Fixers (30 page)
Authors: Michael M. Thomas
After much press room fanfare, with the Attorney General behind him to one side, Winters and Holloway to the other—all three looking pious with hands clasped in front of them—OG announced the formation of the Financial Fraud Enforcement Task Force, which promises to deal forcefully with the Wall Street miscreants responsible for the crisis.
This brave new unit will operate within Justice, which means that any “enforcement” will have to be signed off on by Eliza Brewer, which in turn means there will be no meaningful enforcement. In other words, this “task force” is typical OG bullshit, claptrap to catch the groundlings (as was said in Shakespeare’s time).
The in-the-know betting on the Street is that, come five years from now, the number of meaningful criminal prosecutions carried out by this lofty-sounding “task force” will be fewer than the fingers on one hand. We shall see. I look forward to hearing what my new friend Arthur Han thinks of this OG initiative. Not much, is my guess.
The high spot of my morning was a long e-mail from Artie Han:
Chauncey: Greetings from Shanghai. Amazing city. Exhilarating and troubling at the same time. It was nice to meet you and have a chance to chat and I hope we can manage to keep in touch. I hope I didn’t bore you with my focus on Wall Street psychopaths. I don’t meet many laymen who are acquainted with Hare’s famous checklist of the attributes of the psychopathic personality. A lot of fairly original research on the subject has been done by Professor Clive Boddy at the University of Nottingham in the UK, some of which I’ve tried to incorporate in my seminar on Capital Markets Control Fraud. Professor Boddy kindly sent me a draft of a paper on (tentative title) “The Corporate Psychopaths’ Theory of the Global Financial Crisis” that he expects to publish early next year in the
Journal of Business Ethics
. Here’s a sample—I hope you find it interesting:
… corporate collapses have gathered pace in recent years, especially in the western world, and have culminated in the Global Financial Crisis that we are now in. In watching these events unfold it often appears that the senior directors involved walk away with a clean conscience and huge amounts of money. Further, they seem to be unaffected by the corporate collapses they have created. They present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings, and investments, and as lacking any regrets about what they have done.
They cheerfully lie about their involvement in events, are very persuasive in blaming others for what has happened
and have no doubts about their own continued worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.
Many of these people display several of the characteristics of psychopaths and some of them are undoubtedly true psychopaths. Psychopaths are the 1 percent of people who have no conscience or empathy and who do not care for anyone other than themselves.
Han ends his e-mail with the following: “Don’t forget to keep March 21, 2010, open. I told Bianca a little about you, and I can fairly say she seemed vaguely interested, which isn’t generally the case. She’s run through most of the men in Hollywood and a goodly percentage of those elsewhere. Best wishes for all the holidays—AH.”
A troubling day. Here’s the story. A friend of mine, a curator at the Clark Museum in Williamstown, came down to lecture at the Met, and we had lunch in the museum’s fancy restaurant. The food’s not bad, even if you do pay for a
soufflé
approximately what the museum itself pays for a Rembrandt.
During lunch, Iona and I chattered merrily about cabbages and kings, until over coffee I mentioned that I haven’t heard from the Hastingses, the couple I always stay with over New Year’s. Usually, by now, I have that invitation all buttoned up. I expressed concern that either Rex or Millie Hastings might be ill.
Iona put down her cup. “My God,” she said, “you haven’t heard?”
“Heard what? Don’t tell me …”
“Nothing like that. No one’s sick. It’s worse than that—at least as far as some of us are concerned.”
Then she went on to tell me a sad story about how Rex had been talked into a no-risk sure thing by “his man” at Merrill Lynch. It’s like stealing money, he’d been told. And so it had turned out—only in the wrong direction. Rex had literally bet the farm. Money had been borrowed to double down, stocks Millie had inherited from her father were sold, a second mortgage was taken out on the Hancock house. Then the margin calls started to come in, and finally the issue defaulted.
“And now the bank has foreclosed on the farm,” she finished.
“Rex has a lot of friends up there,” I said. “Surely he can work his way around that with the bank. Doesn’t his wife have money?”
“We all thought that, but apparently not. As for the bank, they say they’re out of the picture. They sold Rex’s mortgage to some Wall Street firm that stuck it into one of those big pools and sold
that
to some bank in Tasmania. It’s supposed to be
serviced by some firm in Florida but nobody
there
seems to know anything.”
“Are you telling me they’re broke?”
“Stone-cold. Rex has his salary from Williams, of course,” Iona continued. “And Millie does have a small trust from an aunt that couldn’t be touched. But they have a daughter at medical school at Penn and a son at Michigan Law, and now all this debt … well, I don’t have to tell you …”
She paused, presumably to contemplate the wreckage of our friends’ lives, then continued: “They’ve put the house on the market—and, of course, it’s probably worth half what it was two years ago—and are looking for something to rent. The children can refinance with student loans, I gather. It’s so sad. Why is it always the good and decent and prudent who get torn to pieces by these things? Why aren’t the crooks who came up with these investments, quote unquote, in jail? That was one reason we all voted for the president.”
There was a lot I could have said to that. Prudent people don’t buy CDOs and other stuff with asserted alchemical powers. Prudent people don’t bend an ear to the blandishments of stockbrokers posing as “wealth managers.” Prudent people take out only one mortgage, and in amounts not exceeding fifty percent of the value of the property. Prudence assumes the worst to be possible, if not likely.
But prudence and decency aren’t synonymous. Some of the most prudent people I know are sharks, and some of the most decent people I know can be downright reckless; just look at Rex Hastings. Decent people reject the notion that others don’t give a damn about them, are just using them to make money or gain social acceptance. I thought about the people I see every time I go down to STST, who would soon be collecting bonuses that would buy Rex and Millie a dozen houses, and for doing what?
For persuading German banks to buy the Polton deals? For soft-soaping the guileless New Zealanders who went bust thanks to Wolverine? These are buyers who are paid to be prudent. The trouble is, not enough people understand that prudence needs to incorporate a healthy measure of flat-out mistrust—especially when it comes to Wall Street.
So I said nothing. Iona, meanwhile, was just getting started, and I couldn’t tell if she was simply venting, or because she had me in her sights.
“It isn’t just Rex and Millie, of course. Half the people I know seem to have bought these securities—or worse. This man from Merrill cast a wide net. And the ripples have spread much, much further. Do you know a terrible man named Harley Winters?”
“Of course I’ve heard of him. Who hasn’t? Sitteth on the right hand of the Almighty down in D.C., right?”
She nodded. “Well, he got the ear of one of the important trustees of a foundation I’m in touch with, and persuaded him to put a big piece of the operating endowment into something called a ‘swap,’ and it’s lost them close to $100 million. They’ve had to cancel programs, cut fellowships and reduce benefits. You know that Palissy exhibition I’ve been working on with them for two years?”
“Of course.”
“It’s canceled. You should walk around our village. Businesses that have thrived in the town since World War II have had to close. That nice shoe store, for example. For the first time I can remember, people I know are using food stamps in the markets. It’s horribly embarrassing for all concerned. You see what’s going on, and you come to
hate
Wall Street. I’m surprised none of these bankers have been murdered.”
This made me feel truly guilty—for perhaps the first time. These were people whom I knew—whose lives I knew—who had been hospitable and generous to me.
“It’s really sad,” Iona was saying. “Christmas is going to be awful. Everyone’s depressed and angry and hardly in a festive mood. A whole way of life has collapsed around our heads, and people need to sort out their lives before they can begin to go on with them. I can tell you my own circumstances aren’t what they were, but fortunately there’s Mother—but even she’s complaining that her bonds aren’t doing as well as the bank told her they would.”
Still, if you look at the situation with a clear eye, Rex Hastings has no one but himself and his “wealth manager” to blame for the financial mess he’s in. But who has the luxury of clarity these days?
They say if you take the king’s shilling, you’re the king’s man. So where does that leave me? I feel like a stiff drink might help. No wonder people become alcoholics.
The sleeping dragon has finally rolled over and opened one eye. Dodd-Frank has reached the Hill for markup.
It’s a process that shouldn’t take more than a decade. Wall Street will see to it that if and when Dodd-Frank passes, it will consist of several thousand impenetrable pages of bothersome but essentially toothless regulation. And that will only be a first step. Hundreds, more likely thousands, of administrative implementations (how the damn thing will actually function; who will have the power to do what to whom; and how; and when) will have to be written and incorporated into law, and that is when Wall Street will set its K Street wolves on the fold. The carnage should be terrifying.
Lucia reports that STST is a graveyard. Everyone’s tired. No one above a certain pay grade is in the office; they’re out spending their estimated bonuses (which are still paid before the actual trades pay off, so why shouldn’t they spend them lest someone try to take them back?). This means good news for local Ferrari dealers, Hamptons real estate agents, people who sell $25,000 wristwatches and $100,000 earrings and $1,000/ounce caviar. Bonus time also activates the pheromones, and you can bet that in $500-an-afternoon hotel suites up and down Manhattan, comely young persons ranging from the crème de la crème of pole dancers to clients’ “executive assistants” to junior analysts with degrees in English from Sarah Lawrence are celebrating the jolly season with their bosses.
The only sign of austerity at STST is Mankoff’s ban—over Rosenweis’s strong objections—on Christmas parties. Official STST Christmas parties, that is. Anyone is free to use his own dime to hire a private room at La Grenouille or Per Se or the skating rink at Rockefeller Center and haul in buckets of Veuve Cliquot and all the foie gras you can swallow. Just as long as it doesn’t appear in Page Six or New York Social Diary. Caterers’ people have eyes and ears, and have been known to sell what they’ve seen and heard to the media.
Publicity other than that disseminated by Lucia and her troops is now anathema at STST. No freelancing, no talking to journalists without prior permission. The less the public grasps how well the firm is doing while the rest of the economy is down in the dumps, the better for all.
By noon today, I had got through whatever was on my desk and brought my calendar and to-do list up to date, so I thought I’d risk the wild streets to finish my shopping. On the way out, I decided
to peek in and see if anyone at San Calisto was around. Not that my expectations were high. Most of the old boys decamp for the Christmas holidays to sunnier places—Florida, the Caribbean, Arizona—returning to the city after New Year’s for a brief spell of portfolio rebalancing before heading back to the sun or the slopes for the balance of the winter.
The Ancient Mariner was alone at the table where the old boys gather for drinks. He was engrossed in a thick book while he picked at a plate of cheese. I greeted him and asked what he was reading.
“It’s this new history of the Morgan bank. Absolutely first-rate. Listen to this. It’s from the summer of 1932. Roosevelt’s running for president and he gets a letter from Russell Leffingwell, an important Morgan partner and a terrible busybody-about-Washington. Leffingwell starts out by pleading—and I quote—
“ ‘You and I know that we cannot cure the present deflation and depression by punishing the villains, real or imaginary, of the first postwar decade, and that when it comes down to the day of reckoning nobody gets very far with all this prohibition and regulation stuff.’
“To which FDR replies:
“ ‘I wish we could get from the bankers themselves an admission that in the 1927 to 1929 period there were grave abuses and that the bankers themselves now support wholeheartedly methods to prevent recurrence thereof. Can’t bankers see their own advantage in such a course?’
“And then Leffingwell again: ‘The bankers were not in fact responsible for 1927 to 1929 and the politicians were. Why then should the bankers make a false confession?’ ”
He put the book down and beamed at me triumphantly. “Who says history doesn’t repeat itself?”
“Amazing,” I said. We chatted briefly, and then I made my escape just before he launched into what I was certain would be
a book-length discourse on the Penn Central collapse of the late ’60s. As I waited for the elevator, my mind shifted to other matters, and my thoughts weren’t happy ones. I was thinking about old times and past New Years in the Berkshires, perhaps never to come again. Other reflections on life’s shouldn’t-haves and might-have-beens crowded in.