I think we have to be realistic. The people who brought us this mess, beginning with the failure of securitized loans that led to a credit crisis that has culminated in general economic conditions that are proving dire for a great many people around the world and in this country, those people … well, they’re going to get away with it, and—as I have written over and over again in this space—they’re going to be paid handsomely for our troubles.
Every day now, as this sorry story plays out, I find myself wondering whether Obama isn’t a bigger Wall Street con than Madoff. If so, I admit I was fooled. I suppose I should have paid closer attention to the extraordinary fact that the Street was pouring tens of millions into a campaign that on the face of it was likely to be antithetical to the interests of hedge funds, private equity and banks too stupid to survive. I suppose I was somewhat blinded by the conviction that the other candidate was, like death, the unacceptable alternative, but that’s no excuse.
Six months ago, the banks needed TARP to survive. Now, claiming that the program was forced on them, a number of them wish to pay it back in order to get out from under restrictions that they claim are onerous. I can’t argue that the proposed caps on compensation make sense because they don’t. In that area, it’s up to stockholders to protect themselves. But they will also argue that the equity stakes, represented by stock purchase warrants that were packaged into the infusions of fresh capital that TARP and other programs supplied, are an unfair and untoward exaction on a bunch of grand fellows who have suffered enough for a night on the town. That’s a load of crap. There should have been a one-size-fits-all formula: 1 percent of pro forma equity for every $1 billion of TARP, etc.
The people charged with upholding the taxpayers’ side of these bargains with the devil have let us down terribly—so terribly that a rational observer can only conclude that this was the intent from the outset. As I wrote years ago in an unpublished piece for The Times, “On Wall Street, there are no hearts of gold: only calves.”
ANYWAY, here we are now, with our great, silver-tongued president, the guy with the cute family and the fearsome articulateness, clearly having fronted for powers that from the outset conspired to sell the average taxpayer, the average employee, the average credit-card holder, right down the Potomac. The word “jobs” seemed to have disappeared from central political discourse. Why? I would think that an administration that really gives a merry screw about the general state of the nation might have something to say about employment. Why is no one upfront demanding serious study of such questions as, how are we going to put people back to work? How are we going to put our college graduates to work? Can we find work for them? If so, of what kind? We are continually told that the mark of a great nation is an educated workforce, that the key to our collective future will be massive investment in education, and yet here are 2.2 million members of the class of ’09 fanning out across the landscape looking for work and not finding it. What are the baby boomers going to live on when they retire, if they retire, now that their retirement mites have been decimated? And if they don’t, are we going to see the same “choke effect” in jobs that we were told affected the credit markets?
Does no one capable of effective protest have a shred of insight into the financial prestidigitation that is the Great Geithner Giveaway? Has no one grasped the shift in Fed-Treasury thinking that the best way to rebuild banks’ balance sheets isn’t by injecting capital, or dealing with toxic assets (which seem, as I wrote recently in this space, no longer to be a problem, to judge from the media’s silence on the matter), but by putting in place a “carry trade” (borrow from Uncle Sam at less then 1 percent, lend that money back to Uncle Sam at 3 percent, pocket the difference: adds up nicely when a trillion dollars is involved) that the Street, in its wildest fantasies of free money, could never have contemplated.
Now the Street must be thinking, and—take it from me—they are, “If I can get away with this, what can’t I get away with?” Let us hope this thinking is delusional, but if it should prove not so, that proof will be in a pudding baked by the Obama administration.
IN A WAY, I’m not surprised. You can’t say I didn’t warn you in one respect. From what I read, it appears that the administration is getting loads of useful advice from “the Hamilton Project.” These are people who see life in macro and conceptual terms. They have nothing useful to say or offer with respect to the situation of someone losing his house or her job. Nothing. Why should they? Life, as generally understood in these circles, barely grazes the hors d’oeuvre tray.
I know these people. The curse and blessing of my life was to grow up in circumstances where anyone who might be useful to my younger ambitions or gratification was seldom further than two phone calls away. Life was all about being “inside,” a truth whose hard lesson has been ground into me evermore as, thanks to this column and other follies, I have taken myself “outside.” In Washington today, no one seems to be looking out for the “outside” interests.
Anyway, as I was saying, look where we are now. It appears that a perfect storm of folly in finance has mutated into a perfect storm of fatuity in governance. It has always seemed to me a truth self-evident that you get the government you are willing to pay for. We pay our senators and congresspeople, stewards of a multitrillion-dollar budget, roughly 60 percent of the magic $250,000 that all hands agree is the threshold income level for economic respectability. What we pay a senator would be sniffed at by a third-line bond trader, one of those prognathous steakhouse types who makes millions by following a computer’s instructions. No wonder our elected representatives’ hands are out when K Street comes calling. No wonder we get the mediocrities, crooks and fools we have.
In the U.K., in a scandal that has gotten surprisingly little traction in this country, MPs have been caught fiddling their reimbursable expenses as a way of topping up inadequate incomes. Even the British right-wing press admits that MPs are underpaid compared to other professions. Wall Street argues that ample—we in the street might say “bloated”—compensation packages are essential to getting and keeping the best talent. Why can’t the same argument be made on behalf of Congress? Or is the money better under the table? I fear to ask.