Tomgram: Steve Fraser, The Two Gilded Ages

Think of it as gilding the pain. Last year, hedge fund manager John Paulson of Paulson & Co. hauled in a nifty $3.7 billion. (Yes, you read that right.) Mainly, he did so, according to the Wall Street Journal, “by shorting, or betting against, subprime mortgage securities and collateralized debt obligations.” And he wasn’t alone. Hedge fund money-maker Philip Falcone of Harbinger Capital Partners raked in a comparatively measly $1.7 billion in 2007, also by shorting subprime mortgages. These are fortunes beyond imagining, made in no time at all by betting on the pure misery of others. Think of them as Las Vegas with a mean streak a mile wide.

In a week in which Citibank released news of quarterly losses of $5.1 billion and sweeping job cuts, food riots dotted the planet, oil hit $117 a barrel, and regular gas prices averaged $3.47 a gallon at the pump (with another 30 cents likely to be tacked on in the next month), Institutional Investor’s Alpha magazine released its list of the 50 top hedge fund managers. In 2007, they “made” a cumulative $29 billion. (Even to slip in among the top 25, you had to take in at least $360 million.) To put this in perspective, Paulson alone made $1.6 billion dollars more than it is going to cost J.P. Morgan Chase to pick up the tanking Bear Stearns; in one hour, he made 30 times what the median American family earned all last year. And here’s a little tidbit to go with that: Income inequality in 2007 was, according to the Associated Press, “at the highest level since 1928, the year before the Great Depression began.”

And still, a New York Times piece on the gains of Paulson and crew described the hedge fund managers with genuine awe as “those masters of a secretive, sometimes volatile financial universe.” Master of the Universe (a label originally attached to an over-muscled action figure of the 1980s by the name of He-Man) — such descriptions have been with us since the beginning of our new Gilded Age and no one knows this better than Steve Fraser. His book on our financial “masters of the universe” from the eighteenth century to the present, Wall Street: America’s Dream Palace, has just been published. As he writes, “Beginning with the merger and acquisition mania of the mid-1980s, the media were overrun with depictions of Wall Street ‘gunslingers,’ ‘white knights’ and ‘black knights,’ ‘killer bees,’ ‘hired guns,’… and ‘barbarians at the gates,! ‘ warrior appellations borrowed helter-skelter from antiquity, the Middle Ages, and America’s mythologized West.” The language brought to bear always had that requisite edge of awe, part of an ethos that added up to a cult of the Titan. Fraser, whose book is simply superb (and, in this age of information onslaught, mercifully short), offers a brief history of key images of Wall Street movers and shakers — the aristocrat, the confidence man, the hero, and the immoralist — taking you on a concise tour of America’s love/hate relationship with Wall Street from the founding of the republic to late last night.

Now, as the gilding on our present age begins to peel and flake, Fraser turns back to the last Gilded Age at the end of the nineteenth century, to ask a few questions germane to our moment, especially why, today, unlike in the late nineteenth century, the protests over the Paulsons of our world aren’t rising to the heavens. Tom

The Great Silence

Our Gilded Age and Theirs
By Steve Fraser

Google “second Gilded Age” and you will get ferried to 7,000 possible sites where you can learn more about what you already instinctively know. That we are living through a gilded age has become a journalistic commonplace. The unmistakable drift of all the talk about it is a Yogi Berra-ism: it’s a matter of déjà vu all over again. But is it? Is turn-of-the-century America a replica of the world Mark Twain first christened “gilded” in his debut bestseller back in the 1870s?

Certainly, Twain would feel right at home today. Crony capitalism, the main object of his satirical wit in The Gilded Age, is thriving. Incestuous plots as outsized as the one in which the Union Pacific Railroad’s chief investors conspired with a wagon-load of government officials, including Ulysses S. Grant’s vice president, to loot the federal treasury once again lubricate the machinery of public policy-making. A cronyism that would have been familiar to Twain has made the wheels go round in these terminal years of the Bush administration. Even the invasion and decimation of Iraq was conceived and carried out as an exercise in grand-strategic cronyism; call it cronyism with a vengeance. All of this has been going on since Ronald Reagan brought back morning to America.

Click here to read more of this dispatch.

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