Harvard – Bought and Paid For

September 18, 2011

Inside Job is an excellent documentary about the financial crisis of 2008.  The basic point, very well documented, is that an extremely small group of people with lots of money managed to tweak the economic system of the country, to divert huge sums of cash their way.  Some timely deregulation legislation, carried forward by a thirty-year drumbeat of intellectual support from influential economists, made it happen.

In the end, the vast collective wealth of the United States, and much of the world economy, became the gambling stake of these people, and when it all crashed, they walked away with their loot, and were free from any consequences.  The people in charge now, under Obama, are the same ones who made it possible, and who made it happen:  it’s a Wall Street administration, as one critic in the film says.  As Mr. Rosewater says in Kurt Vonnegut’s novel, God Bless You, Mr. Rosewater, getting rich in America is largely a matter of positioning yourself to get your straw into the money stream:  These people had very big straws.

Towards the end of the film, there is a section in which various heavyweight academic economists are interviewed about the possible conflicts of interest inherent in consulting and publishing articles for firms that were pursuing extremely risky behavior.  These firms crashed and burned, despite the intellectuals’ assertions that they were sound, a good idea, helping stabilize the economy, etc.  The opinions of these people, from Columbia, Harvard, and other schools, were extremely influential.

In one stunning sequence, the chairman of the Harvard Economics Department, John Campbell, is asked if he thinks it’s relevant that people like Larry Summers, Obama’s economic advisor and a Harvard economist, made tens of millions of dollars from finance firms while he was writing papers and pushing policies extolling their virtues and efficiency.  “No, I don’t see why it’s relevant at all.”  The interviewer asks a hypothetical question:  What if a medical researcher published and spoke about the importance of using a certain drug, and then it was found that 80% of his income was from the company that manufactures that drug?  Is that relevant?  What follows is a series of ums, aahs, and hmms… as Campbell looks away from the camera and finally offers in a mumble, “Well, I think this is very different…


Enron and the dung heap…

January 20, 2010

After finishing Zola’s novel, Money (L’Argent), one name comes to mind – Enron.  It’s the same story!  Saccard, the infatuated market manipulator is Ken Lay, or maybe his more intelligent cronys who did the real work.  The hysterical run up of the market to fantastic stock prices, the fraud, the cooked books, the government winking and looking the other way, the grand infrastructure projects, and the inevitable crash that brings the house of cards to a pile of paper, and reduces thousands of people, many of them ordinary workers, to penniless, shell-shocked victims.

The book contains a few scenes in which Sigisimond, a fanatical Marxist, dying of consumption, and racing to commit to paper his world-saving vision for the New Society, converses with Saccard, the rapcious capitalist, and other characters.  He is clearly delusional and religious in his socialist faith – Zola was a liberal, but no revolutionary utopian – a sort of cockeyed, would-be Christ besotted with the Enlightenment.  Saccard just can’t get a purchase on his ideas – they seem to be speaking in different tongues.  The book ends, however, with this Sigisimond dying after relating his celestial vision to a more sympathetic figure, Madame Caroline.

Caroline’s brother was Saccard’s chief engineer, and truly believed in the mission of his Universal Bank.  Brother and sister deplored the financial chicanery, but eventually went along.  They sold early, before the crash, but gave away their profits out of guilt.  The brother is convicted along with Saccard in the post-crash scandal, although he was actually not culpable. 

Caroline is a voice of conscience throughout the novel, but she loves Saccard!  Their affair is broken off when he moves onto more glamorous and richer women, but he retains feelings for her.  Why does she love this shark, this brigand, this fraud, this man who will ruin so many?  Because…he is passionate, he does truly believe in his schemes, he is a life force. 

At the end, Caroline meditates on money, that filthy stuff that corrupts and destroys, and which drives Saccard and others to do prodigious things.  Saccard understands her misgivings, but he has an answer:  money is like the dung heap, and from that manure springs…LIFE.  It’s like sex, you see, it may be dirty, but without it, there is no love, and no life.  What an interesting combination of ideas!

Et Mme Caroline était gaie malgré tout avec son visage toujours jeune, sous sa couronne de cheveux blancs, comme si elle se fût rajeunie à chaque avril, dans la vieillesse de la terre. Et, au souvenir de honte que lui causait sa liaison avec Saccard, elle songeait à l’effroyable ordure dont on a également sali l’amour. Pourquoi donc faire porter à l’argent la peine des saletés et des crimes dont il est la cause? L’amour est-il moins souillé, lui qui crée la vie?  [conclusion of L'Argent]

My very inexpert translation:

Madame Caroline was gay despite herself, her face was looking young beneath her crown of white hair, and she was rejevenated as each April brings life to the old earth.  And, recalling the shame she felt about her affair with Scaccard, she thought of the awful dung heap that is like the soiled elements of love.  Why should one put all the blame and dark crimes on money?  Love, is it any less sullied? Love, that creates life?


Money!

January 12, 2010

L’argent (Money), the 18th in Zola’s massive chronicle of France under the Second  Empire, finds Saccard scrambling to get back in the game, trying to put behind him the disasters that came after The Kill.  His is a world of financial chicanery – let’s say outright fraud – practiced on a colosal scale, pretty much in the open and with the benevolent neglect of Napoleon III’s ministers, of which Saccard’s brother is one.  As with Sebastian Melmotte and Bernard Madoff, the intent is to generate enthusiasm for a stock issue, hysteria if possible, rake in the cash, and put it away before the great crash comes.  Sound familiar..?

Saccard waxes grandiloquent as he allays the moral scruples of the adorable sister of the engineer whose great plans for the East he wishes to employ as the basis for his giant house of cards.  She is upset that he isn’t following the financial code to the letter.  She fears for the “little people” who will be crushed by his scheme, but after all, you can’t make an omelette without breaking some eggs, right?  In the passage below – no English version on the web – he gives vent to his empassioned devotion to the cause of money, as opposed to the Old Economy of landed wealth. 

«Mais, madame, personne ne vit plus de la terre…. L’ancienne fortune domaniale est une forme caduque de la richesse, qui a cessé d’avoir sa raison d’être. Elle était la stagnation même de l’argent, dont nous avons décuplé la valeur, en le jetant dans la circulation, et par le papier-monnaie, et par les titres de toutes sortes, commerciaux et financiers. C’est ainsi que le monde va être renouvelé, car rien n’était possible sans l’argent, l’argent liquide qui coule, qui pénètre partout, ni les applications de la science, ni la paix finale, universelle…. Oh! la fortune domaniale! elle est allée rejoindre les pataches. On meurt avec un million de terres, on vit avec le quart de ce capital placé dans de bonnes affaires, à quinze, vingt et même trente pour cent.»  L’argent

My inexpert translation here:

But, Madame, nobody lives on land anymore!…The ancient estates are an obsolete form of wealth that have lost their reason for being.  They just let wealth stagnate, the weath which we throw into circulation with paper money and with all those commercial bits of paper that financiers create.  This is how the world will be renewed, but it isn’t possible without money, liquid money that flows about and penetrates everywhere – not the application of science nor universal peace!  Oh, those old landed estates!  They’ve gone the way of stagecoaches.  A person dies with a million in land, but with just a quarter of that, placed to good use, at fifteen or twenty-five percent, he lives!

Saccard is also a jew-hater.  Zola treats us to an internal monologue in which he retails all the usual negative stereotypes of Jewish money-men that rattle around Saccard’s brain.  It’s an amusing irony because those qualities are precisely the ones that define Saccard himself, while the successful Jews he meets, and resents, are portrayed, at least in the beginning, as gentle and reasonable people.


Madoff Prequel

January 13, 2009

madoff_trollope1

Regarding a certain Augustus Melmotte, a fictional character:

… And yet these leaders of the fashion know,–at any rate they believe,–that he is what he is because he has been a swindler greater than other swindlers. What follows as a natural consequence? Men reconcile themselves to swindling. Though they themselves mean to be honest, dishonesty of itself is no longer odious to them. Then there comes the jealousy that others should be growing rich with the approval of all the world,–and the natural aptitude to do what all the world approves. It seems to me that the existence of a Melmotte is not compatible with a wholesome state of things in general.’

Roger dined with the Bishop of Elmham that evening, and the same hero was discussed under a different heading. ‘He has given £200,’ said the Bishop, ‘to the Curates’ Aid Society. I don’t know that a man could spend his money much better than that.’

‘Clap-trap!’ said Roger, who in his present mood was very bitter.

from Anthony Trollope’s The Way We Live Now, Chapter 55 – “Clerical Charities,” 1875


Live, from Wall Street!

September 30, 2008

I took a little walk down to Wall Street, USA at lunch just now.  I actually went into Federal Hall for the first time.  (That’s George Washington on the steps, the Stock Exchange in the background.)  I hadn’t known that the building was erected some 40 years after GW’s first innaugaral.  The original structure wasn’t so imposing.

The scene there was frenetic.  Of course, tourists are always in abundance in NYC these days, what with the dollar being so low, but the television cameras were out in force.  I had to fight my way past a crowd gathered to here the latest pronouncement from the Oracle…er, update from the trading floor.  An historic time, this, and liable to more deeply change the country than 9/11 I would say.  That threat came from without – now, as the saying goes, the enemy is us.

David Brooks, with his finger in his ear to take the nation’s pulse, is fit to be tied as he decries the Republican “nihilists.”  He can’t believe that they are acting as though it is 1984 and the “enemy” is socialism or “Mondale liberalism.”  (It’s always 1984 somewhere!) Well, soi disant conservatives on the right tend to be out of touch with history, Dave.  They yearn for the golden days of 1884!  The Republican elephant is splintering into its constituent parts:  Palin-ite religious paleo-conservatives; Wall Street money men; and strict captialist libertarians, similar to what were called in the 19th century, horrorible to say,…liberals!

The hub hub makes me think of the last days of the ancien regime.  Hope it doesn’t get to that!  History is happening right before me – real people, milling around, wondering what’s going on – hanging on the words of the suits emerging from the temples of Mammon.  Surely, many of them must be thinking, “All those words of the politicians…what do they mean?  This whole system, it’s just made of people!  It’s not rocket science, it’s not the weather.  Some people wanted to get very rich in a very easy way, and now they’re terrified.  Of course they want us to bail them out.”


Schadenfreude Anyone?

March 21, 2008

schadenfreude.jpg

It’s hard to restrain oneself from chuckling with glee at the ci devant masters of the universe at Bear Stearns as they contemplate their fortunes turned to dust in the twinkling of an eye. Surely the ghost of J. P. Morgan is heaving his paunch and laughing heartily somewhere, up there? down below? jpmorgan.jpg Still, at the banking firm of Bear Stearns – should we just call it BS? – where the culture was to buy the stock of the padrone, quite a few of very ordinary folks will go down with the ship. Secretaries, mail-room workers, lower level admin and research staff, etc. In terms of percent of the people affected, they will be the majority, and they are royally screwed.

In a crisis, they say, you see what people are made of, and so too, a system. Without trust, there can be no business, and trust is dwindling a bit these days. “Come to think of it, just how were those people making all that money?” Why, when you examine the entire business, it does seem a little like a shell game, a Ponzi scheme, don’t it?

It’s all fine as long as the stock is going up. If you aren’t getting rich, it’s your fault, your genes, your backbone, your sorry moral state. The elect and the masters are chosen by The Market, and the words of the Lord are written in the annual reports (doctored, it’s true, but every deity needs an interpretor, a prophet). Now, once again, we hear the words of Captain Renault from the film, Casablanca: “I’m shocked, shocked to find that gambling is going on in here!”

Oh well, damn the torpedoes, full speed ahead and socialize the risk, privatize the profits! See the recent NY Times editorial on this that sums it up well.

Meanwhile, consider this snippet from a day or so ago in an article about the collapse of Bear:

“In this room are people who have built this firm and lost a lot, our fortunes,” one Bear executive said to Mr. Dimon with anger in his voice. “What will you do to make us whole?”

Why the hell should anyone care about making this troglodyte “whole?”


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