Angry America and the Bailout
This article originally appeared on TomDispatch.
Obtuse hardly does justice to the social stupidity of our late, unlamented financial overlords. John Thain of Merrill Lynch and Richard Fuld of Lehman Brothers, along with an astonishing number of their fraternity brothers, continue to behave like so many intoxicated toreadors waving their capes at an enraged bull, oblivious even when gored.
Their greed and self-indulgence in the face of an economic cataclysm for which they bear heavy responsibility is, unsurprisingly, inciting anger and contempt, as daily news headlines indicate. It is undermining the last shreds of their once exalted social status--and, in that regard, they are evidently fated to relive the experience of their predecessors, those Wall Street "lords of creation" who came crashing to Earth during the last Great Depression.
Ever since the bailout state went into hyperdrive, popular anger has been simmering. In fact, even before the meltdown gained real traction, a sign at a mass protest outside the New York Stock Exchange advised those inside: "Jump, You Fuckers."
You can already buy "I Hate Investment Banking" T-shirts on line. All the Caesar-sized salaries and the Caligula-like madness as the economy crashes and burns, all the bonuses, dividends, princely consulting fees for learning how to milk the Treasury, not to speak of those new corporate jets, as well as the government funds poured down the black hole of mega-mergers, moneys that might otherwise have spared citizens from foreclosure--all of this is making ordinary Americans apoplectic.
Nothing, however, may be more galling than the rationale regularly offered for so much of this self-indulgence. Asked about why he had given out $4 billion in bonuses to his Merrill Lynch staff in a quarter in which the company had lost a staggering $15 billion dollars, ex-CEO John Thain, typically, responded: "If you don't pay your best people, you will destroy your franchise. Those best people can get jobs other places, they will leave."
Apparently it never occurs to those who utter such perverse statements about rewarding the "best people," or "the best men," that we'd all have been better off, and saved some serious money, if they had hired the worst men. After all, based on the recent record, who could possibly have done more damage than the "best" Merrill Lynch, Wachovia, WaMu, Citigroup, AIG, Bank of America and so many other top financial crews had to offer?
The "Best Men" Fall
Now even the new powers in Washington are venting. Vice President Biden has suggested that our onetime masters of the universe be thrown "in the brig"; Missouri Senator Claire McKaskill has denounced them as "idiots...that are kicking sand in the face of the American taxpayer," and even the new president, a man of exquisite tact with an instinct for turning the other cheek, labeled Wall Street's titans as reckless, irresponsible and shameful.
To those who remember the history, all this bears a painfully familiar ring. Soon enough, that history tells us, Congressional investigators will start hauling such people into the public dock and the real fireworks will begin. It happened once before--a vital chapter in the ongoing story of how an old regime dies and a new one is born.
After the Great Crash of 1929, those at the commanding heights of the economy who had enriched themselves and deluded others into believing that, under their leadership, the United States had achieved "a permanent plateau of prosperity"--sound familiar?--were subject to a whirlwind of anger, public shaming and withering ridicule. Like the John Thains of today, Jack Morgan, Charles Mitchell, Richard Whitney, Albert Wiggins and others who headed the country's chief investment and commercial banks, trusts, insurance companies and the New York Stock Exchange never knew what hit them. They, too, had been steeped in the comforting bathwaters of self-delusion for so long that they believed, like Thain and his compadres, that they were indeed the "best," the wisest, the most entitled, and the most impregnable men in America. Even amid the ruins of the world they had made, they were incapable of recognizing that their day was done.
Under the merciless glare of Congressional hearings, above all the Senate's Pecora Committee (named after its bulldog chief counsel Ferdinand Pecora), it was revealed that Jack Morgan and his partners in the House of Morgan hadn't paid income taxes for years; that "Sunshine" Charlie Mitchell, head of National City Bank (the country's largest), had been short-selling his own bank's stock and transferring assets into his wife's name to escape taxes; that other financiers just like him, who had been hero-worshiped for a decade or more as financial messiahs, had regularly engaged in insider-trading schemes that made them wealthy and fleeced legions of unknowing investors.
The Pecora Committee was not the only scourge of the old financial elite. Franklin Delano Roosevelt, as publicly mild-mannered as and perhaps even more amiable and charming than President Obama, began excoriating them from the moment of his first inaugural address. He condemned them in no uncertain terms for misusing "other people's money" and for their reckless speculations; he blamed them for the sorry state of the country; he promised to chase these "unscrupulous money changers" from their "high seats in the temples of American civilization."
Jack Morgan, called to testify by yet another set of Congressional investigators, had a circus midget plopped in his lap to the delight of a swarm of photo-journalists who memorialized the moment for millions. It was an emblematic photo, a visual metaphor for a once proud, powerful elite, its gravitas gone, reduced to impotence, ridiculed for its incompetence and no longer capable of intimidating a soul.
What happened to Jack Morgan or later Richard Whitney--a crowd of 6,000 turned out at New York's Grand Central Station in 1938 to watch the handcuffed former president of the New York Stock Exchange be escorted onto a train for Sing Sing, having been convicted of embezzlement--was the political and social equivalent of a great depression. It represented, that is, a catastrophic deflation of the legitimacy of the ancien régime. It was part of what made possible the advent of something entirely new.