The Saga of Man

By Ed Raymond
Staff Writer

In the movie musical “Guys and Dolls,” Sky Masterson, played by Marlon Brando, waxed philosophical with the hustling Nathan Detroit, played by Frank Sinatra. “When I was a young man…my father says to me like this: ‘Son, I am sorry that I am not going to be able to bank roll you to a very large start, but not having any potatoes which to give you, I am now going to stake you to some very valuable advice. One of these days in your travels, a guy is going to come to you and show you a nice new deck of cards on which the seal is not broken. This man is going to offer to bet you that he can make the jack of spades jump out of the deck and squirt cider in your ear. Now son, do not bet this man, for as soon as you stand there, you are going to wind up with an earful of cider.’ “

Then Sky says to Nathan: “However if you are really looking for some action, I will bet you you the same thousand that you do not know the color of necktie you are currently wearing (covers Nathan ‘s tie with hand). Well?” Nathan says: “No bet.” (Sky removes hand.) Only Nathan Detroit could blow a bet on polka dots!

Wall Street and the Jumping Jack of Spades

I thought of both Masterson and Detroit when I was watching the Congressional Inquisition of four young Goldman Sachs executives at a Congressional hearing testifying about their trade, showing new decks of cards to greedy investors and asking them to bet on whether they could make the jack of spades jump out of the deck. The greedy investors took the bet and ended up showered with sour Wall Street cider. It was kind of entertaining, actually, to watch greed meet and tackle greed in a Congressional hearing room. It seemed that all of the guys and dolls in the room were wearing polka dots but thought they were wearing plain. The young guys, buoyed with the arrogance of money and the bloated reputation of Ivy League degrees, never answered a question without posing another-–and showed they knew nothing of Main Street and people who didn’t play in the casinos of Las Vegas and Wall Street.

The “Maestro” Who Turned Into “Alan Who?”

Former Federal Reserve Chairman Alan Greenspan has continued to be a follower of Ayn Rand, the cranky advocate of unfettered capitalism who wrote “The Fountainhead” (almost readable) and her more famous 800 lb. gorilla of capitalistic drivel “Atlas Shrugged.”

Greenspan claimed in a Congressional hearing that he had been right 70 percent of the time while he served as Fed chairman and wrong 30 percent of the time—and then admitted he had made a lot of mistakes in 21 years at the helm. He sure did. Over nine trillion dollars of America’s wealth evaporated just in the last two years of his chairmanship. Greenspan finally had to admit that he didn’t think capitalists could be so damn greedy. He admitted that the free market was indeed too free. Heck, even Herbert Hoover thought capitalists were too greedy.

It’s ironic that the executives of Goldman Sachs always quoted this axiom of the firm: “True capitalists are long-term greedy, trying to maximize their take over the long run.” The dons of Sachs often added that the short-term greedy aren’t capitalists, they’re pigs. In the old days they thought that all pigs on Wall Street would get slaughtered. Actually investment bankers and traders in the last three years were dumber than pigs. Pigs are smart enough to eat only what they need, even if they are omnivorous.

What About Those C Students?

Bob Herbert of the New York Times recalled a large posting on the wall of his chemistry classroom at Purdue University over 40 years ago: “Professors, be good to your A students, for one day they will come back and make excellent faculty. Be good to your B students, because they are the mainstay of your graduate class. Be good to your C students, for one day they will come back and donate $100 million for a new science building.”

During the dot-com and housing bubbles of the last decade, the mainstream press always used words such as “smart,” “exceptionally brilliant,’ and “the brightest young minds” when they talked about the movers and shakers on Wall Street. So if they were so smart, how come they blew $9 trillion of our wealth in a Wall Street minute? They ended up being pigs. They took unbelievable risks on a golden high wire. They had multi-million dollar paychecks and built private castles around the world as their own private monuments. In the short span of about a year of subprime mortgages and millions of foreclosures, the Wall Street crowd has put the American Dream on life support—and the current is flickering. The Wall Street crime families far exceeded what the Mafia crime families ever did to this country.

What does a hedge fund make? Does it make one paper clip or wood screw? While China is building 42 high speed rail lines and we are beginning to study where we are going to construct one, our bankers are buying and selling “crap” and “shit” as the “smart” young men of Goldman Sachs described it in their e-mails. Then to top it off they bet millions and billions using the crap of derivatives, credit default swaps, and other “exotic” financial “instruments.”

What Did You Use Today That a Hedge Fund Made?

Even Greenspan admitted he didn’t understand all of these instruments that turned “crap” and “shit” investments into gold for some investors and real crap for many others. At the same time the bankers were busy screwing each other with credit default swaps and derivatives instead of loaning our stimulus money to legitimate businesses, we have to remember that 237 members of our Congress are millionaires. They didn’t get that way without Wall Street money. In the last 21 years Goldman Sachs has contributed over $30 million to the campaigns of Congressmen. I loved the cartoon of the dozens of long cars going down Pennsylvania Avenue to the Capitol Building. An observer says: “What is this?” Another says: “Wall Street lobbyists…They’re calling it the ‘thousand limo march’.”

Why did Goldman Sachs make 76 percent of their profits trading and investing for their own accounts while their investments in productive businesses accounted for only 11 percent of their profits? Because that’s where the money is short-term. A letter writer to the Tribune asks this question: “How else is it that Goldman Sachs can make billions selling a mortgage agreement that was intended to fail?” This is casino money, not productive money. Isn’t there something wrong where nothing of value is created by “investment” banking except money? Perhaps every Wall Street bank should have this posted above the doors: “You can’t take your money with you, professional success can’t make you happy, and you can eat only three meals a day.”

Have You Ever Had a Guy Give You a Hot Tip on a Synthetic Collaterized Debt Obligation?

In the hearing the other day, a couple of the “brightest” boys talked about synthetic collaterized debt obligations (CDOs). This is another exotic creation of the investment banking crowd. Will someone please define that financial abortion so the ordinary investor in a mutual fund can understand its function? If not, it should be banned along with the other crap of derivatives and credit default swaps. Even Las Vegas and Atlantic City don’t use that stuff at the crap tables.

When I decided to write a column about Wall Street shenanigans, I was going to try to define the exotic instruments created by the geniuses on the Street. Just what are regular derivatives, over-the-counter derivatives, credit default swaps, synthetic collaterized debt obligations, and a creation called “Exchange Traded Funds”? There’s a new item priced every second of the trading day. If you understand the ETFs as described by USA Today writer John Waggoner you have my permission to buy: “ETFs have a complex mechanism that helps reduce the premiums and discounts that closed-end funds often have. Very large investors can trade big blocks of an ETF’s shares–typically 50,000 shares or so—for the underlying securities in the ETF. Normally the only reason to do so is if the cost of the ETF shares is less than the underlying stocks in the ETF.” Got that?

I have never been interested in finance, except for a short time in the Marine Corps, when my regimental commander saw that I had a math minor and named me his regimental fiscal and accounting officer. I was responsible for an $80 million annual operating budget, but I had a good crew who knew what they were doing. At least they kept me out of Portsmouth for two years. Portsmouth is a military prison where really bad Marines go.

These Young Guys Had the Look of the Business Gestapo

One of the young geniuses testifying before Congress was 31-year-old Fabrice Tourre, who called himself “Fabulous Fab.” He turned himself into a Mafia-type soldier in numerous e-mails to fellow workers and friends. He described himself this way in one: “Standing in the middle of all these complex, highly levered (very little money supporting them), exotic trades he created (speaking of himself) without necessarily understanding all the implications of those monstrosities!! Anyway, not feeling too guilty about this…”

In another e-mail to a girl friend he called his “Frankenstein” creation “a product of pure intellectual masturbation, the type of thing which you invent telling yourself: Well what if we created a thing, which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?” That’s what the young hot boys in the business thought of the crap they were selling to serious investors. In another e-mail he joked that he was selling toxic junk “to widows and orphans that I ran into at the airport.”

To show to what depths Wall Street has sunk, New York Times columnist Maureen Dowd used the ethics-impaired Senator John Ensign to testify against the morals and ethics of the Wall Street crowd. (He is currently under investigation by the Senate Ethics Committee for having his wealthy parents pay $100,000 to his mistress—the wife of an aide—to keep her mouth shut.) Ensign said: “I think most people in Las Vegas would take offense at having Wall Street compared to Las Vegas. Because in Las Vegas, actually people know that the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you’re playing the game, and I would say that it’s actually much more dishonest.” It often takes a crook to know one.

When the four young Sachs executives testified with their CEO Lloyd Blankfein, I had the thought that all five with their cold, lifeless, penetrating eyes and total lack of ethics are really serial killers of the American Dream for ordinary folk.

A Definition Of Greed

Warren Buffett, known as the Sage of Omaha and often the second richest person in the world, loves to tell this story about greed. St. Peter met an oil prospector at the Pearly Gates and inquired about his profession. When told, St. Peter said, “I’m so sorry. You meet all the tests for Heaven but over there is a pen full of oil prospectors waiting to get in. We haven’t got room for even one more. The oil prospector said: “Just give me a minute.” He yelled out: “Oil discovered in Hell!!” Immediately all of the waiting prospectors broke the lock on the pen and flapped their wings for the nether region. St. Peter said: ‘That’s a good trick. Move in.” The old oil prospector scratched his head and said: “No, if you don’t mind, I think I’ll go along with the rest of them. There may be some truth to that rumor after all.”

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