They cheered on the stock exchange floor the day Eliot Spitzer went down. The past year has been dismal for stocks, but prices soared on that day! The Sheriff of Wall Street was dead! In fact, he was better than dead…..he was disgraced.
Regular folk heehawed and ridiculed. Under pressure, I reluctantly agreed to close out my Eliot Spitzer category (but reneged), yet even then I stated:
“As NYS Attorney General, Eliot Spitzer took a lot of bad people out of circulation, including some high finance types usually thought untouchable. That should not be taken away from him. New Yorkers can be grateful. Advocates for market fairness say he’s done more to clean up Wall Street than anyone else in decades.”
Eliot’s undoing was sexual misconduct, but it now appears that the financial world could have used 1000 more Spitzers, as opposed to dumping the one they had. Even if every one of them cheated on their spouses. Look, he wasn’t put there to teach Sunday school. His mission was to kick butts.
It now is clear that there were many whose butts needed kicking. More butts than even a thousand Spitzers could have managed, even if he knew which ones to kick and which ones to leave alone (an unclear assumption). As this post is being written, Henry Paulson, former Goldman Sachs CEO and now Treasury Secretary, is telling Congress that all the financial world’s wheeling and dealing has gone bust and that (without penalizing the ones who ran it aground!) the taxpayer has to bail them out. It’s a massive bailout he wants, to the tune of $10,000 per American household! On top of debt the public has already assumed from Fannie, Freddie and AIG. Congressmen are taking turns to vent, the way they do, but in the end, we all know the deal will pass, or some close modification, because the apparent alternative is another Great Depression. Once again, the Economist nailed it. Their latest issue’s cover is a portrait of Paulson pointing, just like on those Uncle Sam recruitment posters, saying “I Want Your Money.”
Seeing it all play out in Congress, it’s hard not to think of that description from Micah 7:3.
the ruler demands gifts,
the judge accepts bribes,
the powerful dictate what they desire—
they all conspire together. RVS
Or, as the English Standard Version puts it….
the prince and the judge ask for a bribe
and the great man utters the evil desires of his soul
thus they weave it together.
The great men, through their greed, have broken the system and look to the public purse to get them funded again. Up to the final months executives were distributing billions in bonuses among themselves, exorbitant rewards for failure! The prince and the judge aren’t happy about it, of course, but they’ve long played ball. They’ve made laws allowing the mess to mushroom. They’ve formed regulatory bodies that have watched it all develop. Some have taken huge lobbyist payments from the great men….can it be said they are they “bought and paid for?“ As Micah says, they all weave it together. (ESV) Or, as rendered in the Revised Standard Version, they conspire together.
A co-worker of mine spotted two huckster scruffy-type guys on the internet (did he really call them “douchebags?”) who would buy up mortgages and immediately flip them to large institutions. Anything they bought they could sell….no questions asked. So much money was to be made through commissions and inventive accounting that underwriting standards sank lower and lower, and in the end vanished completely. Like a bartender pushing drinks on drunk patrons, the industry pushed mortgages on people who clearly couldn‘t afford them, people who counted solely on the prayer that their property would increase in value. Meanwhile, these two guys blew every dime they made….sometimes $100K in a week!….on penthouses, women, cars and so forth.
Mortgages they, and thousands like them, traded were massed into huge collateralized debt obligations and peddled to financial institutions the world over. The promised cash flows showed up as assets, masking the shaky debts they really were, on accounting books. Sounder debts were steadily watered down with junk until, in time, nobody knew what they were buying, but the commissions and paper profits were so lucrative that they kept buying anyway. Leveraging made it all the more dicey.
It all worked until it didn’t. Word flashed about that folks were defaulting, property values were falling…..and….who could have foreseen?…those debt obligations might not be worth a fraction of what they were sold for. It’s not as though the free market had ever determined their value…..they’d all been priced rather arbitrarily. Suddenly nobody wanted these CDOs anymore. The hucksters were stuck with a million in mortgages they could neither sell nor service. They panicked and bolted their doors.
No doubt, that’s just a small (and oversimplified) chunk of a mountain of mayhem.
So the huge bankers (HB&B….Huge Bank and Broker, Bill Cara calls them) fell over the precipice and look to the general public to pull them out. World finances go down the tubes if the answer is “no.” As I write this, it’s by no means clear how this will all play out. There’s hope the bailout will stem the blood flow, but is it perhaps the first of many? And the long-range implications for the taxpayer and generations to come are not pleasant to contemplate.
Where is Eliot Spitzer when you need him? It would have been good to have him around, if only for the sake of the fireworks. But in the end, would even 10,000 Spitzers have turned the tide? In this system “that which is crooked cannot be made straight.“ Greed almost always wins out, spoiling humankind’s better accomplishments. Not too long ago I was speaking with one of those optimistic atheists, the youthful type who imagine human science and wisdom will solve all problems. He gushed “things have, by nearly every measure, gotten better as time progresses.” I replied that I could think of some measures by which they have not.
Watching televised hearings these past few days, I’ve just thought of another. This week has not been kind to those who put their trust in human efforts.