11/10/07
Today’s Wall Street Journal contained reports on third quarter losses at Fannie Mae (page A2) and at Wachovia (page A3). Both institutions, obviously, attribute most of their problems to “unforeseen” bogeymen.
Fannie, the Journal reports, had modest holdings of sub-prime loans. However, the Journal goes on to report
“While defaults on subprime loans, those to people with weak credit records, are soaring, delayed payments and foreclosures on prime loans also have started to rise from the unusually low levels of recent years.”
Wachovia, the Journal reports, attributed much of its latest write down to deterioration in the value of “super senior” CDOs. (Note here that the seniority of tranches in a CDO has little or nothing to do with the credit quality of the collateral in that CDO, lest anyone think I am trying to equate the “sudden, unexpected” super senior problem with the “sudden, unexpected” deterioration in prime loans. But the deterioration of both super senior CDOs and prime loans are obviously part of the same problem.) The Journal then goes on to quote Amy Brinkley, Bank of America’s chief risk officer, as saying
“There are some aspects of what are (sic) going on that we fully expected in terms of correction (sic). But I don’t know that anyone expected the degree to which liquidity would lock up.”
No one expected this? Well, we all know what Ms. Brinkley and her fellow highly paid Wall Streeters weren’t reading. Below are citations from the Insightful Pontificator from earlier, in one case much earlier, in the year:
3/14/07
(from a note I sent to a friend with whom I share ideas in response to a post in a newsletter he receives):
As you might guess, I don’t share the writer’s sanguinity. As I say in the body of this letter, wait until the market discovers (It will, of course, be shocked to learn this because “nobody” could have foreseen such a development.) that the problems in our nation’s mortgage portfolio are not limited to SUB-PRIME mortgages.
We have only begun to see the difficulties that permeate our “don’t worry, be happy” financial system.
Yeah, the model portfolios outperformed a lousy market, which is cold consolation. I understand relative performance; I made my living on it back when I almost was somebody and even now use it as an excuse when people with whom I work don't do as well as they expected, but it makes little sense to the average person. I had a great day yesterday, owing to my put positions, my short positions, and my TIPs positions. Making money, and not losing money, is what matters to most people.
I'll be interested to see how this guy contorts himself as the crap REALLY hits the fan with this market. Wait 'til the market finds out (I can predict what the "experts" will say: "No one could have seen this coming." Well, someone did, and now you know who.) that it is not only sub-prime mortgages that are a problem, but that the "high quality" paper isn't as high quality as the deep thinkers supposed. Meanwhile, it looks like we MIGHT get a day's reprieve today.
8/19/07
Like anyone else, I could be wrong here, but this problem appears to be far from over. As I said in my 3/14/07 post, wait until it becomes apparent to the financial wunderkinds who have seized control of our economy that this problem is by no means limited to sub-prime mortgages. The truly exotic mortgage products (the interest only loans, negative amortization loans, etc.) were almost exclusively prime, or at least Alt-A, loans. Look around your neighborhood and at your neighbors’ spending habits and tell me with assurance that all these loans are just fine. And if the Fed continues to do the wrong thing, attempting to continue the decades long practice of socializing the risk while privatizing the profits, things could get worse…a LOT worse.
No one indeed. Well, at least no one outside the myopic club of financial insiders.
Saturday, November 10, 2007
Friday, November 9, 2007
THESE POOR PEOPLE NEED OUR HELP!!!
11/9/07
So Ben the Nursemaid of Wall Street is not satisfied providing ample supplies of mother’s milk to his tough guy sucklings in the form of ample credit. Yesterday, he proposed, get this, having the federal government (for a fee—a market based fee, I’m sure) guarantee mortgages of up to $1mm (One million dollars!!!) so that those mortgages can be packaged into securities (by Fannie and Freddie) and sold to investors. Why? Because Fannie and Freddie are currently not allowed to buy and package mortgages over $417,000.
So…
We as taxpayers are supposed to guarantee mortgages of up to $1mm. It seems that those who are (or were) wealthy enough to qualify for $1mm mortgages somehow were misled, planned poorly, or otherwise miscalculated, turning these mortgages into toxic waste. (Those of you who continue to argue that we still live in a free market society in which people generate wealth and make money because they are smart and work hard, not because they are in “the club” or are able to hornswoggle an increasingly bewildered and idiotic consuming and voting public, please explain this to me. Oh, I get it…these masters of the universe were misled by slick mortgage “consultants”…yeah, that’s the ticket! It’s the salesman’s fault! Why, these “affluent homeowners” are mere innocents, putty in the hands of slick salesmen (who were selling shoes, or fast food, a week before becoming mortgage “consultants”)! But I digress.) The Wall Street types who bought the paper backing the mortgages (and who laughingly dismissed the warnings of us alarmist types “Ha! These aren’t sub-prime loans; these are loans to the good people, the wealthy people, the people who make America work! And, with the bustling economy, they can’t miss!!! Ha! Ha! Ha!” But I digress again.) are seeing (sniff!) losses from their bad positions. So Ben must ride to the rescue!!! After all, his job is to protect the Masters of the Universe, who make our economy work.
But of course we as taxpayers will be getting a fee. And if the borrowers default, we will be able to seize the collateral. So the taxpayers are fine, right? But if this were such a good deal, why is a government guarantee necessary? If the collateral is so good, why aren’t traders, distressed or otherwise, all over these troubled loans? Oh, I forgot. The distressed guys will only do a deal with a backstop. As Zay N. Smith (“QT” in the Chicago Sun-Times) might say, add “distressed investing” to the list of things that isn’t what it used to be. The Bernanke “plan” is a subsidy both to wealthy (and overextended) homeowners and to the “bold and swashbuckling” traders who got caught in increasingly malodorous positions and are now scrambling to hide behind Mother Ben’s apron.
Further, let us assume this scheme passes a financially and economically illiterate Congress. The federal government (i.e., you and I) end up guaranteeing $1mm mortgage loans. Borrowers default. The government honors its guarantee and assumes the mortgages (properly understood, i.e., the security interests in the homes). Does anyone think that the government will be able to foreclose? Can you imagine the pressure on the government to renegotiate with “troubled homeowners” (with $1mm mortgages)?
The Democrats, of course, think this is a fine idea. Chucky Schumer says he will introduce a bill incorporating Breanne’s suggestion very soon. “I think it’s a good idea,” Chucky said. Rep. Caroline Maloney, a Democrat from that bastion of poverty, Long Island, who chairs the relevant subcommittee in the House, is also hopping on this bandwagon. So the next time the Democrats tell you they are the party of the working person, throw this back in their face. They are at least as meretricious as the Republicans, looking for any excuse to expand government and mollify anyone who can write a check for a “campaign contribution.”
So Ben the Nursemaid of Wall Street is not satisfied providing ample supplies of mother’s milk to his tough guy sucklings in the form of ample credit. Yesterday, he proposed, get this, having the federal government (for a fee—a market based fee, I’m sure) guarantee mortgages of up to $1mm (One million dollars!!!) so that those mortgages can be packaged into securities (by Fannie and Freddie) and sold to investors. Why? Because Fannie and Freddie are currently not allowed to buy and package mortgages over $417,000.
So…
We as taxpayers are supposed to guarantee mortgages of up to $1mm. It seems that those who are (or were) wealthy enough to qualify for $1mm mortgages somehow were misled, planned poorly, or otherwise miscalculated, turning these mortgages into toxic waste. (Those of you who continue to argue that we still live in a free market society in which people generate wealth and make money because they are smart and work hard, not because they are in “the club” or are able to hornswoggle an increasingly bewildered and idiotic consuming and voting public, please explain this to me. Oh, I get it…these masters of the universe were misled by slick mortgage “consultants”…yeah, that’s the ticket! It’s the salesman’s fault! Why, these “affluent homeowners” are mere innocents, putty in the hands of slick salesmen (who were selling shoes, or fast food, a week before becoming mortgage “consultants”)! But I digress.) The Wall Street types who bought the paper backing the mortgages (and who laughingly dismissed the warnings of us alarmist types “Ha! These aren’t sub-prime loans; these are loans to the good people, the wealthy people, the people who make America work! And, with the bustling economy, they can’t miss!!! Ha! Ha! Ha!” But I digress again.) are seeing (sniff!) losses from their bad positions. So Ben must ride to the rescue!!! After all, his job is to protect the Masters of the Universe, who make our economy work.
But of course we as taxpayers will be getting a fee. And if the borrowers default, we will be able to seize the collateral. So the taxpayers are fine, right? But if this were such a good deal, why is a government guarantee necessary? If the collateral is so good, why aren’t traders, distressed or otherwise, all over these troubled loans? Oh, I forgot. The distressed guys will only do a deal with a backstop. As Zay N. Smith (“QT” in the Chicago Sun-Times) might say, add “distressed investing” to the list of things that isn’t what it used to be. The Bernanke “plan” is a subsidy both to wealthy (and overextended) homeowners and to the “bold and swashbuckling” traders who got caught in increasingly malodorous positions and are now scrambling to hide behind Mother Ben’s apron.
Further, let us assume this scheme passes a financially and economically illiterate Congress. The federal government (i.e., you and I) end up guaranteeing $1mm mortgage loans. Borrowers default. The government honors its guarantee and assumes the mortgages (properly understood, i.e., the security interests in the homes). Does anyone think that the government will be able to foreclose? Can you imagine the pressure on the government to renegotiate with “troubled homeowners” (with $1mm mortgages)?
The Democrats, of course, think this is a fine idea. Chucky Schumer says he will introduce a bill incorporating Breanne’s suggestion very soon. “I think it’s a good idea,” Chucky said. Rep. Caroline Maloney, a Democrat from that bastion of poverty, Long Island, who chairs the relevant subcommittee in the House, is also hopping on this bandwagon. So the next time the Democrats tell you they are the party of the working person, throw this back in their face. They are at least as meretricious as the Republicans, looking for any excuse to expand government and mollify anyone who can write a check for a “campaign contribution.”
Thursday, November 8, 2007
AN EVER VIGILANT CENTRAL BANK
11/8/07
While reading the otherwise decent page A1 article in today’s Wall Street Journal concerning the sources and origins of yesterday’s (i.e., 11/7’s) stock market debacle, I ran across a curious sentence:
“Central banks are acutely aware of the danger posed by inflation, and declare their readiness to move quickly to combat it.”
Huh? Perhaps this argument could be made of the ECB, or even the BOJ, but the Fed? Lately, every time the legion of stentorian mouthpieces for Wall Street that inhabit our financial media begin to wail that the tough guy traders are suffering so much as a hangnail (These are the same bold free marketeers that tell the blue collar guys (but never to their faces) who lose their jobs to globalization that they ought to suck it up; it’s the wondrous “free market” at work. Besides, these seven and eight figure wise men tell us, the working types deserve it because they are asking too much money for their 8-12 hours of back breaking labor per day. They ought to learn to do something more productive, like putting on ill-advised positions that cripple major financial institutions. But I digress.), the Bernanke Fed has stood ready to provide generous succor in the form of an endless supply of credit in order to “stabilize the markets.”
The Bernanke Fed says it is sensitive to the dangers posed by incipient inflation and a falling dollar. But, by what it does, it demonstrates that it is far more sensitive to the human suffering that will result from Wall Street bigwigs’ having to suffer the ignominy of losing their jobs with seven or eight figure exit packages due to their boneheaded trades, which suddenly have become the responsibility of all of us. Think of the fallout! What, by God, will happen to sales at Neiman Marcus, Tiffany’s, and Mikimoto? We have to act!
The Fed (and the “free market” Republican administration) sees its job as follows: Socialize the risk, privatize the profit, and prop up the wise men who “make our economy work.” Let the working stiff deal with the rising prices of food and gasoline (They don’t count anyway.) and the consequences for the economy of the games Wall Street plays.
And people wonder why the markets, our economy, and our society are in trouble.
While reading the otherwise decent page A1 article in today’s Wall Street Journal concerning the sources and origins of yesterday’s (i.e., 11/7’s) stock market debacle, I ran across a curious sentence:
“Central banks are acutely aware of the danger posed by inflation, and declare their readiness to move quickly to combat it.”
Huh? Perhaps this argument could be made of the ECB, or even the BOJ, but the Fed? Lately, every time the legion of stentorian mouthpieces for Wall Street that inhabit our financial media begin to wail that the tough guy traders are suffering so much as a hangnail (These are the same bold free marketeers that tell the blue collar guys (but never to their faces) who lose their jobs to globalization that they ought to suck it up; it’s the wondrous “free market” at work. Besides, these seven and eight figure wise men tell us, the working types deserve it because they are asking too much money for their 8-12 hours of back breaking labor per day. They ought to learn to do something more productive, like putting on ill-advised positions that cripple major financial institutions. But I digress.), the Bernanke Fed has stood ready to provide generous succor in the form of an endless supply of credit in order to “stabilize the markets.”
The Bernanke Fed says it is sensitive to the dangers posed by incipient inflation and a falling dollar. But, by what it does, it demonstrates that it is far more sensitive to the human suffering that will result from Wall Street bigwigs’ having to suffer the ignominy of losing their jobs with seven or eight figure exit packages due to their boneheaded trades, which suddenly have become the responsibility of all of us. Think of the fallout! What, by God, will happen to sales at Neiman Marcus, Tiffany’s, and Mikimoto? We have to act!
The Fed (and the “free market” Republican administration) sees its job as follows: Socialize the risk, privatize the profit, and prop up the wise men who “make our economy work.” Let the working stiff deal with the rising prices of food and gasoline (They don’t count anyway.) and the consequences for the economy of the games Wall Street plays.
And people wonder why the markets, our economy, and our society are in trouble.
Tuesday, November 6, 2007
DON’T VOTE!!!
11/6/07
Traditionally, the presidential election season would be starting about now, with the first few candidates putting out feelers and testing the waters, trying to decide whether to set up shop in Iowa and New Hampshire. With the “new and improved” professional politics of the last few elections, and especially of the upcoming race, we have been at it for at least a year now. Political junkies exult; normal people with lives to lead grow tired. I digress.
With the expedited Iowa caucuses and New Hampshire primary upon us, and the very high probability that the nominations will be decided by early February, we will soon be hit with the incessant pleas to “Get out and vote!” We should do our “patriotic duty,” our bit for self-government, we are told. But I am telling people not to vote.
Most of the American electorate, or potential electorate, is pathetically ill-equipped to vote intelligently. Most Americans of voting age should not vote. People who spend hours anesthisizing their brains with network prime time television, even network news, which is little more than a treacly amalgam of puff pieces, should stay home on election day. Those who never pick up a newspaper, or never read beyond the sport or “living” sections, should not vote. Those who consider being informed keeping abreast of Brittany Spears’ latest child custody battles should not vote. Those who can’t be bothered to know the names of their U.S. senators, let alone their Congressperson, should not vote. Those who select their candidates based on the likeability of their spouses should not vote.
I liken self-government (not “democracy;” those who think we live in a democracy should not vote) to a household job, say cutting one’s lawn. One can hire someone to do it for him and leave it at that. Or one can elect to do it one’s self, to tune up the mower each year and go out at least weekly and keep the lawn looking good. The former is easy, the latter is hard. The same can be said of self-government. The Founding Fathers decided, and the electorate at the time agreed, that government should be a do-it-yourself proposition. Like any do-it-yourself proposition, self-government involved some work. What was that work? Keeping informed. Following the issues. Knowing something about history and civics. Knowing something about the structure of our government and society and the struggles involved in bringing it about. Self-government involves a lot more than the seemingly backbreaking task of spending fifteen minutes at the voting booth on election day casting one’s ballots for candidates based on the mellifluousness of their names. We could have someone else do it for us; throughout most of history, that is how it has been done, with decidedly mixed results. Our founding fathers, however, thought self-government would be better. Modern Americans have decided that self-government, sans the effort involved, would be the best.
If you are a regular reader of the Insightful Pontificator, you are by definition better informed than at least 90% of the electorate. Even your desire to read such blogs indicates the kind of curiosity that self-government demands. You should vote. But please don’t get caught up in these banausic efforts to get those whose idea of news is Paris Hilton’s efforts to adopt blonde babies in Nigeria or some such vacuous nonsense to vote. Tell those hebetudinous types in your circle of acquaintances to do their bit for the country they take for granted and stay home on election day. Their doing otherwise merely dilutes the votes of those of us who care.
Traditionally, the presidential election season would be starting about now, with the first few candidates putting out feelers and testing the waters, trying to decide whether to set up shop in Iowa and New Hampshire. With the “new and improved” professional politics of the last few elections, and especially of the upcoming race, we have been at it for at least a year now. Political junkies exult; normal people with lives to lead grow tired. I digress.
With the expedited Iowa caucuses and New Hampshire primary upon us, and the very high probability that the nominations will be decided by early February, we will soon be hit with the incessant pleas to “Get out and vote!” We should do our “patriotic duty,” our bit for self-government, we are told. But I am telling people not to vote.
Most of the American electorate, or potential electorate, is pathetically ill-equipped to vote intelligently. Most Americans of voting age should not vote. People who spend hours anesthisizing their brains with network prime time television, even network news, which is little more than a treacly amalgam of puff pieces, should stay home on election day. Those who never pick up a newspaper, or never read beyond the sport or “living” sections, should not vote. Those who consider being informed keeping abreast of Brittany Spears’ latest child custody battles should not vote. Those who can’t be bothered to know the names of their U.S. senators, let alone their Congressperson, should not vote. Those who select their candidates based on the likeability of their spouses should not vote.
I liken self-government (not “democracy;” those who think we live in a democracy should not vote) to a household job, say cutting one’s lawn. One can hire someone to do it for him and leave it at that. Or one can elect to do it one’s self, to tune up the mower each year and go out at least weekly and keep the lawn looking good. The former is easy, the latter is hard. The same can be said of self-government. The Founding Fathers decided, and the electorate at the time agreed, that government should be a do-it-yourself proposition. Like any do-it-yourself proposition, self-government involved some work. What was that work? Keeping informed. Following the issues. Knowing something about history and civics. Knowing something about the structure of our government and society and the struggles involved in bringing it about. Self-government involves a lot more than the seemingly backbreaking task of spending fifteen minutes at the voting booth on election day casting one’s ballots for candidates based on the mellifluousness of their names. We could have someone else do it for us; throughout most of history, that is how it has been done, with decidedly mixed results. Our founding fathers, however, thought self-government would be better. Modern Americans have decided that self-government, sans the effort involved, would be the best.
If you are a regular reader of the Insightful Pontificator, you are by definition better informed than at least 90% of the electorate. Even your desire to read such blogs indicates the kind of curiosity that self-government demands. You should vote. But please don’t get caught up in these banausic efforts to get those whose idea of news is Paris Hilton’s efforts to adopt blonde babies in Nigeria or some such vacuous nonsense to vote. Tell those hebetudinous types in your circle of acquaintances to do their bit for the country they take for granted and stay home on election day. Their doing otherwise merely dilutes the votes of those of us who care.
Wednesday, October 31, 2007
AND ANOTHER THING…
10/31/07 (After the cuts)
This is just what we need at this crucial juncture for our economy…a Fed Chairman who judges his performance by the volume of the cheers emanating from Wall Street.
This is just what we need at this crucial juncture for our economy…a Fed Chairman who judges his performance by the volume of the cheers emanating from Wall Street.
MOTHER BEN
10/31/07—After the fed funds and discount rates were reduced 25 basis points.
Well, it’s official, folks….
We have a Bernanke put!
We have a WPA for Wall Street!
No hedge fund manager will be left behind!
No trading desk can miss!
No asinine financial decision will go unpardoned!
No one on Wall Street need sleep fitfully!
No more singing “Brother can you spare me a billion?”!
No more need to assess risks and exercise prudence!
No reason to avoid taking the most outrageous risks—the rewards are officially privatized and the risks are officially socialized!
Sleep well, Wall Street—your Mother Ben has gathered you under his wings. After all, he can’t bear to see his children experience any degree of discomfort. Why, you are the financial titans, the rugged American individualists on whom our economy depends! And Mommy is never far away!
So, no need to worry, Wall Street wise men…
…until the fox comes along. Then you have to start worrying. But, what the hell, Mother Ben can always…voila…CUT RATES!!!
But what will you do when that doesn’t work any more? Then there will be even more hell to pay, no?
Aw, stop being such a killjoy! Eat, drink, and be merry, for tomorrow we shall die.
Well, it’s official, folks….
We have a Bernanke put!
We have a WPA for Wall Street!
No hedge fund manager will be left behind!
No trading desk can miss!
No asinine financial decision will go unpardoned!
No one on Wall Street need sleep fitfully!
No more singing “Brother can you spare me a billion?”!
No more need to assess risks and exercise prudence!
No reason to avoid taking the most outrageous risks—the rewards are officially privatized and the risks are officially socialized!
Sleep well, Wall Street—your Mother Ben has gathered you under his wings. After all, he can’t bear to see his children experience any degree of discomfort. Why, you are the financial titans, the rugged American individualists on whom our economy depends! And Mommy is never far away!
So, no need to worry, Wall Street wise men…
…until the fox comes along. Then you have to start worrying. But, what the hell, Mother Ben can always…voila…CUT RATES!!!
But what will you do when that doesn’t work any more? Then there will be even more hell to pay, no?
Aw, stop being such a killjoy! Eat, drink, and be merry, for tomorrow we shall die.
Tuesday, October 30, 2007
“IT’S OVER…OVER..”
10/30/07
Maybe Stan O’Neal didn’t blow up Merrill Lynch. Maybe he merely didn’t do his job while the kids on the trading desk lost Merrill $7.9 billion, at last count. So what does Merrill’s ever vigilant Board do? Fires O’Neal. Good. Then what does it do? Negotiates an exit (not severance…no, no, no) package for the bumbling (at best) Mr. O’Neal that could total $160 million!!!
Okay, some of that consoling going away present is the result of restricted stock and stock options (the most lucrative of which, by the way, were conveniently dated 9/24/01). But, still, $160 million? For going ahead with major merger negotiations without the consent of the Board, as if the firm were called “Stan O’Neal” rather than “Merrill Lynch,” and crippling, or conniving while others crippled, a venerable U.S. business icon? It is not a question of whether, but rather when, the Merrill Board had taken leave of its senses.
This post is not designed so much to lambaste Merrill. I’m not a Merrill shareholder, and if the Merrill board wants to betray its shareholders and make a laughingstock out of itself, that is the problem of the Merrill shareholders. I bring up the case of Mr. O’Neal to point out that this is yet another example of how far we have strayed from the free enterprise system that made this country the economic juggernaut it once was.
Free enterprise, you see, includes the possibility of failure. This tempers wild risk taking and counsels prudence. Not excessive prudence, but measured risk taking. But now as capitalism is being replaced with corporatism, there is no accountability. There is no price to pay for failure. There is no reckoning for taking wild hindquartered risks with other people’s money. There is no way to lose once one finds himself in the corporate club.
This used to be a country of innovators and people who took risks fully mindful that there would be a price to be paid for failure and willing to pay that price in order to get rich. It also used to be composed of people with morals and principles, people who could think, read, and reason. Now we have an economy run by corporate titans who know nothing of personal risk, who are already rich and seek only to get richer by gambling with other people’s money, and have no sense of accountability. Capitalism, free markets, and accountability are being replaced with corporatism, tilted playing fields, and buck-passing. Meanwhile, the citizenry laughs and consoles itself with tacky trinkets, cotton candy for the mind, and endless self-congratulation. It injects its collective brain and soul with healthy doses of novocain while indulging in one of the classic definitions of decadence: spending money it doesn’t have on things it doesn’t need, that, indeed, contain the seeds of its destruction. The citizenry is thoroughly anesthetized while being sodomized by the forces that are steering our economy and society toward ruin.
It is indeed over. This is a hopelessly decadent society and economy living through its final death throes. The good news is that Marcus Tullius Cicero, one of the Pontificator’s idols, warned of the decadence of Roman society even before the Republic was thrown over the side for the Empire. It took almost another 500 years for Rome to rot from within. Further, the last 100 or so years of this decay were, by and large, thoroughly enjoyable. Squandering the stored up treasures of one’s forbearers can be quite pleasurable for those doing the squandering, provided they have no sense of history, no sense of responsibility, no principles, no consciences, and no genuine concern for the generations that will follow. So the present American society may be in for a hundred year party. Whoopee!!! Or not. Things move much more quickly than they did 2000 years ago.
Maybe Stan O’Neal didn’t blow up Merrill Lynch. Maybe he merely didn’t do his job while the kids on the trading desk lost Merrill $7.9 billion, at last count. So what does Merrill’s ever vigilant Board do? Fires O’Neal. Good. Then what does it do? Negotiates an exit (not severance…no, no, no) package for the bumbling (at best) Mr. O’Neal that could total $160 million!!!
Okay, some of that consoling going away present is the result of restricted stock and stock options (the most lucrative of which, by the way, were conveniently dated 9/24/01). But, still, $160 million? For going ahead with major merger negotiations without the consent of the Board, as if the firm were called “Stan O’Neal” rather than “Merrill Lynch,” and crippling, or conniving while others crippled, a venerable U.S. business icon? It is not a question of whether, but rather when, the Merrill Board had taken leave of its senses.
This post is not designed so much to lambaste Merrill. I’m not a Merrill shareholder, and if the Merrill board wants to betray its shareholders and make a laughingstock out of itself, that is the problem of the Merrill shareholders. I bring up the case of Mr. O’Neal to point out that this is yet another example of how far we have strayed from the free enterprise system that made this country the economic juggernaut it once was.
Free enterprise, you see, includes the possibility of failure. This tempers wild risk taking and counsels prudence. Not excessive prudence, but measured risk taking. But now as capitalism is being replaced with corporatism, there is no accountability. There is no price to pay for failure. There is no reckoning for taking wild hindquartered risks with other people’s money. There is no way to lose once one finds himself in the corporate club.
This used to be a country of innovators and people who took risks fully mindful that there would be a price to be paid for failure and willing to pay that price in order to get rich. It also used to be composed of people with morals and principles, people who could think, read, and reason. Now we have an economy run by corporate titans who know nothing of personal risk, who are already rich and seek only to get richer by gambling with other people’s money, and have no sense of accountability. Capitalism, free markets, and accountability are being replaced with corporatism, tilted playing fields, and buck-passing. Meanwhile, the citizenry laughs and consoles itself with tacky trinkets, cotton candy for the mind, and endless self-congratulation. It injects its collective brain and soul with healthy doses of novocain while indulging in one of the classic definitions of decadence: spending money it doesn’t have on things it doesn’t need, that, indeed, contain the seeds of its destruction. The citizenry is thoroughly anesthetized while being sodomized by the forces that are steering our economy and society toward ruin.
It is indeed over. This is a hopelessly decadent society and economy living through its final death throes. The good news is that Marcus Tullius Cicero, one of the Pontificator’s idols, warned of the decadence of Roman society even before the Republic was thrown over the side for the Empire. It took almost another 500 years for Rome to rot from within. Further, the last 100 or so years of this decay were, by and large, thoroughly enjoyable. Squandering the stored up treasures of one’s forbearers can be quite pleasurable for those doing the squandering, provided they have no sense of history, no sense of responsibility, no principles, no consciences, and no genuine concern for the generations that will follow. So the present American society may be in for a hundred year party. Whoopee!!! Or not. Things move much more quickly than they did 2000 years ago.
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