Just five little words that say all that needs to be said.
With just five words (six, if you’re a grammar cop and consider the contraction ‘hadn’t’ as two distinct words), James Melcher — one of the New York based hedge fund CEOs — ripped the toga from the deregulate-everything/monitor-nothing/free-market-capitalistic-Reaganomics-rules emperor yesterday, March 14th.
“If the Fed hadn’t acted, that could have triggered a very widespread panic and potentially a collapse of the financial system.”
Two days earlier, mistrust, distrust and fear resulted in a bank run on Bear Stearns, the investment bank, that, if left unabated by the Federal Reserve Bank of New York, might possibly have led to a run on banks worldwide.
Bear, which had suffered devastating losses as a result of its mortgage-linked investments, saw its share-value plunge 47 percent!
Fortunately, perhaps for almost everyone around the globe, the US taxpayer, in the corpus of the Fed, once again rushed to the rescue and propped up the system. Charles Geisst, the preeminent Wall Street historian at Manhattan College, remarked, “I don’t remember a Fed action aimed at a noncommercial bank; this is the kind of thing you see in this post-regulatory environment.” Keep Professor Geisst’s hyphenated phrase “post-regulatory” front and center in your mind as you consider the rest of this offering.
Intuitively everyone understands that each and all of us are a composite of fear and hope, of confidence and uncertainty, knowledge and ignorance, of honesty and deceitfulness, and that this blend can lead us astray. That’s why we cling to and depend upon social norms and laws. Indeed, that human pervasive frailty is precisely what led our founding fathers to devise a governmental system of checks and balances, to prevent unchecked folly and ambition from catapulting the country over the precipice.
To another, yet nonetheless related founding principle, Thomas Jefferson asked, “…have we found angels in the forms of kings to govern…?”
Regardless that we know better, the Republican mantra, especially since Reagan, has been to completely unleash corporate chieftains (Jefferson’s “kings”), and to put all our eggs and faith in their baskets. It’s myopia. It’s naïveté. It’s foolish. It’s intellectual laziness. It’s cowardly. It’s irresponsible. It’s downright stupid.
All that said, there remain among us those who continue to buy the trite clichés, who parrot them almost Pavlovian-like, who vote Republican. They are the enabling dupes who have landed us where we find ourselves today: at the edge of a dark chasm we truly do not want to peer down into. Few among us are sufficiently old to recall the last time the world fell over the economic edge into economic chaos, or the terrible international political price that was exacted for the tumble.
With billion dollar tax breaks, we subsidize corporate scoundrels. We reward them with no-bid and cost-plus contracts. Then we look anywhere except into what they may be doing. We trust, but we never verify. Their names are Silverado Savings and Loan, Enron, and Tyco, and Halliburton and KBR and Custer-Battles, and their names are Legion.
We do not inspect their mines, or their aircraft, or their slaughter houses. Our children’s toys are tainted. Our drinking water is tainted. And by the skewing of the news we receive, our minds and our opinions are tainted. And for driving the company they piloted into the ditch, for sending our best paying jobs overseas, for eviscerating our retirement portfolios, we reward them with hundred million dollar salaries and hundred million dollar severance packages when we fire them.
What we never ever do is to ask much of them. They bear no real risk, unless the possibility of suffering the loss of $1 million from a gain of $100 million can define “risk.” While profits have been privatized, almost the entirety of risk has been socialized; i.e., “If the Fed hadn’t acted…”
Or maybe the comment by Harvard Business School Professor Samuel L. Hayes will bring the need for wider electorate interest in faire more consequent than Idol home: “The public has never fully understood how leveraged these institutions are. This is a run on the bank, just like Long-Term Capital Management, Kidder, and Drexel Burnham.” (And for those who don’t remember, Long-Term Capital Management was founded in 1994. With annual returns in the 40% range, it was an extraordinarily successful hedge fund. But by 2000, LTCM had folded. The “Kidder” the professor refers to was Kidder-Peabody, the old-name securities firm that, just after its sale to GE, was involved in a series of insider-trading scandals that was depicted in the movie, Wall Street. Drexel Burnham Lambert was the fifth-largest investment bank in the country, until it was driven into bankruptcy by its involvement in the junk-bond market.)
The next time someone replies to your inquiry with “I can’t spend all my time worrying about ______,” ask them to provide the last time they were in peril of that: “all my time.” Follow that with an inquiry, when was the last time that they spent any time at all, seriously investigating ______, as opposed to, say, untold hours in front of the television watching ______.
After you have asked these few questions and pondered the emptiness of the responses, do not ask for whom the bell tolls. It’s for you. It’s for me. It’s for all of us.
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