back the next day, but a mechanical voice informed me that there was no service on Sunday. (Don’t people make phone calls on Sundays and pay for them?) Finally, on Monday, I reached someone who assured me that I would have voice mail the next day, and he turned out to be right.
But by that time I was beyond caring. I told him that I had decided to write a column about my AT&T adventures and that, in fairness, I thought I should talk to someone in the corporate structure. He said that he would put me through to the right department, but when someone picked up, she identified herself as “Directories.”
What?, I asked.
I’m in advertising, she replied. We send out telephone directories. Do you want one?
I explained what I was trying to do, and she laughed. I laughed, too, the best moment of the experience.
Every weeknight on MSNBC, Keith Olbermann, who never met an exaggeration he didn’t like, names that day’s “Worst Person in the World” (it’s usually Bill O’Reilly). In the same spirit, I hereby nominate AT&T as the worst company in the world. I admit that my evidence for this judgment is scant and anecdotal, but I stand by it anyway.
About Stanley Fish
Stanley Fish is the Davidson-Kahn Distinguished University Professor and a professor of law at Florida International University, in Miami, and dean emeritus of the College of Liberal Arts and Sciences at the University of Illinois at Chicago. He has also taught at the University of California at Berkeley, Johns Hopkins and Duke University. He is the author of 10 books. His new book on higher education, "Save the World On Your Own Time," has just been published.
Sunday, December 28, 2008
Skillz
Let's take a break from all of the doom and gloom, shall we...?
My first taste of ballin' magic was the Globetrotters, of course; Curly Neal was the dope shit, plus Meadowlark was funny. Later, as a child of the 60's and 70's, I heard tales of Bob Cousy's trickery, and ran out to the library and got his book, Basketball is My Life; I'll never forget the two page photo spread in the middle with stop action photos of him performing his around the back move.
I was lucky as a kid to witness greatness in person in the form of Elgin Baylor, who'd do his famous hang in the air and no look passes at a time when b-ball was just hinting at the freedom of improvisation and creativity that the streets brought. I honestly thought he was a god of some sort, I just marveled at his skill and talent, and to this day, he's without a doubt one of the greatest artists I've ever seen in any discipline.
Then it was the first incarnation of showtime with a small "s" brought by Pistol Pete Maravich. Dude's legendary so there's no need for me to go on. One thing I will say when I read about him as a kid; his father would drive and he'd sit in the passenger seat and dribble out the window! Guess they couldn't have been going that fast. No less than Isiah Thomas called him the man.
During Maravich's era one guy that never gets mentioned is an Angeleno, Paul Westphal. Boy had skillz and proved it by putting on a show during halftime when (I think it was) CBS ran a HORSE competition. He's assisting at Dallas now.
Then it was on to the true beginnings of the modern era, when the game began to evolve above the rim and below as well. But the magicians were Isiah and Magic, "Showtime" with a capital "S," and even Bird who'd let loose with a no look because he simply had that sixth sense that the great ones do.
And 1 has taken it to DVD in the form of their freeform streetball theater - it's not really hoops per se, and is entertaining for a bit. So to provide a bit of entertainment, here's a white boy with some flava; truth is the kid's not really that good as a player but he's got some nice tricks; this is a triumph of editing and it's fun. Gotta say though there's a nice dish at the top when he breaks that kid's ankles.
Here's Rory Grace, aka, "Disaster," with a nice track by Arcee.
My first taste of ballin' magic was the Globetrotters, of course; Curly Neal was the dope shit, plus Meadowlark was funny. Later, as a child of the 60's and 70's, I heard tales of Bob Cousy's trickery, and ran out to the library and got his book, Basketball is My Life; I'll never forget the two page photo spread in the middle with stop action photos of him performing his around the back move.
I was lucky as a kid to witness greatness in person in the form of Elgin Baylor, who'd do his famous hang in the air and no look passes at a time when b-ball was just hinting at the freedom of improvisation and creativity that the streets brought. I honestly thought he was a god of some sort, I just marveled at his skill and talent, and to this day, he's without a doubt one of the greatest artists I've ever seen in any discipline.
Then it was the first incarnation of showtime with a small "s" brought by Pistol Pete Maravich. Dude's legendary so there's no need for me to go on. One thing I will say when I read about him as a kid; his father would drive and he'd sit in the passenger seat and dribble out the window! Guess they couldn't have been going that fast. No less than Isiah Thomas called him the man.
During Maravich's era one guy that never gets mentioned is an Angeleno, Paul Westphal. Boy had skillz and proved it by putting on a show during halftime when (I think it was) CBS ran a HORSE competition. He's assisting at Dallas now.
Then it was on to the true beginnings of the modern era, when the game began to evolve above the rim and below as well. But the magicians were Isiah and Magic, "Showtime" with a capital "S," and even Bird who'd let loose with a no look because he simply had that sixth sense that the great ones do.
And 1 has taken it to DVD in the form of their freeform streetball theater - it's not really hoops per se, and is entertaining for a bit. So to provide a bit of entertainment, here's a white boy with some flava; truth is the kid's not really that good as a player but he's got some nice tricks; this is a triumph of editing and it's fun. Gotta say though there's a nice dish at the top when he breaks that kid's ankles.
Here's Rory Grace, aka, "Disaster," with a nice track by Arcee.
Friday, December 26, 2008
Harold Pinter
The late, great Harold Pinter just passed. I have mixed feelings about England, and I daresay most of them bad. But when they produce people like Pinter, they can't be all bad, eh? After all, it took the English -- Clapton, Mayall, Green, Page, Beck -- to tell us about our own American tradition and evangelize it to the world. Not to mention another Englishman, Chas Chandler, seeing what Jimi had.
Was there anyone who raised the ire of conservatives like good ole' Harry? It was pretty funny to see the right's tight-sphincters's tighten up even more when Pinter went against the US tirade -- led by Bubba, Albright, et al - of the vilification of Milosevic, the "dirty commie."
I appreciate Charlie Rose not for his interview skills, which I find lacking, but the pull of his show. He does attract some great people, and in fact, in his last intro to Chomsky revealed that the most requested guest was in fact Noam. But here's a good example and Pinter's great response.
Charlie Rose: How did it [experiencing the German bombings of London] shape the way you feel and think?
Pinter: Well, I realized what a bomb was. I was under bombs!
HA!
In that same interview, Pinter also says the great truth about west Asia, aka "the middle east," and the elephant in the room no one, ironically save for Bin-Laden(!), wants to talk about: American support of Israel. And Pinter, like the other noted outspoken Israeli critic, Chomsky, is a Jew.
Yeah, yeah, I know, they're self-hating Jews.
It's always interesting to me that when people level this criticism at people like Chomsky and Pinter, that it comes from people who, intellectually, aren't even in the same league.
And to make this great man's passing about me, I remember as a know-nothing young man reading The Dumb Waiter while under Surrealism's spell. I thought, this guy is doing it differently, but really well. I was also reading some Beckett, particularly the Beckett of Endgame. All along with heavy doses of Bunuel and you had the makings of one very unsatisfied young man! Today, this young man is old, but he still looks back and never forgets the skies of his youth.
Beyond anything I can say about him, here are some of Pinter's quotes, courtesy of BrainyQuote.com.
Clinton's hands remain incredibly clean, don't they, and Tony Blair's smile remains as wide as ever. I view these guises with profound contempt.
All that happens is that the destruction of human beings - unless they're Americans - is called collateral damage.
I also found being called Sir rather silly.
I could be a bit of a pain in the arse. Since I've come out of my cancer, I must say I intend to be even more of a pain in the arse.
Iraq is just a symbol of the attitude of western democracies to the rest of the world.
It's so easy for propaganda to work, and dissent to be mocked.
Most of the press is in league with government, or with the status quo.
The crimes of the U.S. throughout the world have been systematic, constant, clinical, remorseless, and fully documented but nobody talks about them.
There is a movement to get an international criminal court in the world, voted for by hundreds of states-but with the noticeable absence of the United States of America.
There's a tradition in British intellectual life of mocking any non-political force that gets involved in politics, especially within the sphere of the arts and the theatre.
While The United States is the most powerful nation the world has ever seen, it is also the most detested nation that the world has ever known.
Friday, December 19, 2008
"I think we have our story, ” said Jim Grant.
But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds.
Okay, enough playtime, back to sullen doom-and-gloom. Sorta.
I have to post this lengthy but great essay by Michael Lewis who I've written reverently about before. But what I'd completely forgotten about in relation to EM08 was Lewis's Liar's Poker, a book as revelatory about Wall Street as William Goldman's Adventures in the Screen Trade was about Hollywood.
He's such a great writer; while I remember digging Liar's Poker, the more I think about his later The Blindside: Evolution of a Game, the more it grows in stature. It is simply one of the greatest books I've ever read.
Now, with all of the EM08 trickery being exposed in business and politics, it seems like this could be the beginnings of something. If it's true that nothing lasts forever, then these devils have to go sometime. Until then, we'll have to rely on people like Michael Lewis and their insights. The beginning where he talks about having his head up his ass and yet entrusted to gamble big time should be required reading of kids in high school.
Last point; if it's anything that the Madoff theft has shown, it's that only he and those like him could have pulled off what he did. Clearly a sociopath, he had social engineering down. But there's another dimension; he was a white male. Together it created the emotional picture investors needed for him to climb the ladder from chairing NASDAQ to running his own fund. This element, what I'll call the "used car salesman type," runs through Lewis's piece as well. It--and Lewis's essay--speaks to things like "investor confidence" and pretty much blows it apart. Because if the market is one giant used car lot with P.T. Barnum hucksters, then you know who the suckers are, right? There's an old poker adage that applies: If you look around the table and can't spot the sucker, it's YOU.
Here, courtesy of Portfolio's December issue, is one great writer pumping out an utterly fascinating article; there are so many great lines in here. As usual, he tells an incredible story, made even more so by our empire's trickery being exposed. GREAT accompanying photo by Ji Lee, too.
The End
by Michael Lewis December 2008 Issue
The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.
To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.
I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.
When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.
Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.
I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”
I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.
Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.
In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?
At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.
Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend.
From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.
Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.
Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.
At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.
It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.
Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”
Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.
Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”
He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the documents and that I hadn’t understood a word of the fucking things.”
Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.
The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”
“A lot of people don’t get Steve,” Whitney says. “But the people who get him love him.” Eisman stuck to his sell rating on Lomas Financial, even after the company announced that investors needn’t worry about its financial condition, as it had hedged its market risk. “The single greatest line I ever wrote as an analyst,” says Eisman, “was after Lomas said they were hedged.” He recited the line from memory: “ ‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’ I enjoyed writing that sentence more than any sentence I ever wrote.” A few months after he’d delivered that line in his report, Lomas Financial returned to bankruptcy.
Eisman wasn’t, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. “You have to understand,” Eisman says in his defense, “I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn’t give a shit what it sold.”
Harboring suspicions about people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn't really do it,” Eisman says.
Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”
Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”
Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.
Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”
At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.
By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.
Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.
Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.
But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.
The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’”
And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking homeowners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.
More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”
In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?
Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.
The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.
But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.
As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”
“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.
A full nine months earlier, Daniel and Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ ”
Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.
Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”
“Would you say that 5 percent is a probability or a possibility?” Eisman asked.
A probability, said the C.E.O., and he continued his speech.
Eisman had his hand up in the air again, waving it around. Oh, no, Moses thought. “The one thing Steve always says,” Daniel explains, “is you must assume they are lying to you. They will always lie to you.” Moses and Daniel both knew what Eisman thought of these subprime lenders but didn’t see the need for him to express it here in this manner. For Eisman wasn’t raising his hand to ask a question. He had his thumb and index finger in a big circle. He was using his fingers to speak on his behalf. Zero! they said.
“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”
“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.
Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.
Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.
His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”
FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.
“No,” the guy said, “I’ve sold everything out.”
After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”
Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”
That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”
This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”
Eisman started out running a $60 million equity fund but was now short around $600 million of various subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”
He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.
“Why?” asked Hintz.
“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.
There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007. “The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?” Eisman had long subscribed to Grant’s Interest Rate Observer, a newsletter famous in Wall Street circles and obscure outside them. Jim Grant, its editor, had been prophesying doom ever since the great debt cycle began, in the mid-1980s. In late 2006, he decided to investigate these things called C.D.O.’s. Or rather, he had asked his young assistant, Dan Gertner, a chemical engineer with an M.B.A., to see if he could understand them. Gertner went off with the documents that purported to explain C.D.O.’s to potential investors and for several days sweated and groaned and heaved and suffered. “Then he came back,” says Grant, “and said, ‘I can’t figure this thing out.’ And I said, ‘I think we have our story.’ ”
Eisman read Grant’s piece as independent confirmation of what he knew in his bones about the C.D.O.’s he had shorted. “When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an orgasm.”
On July 19, 2007, the same day that Federal Reserve Chairman Ben Bernanke told the U.S. Senate that he anticipated as much as $100 billion in losses in the subprime-mortgage market, FrontPoint did something unusual: It hosted its own conference call. It had had calls with its tiny population of investors, but this time FrontPoint opened it up. Steve Eisman had become a poorly kept secret. Five hundred people called in to hear what he had to say, and another 500 logged on afterward to listen to a recording of it. He explained the strange alchemy of the C.D.O. and said that he expected losses of up to $300 billion from this sliver of the market alone. To evaluate the situation, he urged his audience to “just throw your model in the garbage can. The models are all backward-looking.
The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”
On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.
At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”
Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.
Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”
This was what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy shit, I’m wrong!’ ” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct.
Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”
Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,” Eisman says. To which Daniel replies, “The way we thought about it was, ‘By shorting this market we’re creating the liquidity to keep the market going.’ ”
“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”
About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.
There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)
When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.
The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.
I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.
Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.
When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.
We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.
But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.
But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”
I smiled back, though it wasn’t quite a smile.
“Your fucking book destroyed my career, and it made yours,” he said.
I didn’t think of it that way and said so, sort of.
“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.
You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.
From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.
No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.
No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?
Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.
It was now all someone else’s fault.
He watched me curiously as I scribbled down his words. “What’s this for?” he asked.
I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.
“That’s nauseating,” he said.
Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”
Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.
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