Tomgram: Steve Fraser, Wall Street and the Return of the Repressed

October 6, 2008

October 2, 2008
Tomgram: Steve Fraser, Wall Street and the Return of the Repressed

Think of this as the month when Fannie and Freddie entered everyday speech as something other than friendly names, when Americans realized that WaMu wasn’t an over-performing Orca at SeaWorld but a massive failing savings bank, and that Wachovia wasn’t a watch brand, but a finance group, as well as the fourth largest bank holding company in the U.S.

And the faster we learned those names, the faster they disappeared into the dustbin of history. First, Bear Stearns hit the skids, then Lehman Brothers vanished into the ether just as Fannie Mae and Freddie Mac were being absorbed by the U.S. government. Merrill Lynch headed directly down the gullet of Bank of America. Just behind was a desperate American International Group (A.I.G.), the world’s largest insurer, in a state of financial collapse, only to be bailed out by the Bush administration. Next, Washington Mutual (or WaMu) fell into the clutches of JP Morgan Chase, and Wachovia into the embrace of Citigroup, just as five big banks in Europe were being “rescued” and two of them essentially nationalized. Meanwhile, other banks in the U.S., Europe, Russia, and East Asia, as well as brokerage houses, and even hedge funds seemed to be stumbling like so many zombies to the brink of catastrophe, teetering over the abyss of… well, we really don’t yet know what.

As the stock market began its trip south, the Bush administration made one of its typical grabs for unparalleled executive power (to be vested in the person of the Secretary of the Treasury). Unfortunately — for its top officials — they had a tad of a “credibility gap” problem and, after an outpouring of popular anger at the thought of bailing out the rich and improvident, a revolt in the House of Representatives by anxious Democrats and a horde of angry conservative Republicans got the administration’s plan voted down. Politicians across the political spectrum, especially those up for election in competitive districts, surely feared being labeled supporters of the “bailout party,” especially when the bailout was to be run by the gang that couldn’t shoot straight in Iraq, Afghanistan, Pakistan, or New Orleans.

This was also a month of financial feeding frenzy, of “creative destruction” in which, as Americans watched in amazement, survivors of the roiling economic carnage swooped onto the battlefield to bloat themselves on the tastiest corpses around (with a helping hand from the federal government). Already in this process, strange, monstrous, jigsaw-puzzle versions of more familiar financial outfits are emerging. Giant creatures like Bank-of-America-Merrill-Lynch, or JPMorgan-Chase-Bear-Stearns-WaMu or Citigroup-Wachovia (whatever they may officially call themselves) now exist, however provisionally. The creative destruction engendered by a faltering American capitalism may prove advantageous to specific companies when the dust clears, but it will surely crush untold numbers of ordinary Americans who simply find themselves in the way.

Of course, even in the “good times,” there were feeding frenzies that crushed the many and sated the few. There was Enron, after all; and as the bad times began, when all those subprime mortgages started to go bad, there was still hedge-fund manager John Paulson of Paulson & Co. to haul in a nifty $3.7 billion in a single year. Mainly he did so, according to the Wall Street Journal, “by shorting, or betting against, subprime mortgage securities and collateralized debt obligations.” In other words, he made his money by betting on the pure misery of others.

If there’s a bright side to any of this, then maybe it’s that, after 50 years of relative immunity from criticism, Wall Street is again the street Americans love to hate; so Steve Fraser, TomDispatch’s (and, right now, everyone else’s) expert on Wall Street’s grim history and author of the indispensable book, Wall Street: America’s Dream Palace, tells us in vivid detail below.

Meanwhile, perhaps it’s time to remember the catastrophic Argentinean national collapse and bankruptcy of 2001-2002, and to try to imagine what in the world any faintly similar set of events might mean when transposed to the world’s “sole superpower.” Here’s one change to expect from the present financial chaos: When the next president of the United States looks “over the horizon,” he’s likely to see a world without a reigning superpower and, when he thinks about “the next war” (as they like to say in the Pentagon), the good news is that he may not have the money to pay for it. Tom

The Specter of Wall Street

Wall Street’s Comeback as the Place Americans Love to Hate

By Steve Fraser

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America Pays the Piper

September 24, 2008

To understand how the United States got itself into today’s bailout mess, one has to look back three decades to the rise of Ronald Reagan, the neocons and the anti-regulators, writes Robert Parry.

After a 28-year binge of drunken optimism and blind nationalism – often punctuated by chants of “USA, USA!” and “We’re No. 1!” – Americans are waking up with a painful hangover, facing a grim “morning in America,” not the happy vision that Ronald Reagan famously sold them on.”

For the full story, go to Consortiumnews.com .


Arianna Huffington: The Bailout Plan: Welcome to Economic Shock and Awe

September 23, 2008

In the preface to her post, Arianna Huffington has this to say about the Paulson bailout package:

“Over the past 30 years, Americans have been bombarded with sermons evangelizing for the free market religion of the Right. In the course of selling us on buying, the market-worshippers tried to convince us that all concerns about the most vulnerable members of society could be left up to the soulless, self-correcting calculus of supply and demand. Government involvement was an anachronism, regulatory oversight an impediment. The last few weeks have demolished that notion. In the battle over the proper role of government, the high priests of the church of the Free Market — including Bush, Paulson, and the Masters of Wall Street — have suffered a monumental defeat. So why are we allowing them to dictate the terms of their surrender?

Arianna begins her corresponding article The Bailout Plan: Welcome to Economic Shock and Awe with this:

See if this sounds familiar:

There is a gathering threat to the safety of the United States. We must take immediate action. Congress must quickly grant the President and the Secretary what they want and also give them full and unfettered authority to execute the plan.

Welcome to Economic Shock and Awe (or as some have dubbed it, according to Paul Krugman, “the Authorization for Use of Financial Force”).

Even the amount of taxpayer money being bandied about — $1 trillion — is similar. Think you got your money’s worth for the Iraq war? Congratulations — you’re about to buy another pricey debacle.

[…]

Read the rest of this article here.


Tomgram: Steve Fraser, The Two Gilded Ages

May 15, 2008

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.

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