Occupy Wall Street

October 3, 2011

I work a block or two north of Zucotti Park where the Occupy Wall Street demonstration has been going on.  When I checked it last time, a couple of weeks ago, there was a young woman holding up a sign saying, “Blame Barney Frank!”  Hmm…better choose your targets more carefully, sister, is what I thought.  Today, the crowd, many of them encamped, was much larger, and the slogans were various.

A generally scruffy bunch – goes with sleeping outside in a park, I guess – some with pretty wacked out messages.  A wondering crank denouncing adultery was on his own.  More common were protesters against The Federal Reserve System, fiat money, central banking generally, and so on.  This group is heavily influenced by the intellectual wing of the anti-establishment wave, some of which sloshes in the Tea Party’s cups, and is libertarian, pro-silver, and a bit loony as far as I can tell.

Most of the people were simply angry at the usual and well documented offenses of “Wall Street.”  Oversize-bonuses for CEOs while people get evicted from homes; hand-outs, bailouts, guarantees, and golden parachutes for the financial élite while most people hunker down and suffer.  The capture of government and politics by the super-rich, and so on.  One sign that I liked a lot said, “Lay off CEOs, not teachers.”  Pretty good idea, pretty simple.

There was a man there making buttons with a T-shirt that said Un-Locke America, and had a picture of venerable John Locke with an international ‘NO’ sign on top of his face.  “A pretty smart guy, but a schmuck,” is how the man described the granddad of British Empiricism and the intellectual godfather of our American bourgeois revolution.  In particular, he took issue with Locke’s ideas of natural rights, and property rights being prior to all governmental arrangements.  That was all a convenient assumption for a 17th century philosopher to make, and so very congenial to his patrons and his class.


Cartels

September 3, 2011

These days, I have garbage and economic cartels on my mind.  And Wall Street, of course.

In New York, the Department of Sanitation picks up residential garbage, but commercial waste is disposed of by private carters.  In the 1950s, the Department still picked up commercial waste on residential streets, i.e. streets that mixed apartments and businesses, but they discontinued that policy which opened up a vast market for private carters.  The Mob saw a great opportunity and moved in with force.

Until the late 1990s, the Mob controlled the collection and disposal of commercial waste with a cartel that all businesses were required to join.  Refusal was not a viable option.  It was, as they said, “A beautiful thing.”  Recalcitrant trash haulers were intimidated, firebombed, or beaten to a pulp.  Members of the club charged businesses exorbitant rates:  three, four, five, ten times what the cost would be in a market with competitive bids.  If any business protested, mom and pop grocer or Fortune Five Hundred multi-national, the answer was the same:  “Pay up!  Who youse gonna call?”

If a carter got out of line and actually submitted a bid for service that was below the cartel price, the Mob came down hard.  If the carter actually won the job, taking the “stop” from a cartel member, howls of protest were heard:  “He stole my stop!”  Restitution would be paid, or the stop would be forfeited.  The heavies in the cartel would try to set the rebel straight.  Submitting low bids did nobody any good.  It only ‘educated’ the customer that the price structure was simple gouging.  “And when that happens, who wins?  The customer wins”  Can’t have that!  It was the American way.  As the gangsters liked to say, “Hey, it’s a free country!”

I learned all this from a book called Takedown:  The Fall of the Last Mafia Empire.  It’s an in-depth recounting of a three-year NYC undercover operation that resulted in the complete destruction of the mob cartel.  It began by chance, when a detective interviewed an honest carter who just wouldn’t knuckle under:  some thugs walked in and asked who he was.  The carter, thinking fast, and knowing that being caught talking to a cop was a death sentence, said “That’s my cousin Danny.”  Thus was Rick Cowan, Irish NYC detective transformed into Danny Benedetto, member of a large Italian-American family that had been in the wastepaper business for generation.  He carried a wire and worked himself into the cartel for years, living a double life that I cannot imagine.  As Danny, he paid enormous amounts of extortion to the Mob, and got it all recorded.  The principals, among the Alphonse “Allie Shades” Malangone at the top, were convicted, fined, imprisoned, and debarred from the industry in perpetuity.

Reading this book, I reflected on the similarities between the mob cartel and the wall street cartel.  They both have beautiful things going.  Wall Street buys the politicians, makes the rules, comes up with derivatives that serve no purpose other than to generate massive fees, produces junk mortgages, and it’s all legal.  Transparency is anathema them all.  But what really got me, was a certain catch phrase.  When a cartel member was bumped from an account by an honest low bid, the cry was,  you have to make me whole! That is, pay me extortion to compensate me for loosing my good deal.  I thought I heard that during the Bear-Stearns debacle.

“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?”

After the takedown, prices for commercial waste collection in NYC fell by 40%, and in some cases much more.  The service vacuum left by the exit of the mob outfits was filled by big companies coming in, and they promptly began to raise their prices.  As a friend of mine who is an expert said on an NPR production about the topic a few years ago, prices are nearly back where they were under the cartel.  And the carter who started it all remarked, “The only difference between the Majors and the Boys is that the Majors won’t really kill you.”  Well…that’s a pretty big difference even so.

This is an excellent book to read if you want to know what the Mob is really like.


Obama Seeks to Win Back Wall St. Cash

June 13, 2011

The post’s title is the headline of a NYTimes article today.  In case you are wondering why the reign of the Bankers and Rentiers seems so secure.  The President and the Congress seem as one on this point.  No change you can believe in.

Alas, poor suckling public servants, sometimes there are more pigs than teats!


Hey, Bernie!

December 20, 2008

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Am I alone if finding the Madoff  affair a bit, well…humorous?  C’mon, lots of rich people who still don’t have enough and are seduced by something too good to be true.  A modern retelling of the Goose & the Golden Egg fairy tale?  There’s a reason they’re called fairy tales!

What a character!  So low-key.  As one friend said, he’d rather spend time on the Riviera than going to society parties.  Well, so would I!  Just a nice Jewish boy who did well by doing good.  Did really well.  The New York Times has so many references to the “clubby world of Jewish philanthrophy” it might make even a Jew-hater feel sorry for those rich Hebrews who were taken!

Let’s revisit some old stereotypes:  the smart Jew – he’s smart.  What about those rich Jews he fleeced – weren’t they smart too?  And is everyone else so dumb?  Those French investigators from a major bank spent three days with Bernie’s crew and concluded that something was rotten in Madoff land – they didn’t bite!  The greedy Jew – guess he was greedy too, but who isn’t on Wall Street?  Isn’t that the biggest lie of all, that Wall Street “wizards” are smart, not just plain avaricious?  The smart, virtuous Jewish immigrant who works his way up the American ladder to fame and fortune?  Well, he was raised on Long Island, but still…

And reverberating through all the stories in the press is the unspoken refrain, “Hey Bernie, we hardly knew ya!”  How long was he doing this?  He must have started off legit or he’d never have gotten his foot in the door of those country clubs.  I guess part of the appeal of this is the story of a regular guy who made good, but was an impostor!  Don’t we all dream of faking our way to riches and fame, at least once in a while?  He did it!  A bizarre and dark twist on the old assimilation-outsider-immigrant American dream too.

And the humor?  Well, to me, a Ponzi scheme has its own intrinisic comedy.  Shovel out the money as the new money comes in, but the pile grows bigger.  It’s like the Sorcerer’s Apprentice, can’t you see it?  Marx Brothers finance!  And then it tumbles down and everyone asks, “How could it happen?”  It’s classic.

Well, maybe it’s just schadenfreude, but I can’t suppress a chuckle.  That Bernie!  What a character, oy!


Isaac Newton – Granddaddy of the Quants*

October 11, 2008

Today, in the NYTimes, Joe Nocera reflects on the history, psychology, and inevitability of bubbles.  That is, as long as there is some freedom to speculate.  He begins with a melancholy quotation from the great Newton, the original “master of the universe.”

I can calculate the motions of heavenly bodies, but not the madness of people.” — Isaac Newton, 1721, after the South Sea bubble burst.

Poor Izzie lost big time, but he was comfortably off with several government sinecures, nevertheless.  This contemporary economic magus quoted by JN wasn’t so lucky:

On Friday, Mr. Shiller [an economist] told me of a conversation he had with an economist friend of his. The man had spent his entire career advocating the efficient market hypothesis, which posits that all known information about a stock is already priced into it. But with the market in collapse, the economist sold all his stocks. “I feel like a Christian Scientist who has come down with appendicitis,” he told Mr. Shiller.

I wonder where Nocera had his money!  Did he see it coming?

Well, if you’re not having enough fun yet, delve into the history of the South Sea and Mississippi Bubbles, and the Ur-Panic of them all, the Tulipomania by skimming through this Victorian classic:

That’s Extraordinary Popular Delusions & the Madness of Crowds, which you can buy for pennies in used book stores on the Net.  Or you can buy this antique edition…might be a good investment!  That’s John Law on the cover.  He’s the subject of a popular biography, Millionaire, that tells of his ill fated inteventions with the French economy a generation or so before the Revolution.  Seems he was fond of risky securities.  The plot of the novel, Manon Lescaut – adopted for opera, plays, television? – is connected with the John Law schemes:  it is the device by which the star crossed (numbskull) lovers are united in the New World, temporarily free from the oppression of class society and debt.

Gleeson seems to have a preoccupation with financial alchemy:  She has another book, The Arcanum, that describes an early case of industrial espionage regarding the secret of turning dirt into  retail gold, procelaine, that is.

Are we having fun yet?

*For those of you not in the know, “quants,” short for “quantitative analysis,” is the nickname given to Wall Street nerds doing computer model predictions of the market’s behavior.

 


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.”


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