"What matter who's speaking, someone said, what matter who's speaking."
Friday, October 31, 2008
Mr. Secretary, this analysis is not rocket science. Just twenty days before Goldman announced that it would “accept” Treasury’s investment, Warren Buffett invested $5 billion into Goldman Sachs and acquired the very same type of security – preferred stock – with the very same form of “upside” – warrants to purchase common stock. For some reason, however, per dollar invested, Mr. Buffett received at least seven and perhaps up to fourteen times more warrants than Treasury did and his warrants have more favorable terms. In addition, Mr. Buffett’s preferred stock has a higher dividend rate and can only be bought away from him at a premium, while Treasury’s investment of taxpayers’ money pays a lower dividend and can be repurchased at par.
Now I know that you have a lot on your plate, but I am sure that someone at Treasury saw the terms of Buffett’s investment. In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal – 50% invested and 50% as a gift – is quite consistent with the Republican version of the “spread-the-wealth-around” philosophy that seems so much in vogue.
If the result of our analysis is applied to the deals that you made at the other eight institutions – which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return – you paid $125 billion for securities for which a disinterested party would have paid $62.5 billion. This means that you gifted the other $62.5 billion to the shareholders of these nine institutions.
Bulls, he writes, are what someone else might call zealously open to the messianic other:
In rising financial markets, the world is forever new. The bull or optimist has no eyes for past or present, but only for the future, where streams of revenue play in his imagination. In falling markets, there is nothing that has not happened before. The bear or pessimist sees only the past, which imprisons the wretched financial soul in eternal circles of boom and bust and boom again.
Bulls don't read. Bears read financial history. As markets fall to bits, the bears dust off the Dutch tulip mania of 1637, the Banque Royale of 1719-20, the railway speculation of the 1840s, the great crash of 1929. Leering phantoms emerge from the historical dark, like the parade of ghostly Scottish kings in Macbeth...
(Funniest paragraph:
Ferguson's reputation is so high that if he were a stock one would short him. The very title of his book, The Ascent of Money, is a screaming sell signal, like the shoe-shine boys trading stock tips at the door to Grand Central Station in New York in 1929. In fairness, Ferguson recognises that and his pages are hot with proof-stage tyre-marks, as he goes into violent reverse to escape from under collapsing arguments. None the less, his book is very readable indeed and the television series for which it is a sort of trailer, will, I am sure, be even better.)
Naked Short: Bare Life As Fidelity To The Truth Of The Financial Event
Prodigal Sums or The Revenant Revenu - Openness to the Gift of Good Debt
and the cover story
Immaterial Wages
As wages and assets of the working class rapidly dematerialise, a Left trapped in hopeless nostalgia for crudely tangible indulgences laments the transcendance as a catastrophe, obstinately resisting incorporation into the explosion of post-human imaginary prosperity already achieving the utopian transformation our world and unraveling an infinite realm of immaterial wealth and pleasure easily accessible via iPhones
Former Federal Reserve Chairman Alan Greenspan said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.
``Yes, I found a flaw,'' Greenspan said in response to a grilling from the House Committee on Oversight and Government Reform. ``That is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.''
Matt Taibbi: You don't think the unregulated CDS market was a major factor in the current crisis? Were you watching when AIG almost went under? Were you watching the Lehman collapse?
Byron York: I think that Fannie Mae and Freddie Mac were also major factors. And I believe that many of the problems in the mortgage area can be attributed to the confluence of Democratic and Republican priorities: the Democrats' desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans' desire to achieve an "ownership society," in part by giving mortgages to people who could not afford them. Again, I believe that if you are suggesting that the financial crisis is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.
M.T.: Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme. The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable.
B.Y.: I was struck by the recent Senate testimony of James Lockhart, who is head of the Federal Housing Finance Agency, about the sheer recklessness of Fannie in recent years. Despite "repeated warnings about credit risk," Lockhart testified, Fannie became more reckless in 2006 and 2007 than they had been in the scandal-ridden tenure of Franklin Raines (who departed in 2004). In 2005, Lockhart said, 14 percent of Fannie's new business was in risky loans. In the first half of 2007, it was 33 percent. So something terribly wrong was going on there, and it became a significant part of the present problem.
M.T.: What a surprise that you mention Franklin Raines. Do you even know how a CDS works? Can you explain your conception of how these derivatives work? Because I get the feeling you don't understand. Or do you actually think that it was a few tiny homeowner defaults that sank gigantic companies like AIG and Lehman and Bear Stearns? Explain to me how these default swaps work, I'm interested to hear.
Because what we're talking about here is the difference between one homeowner defaulting and forty, four hundred, four thousand traders betting back and forth on the viability of his loan. Which do you think has a bigger effect on the economy?
B.Y.: Are you suggesting that critics of Fannie and Freddie are talking about the default of a single homeowner?
M.T.: No. That is what you call a figure of speech. I'm saying that you're talking about individual homeowners defaulting. But these massive companies aren't going under because of individual homeowner defaults. They're going under because of the myriad derivatives trades that go on in connection with each piece of debt, whether it be a homeowner loan or a corporate bond. I'm still waiting to hear what your idea is of how these trades work. I'm guessing you've never even heard of them.
I mean really. You honestly think a company like AIG tanks because a bunch of minorities couldn't pay off their mortgages?
B.Y.: When you refer to "Phil Gramm's Commodities Future Modernization Act," are you referring to S.3283, co-sponsored by Gramm, along with Senators Tom Harkin and Tim Johnson?
M.T.: In point of fact I'm talking about the 262-page amendment Gramm tacked on to that bill that deregulated the trade of credit default swaps.
Tick tick tick. Hilarious sitting here while you frantically search the Internet to learn about the cause of the financial crisis — in the middle of a live chat interview.
B.Y.: Look, you can keep trying to make this a specifically partisan and specifically Gramm-McCain thing, but it simply isn't. We've gone on for fifteen minutes longer than scheduled, and that's enough. Thanks.
M.T.: Thanks. Note, folks, that the esteemed representative of the New Republic has no idea what the hell a credit default swap is. But he sure knows what a minority homeowner looks like.
RICHMOND, Va. (AP) - Republican vice presidential candidate Sarah Palin mistook some of her own fans for hecklers Monday at a rally that drew thousands.
A massive crowd of at least 20,000 spread across the parking lot of Richmond International Raceway, and scores of people on the outer periphery more than 100 yards from the stage could not hear.
"Louder! Louder!" they began chanting, and the cry spread across the crowd to Palin's left. Some pointed skyward, urging that the volume be increased.
Palin stopped her remarks briefly and looked toward the commotion.
"I hope those protesters have the courage and honor to give veterans thanks for their right to protest," she said.
Paul Krugman being interviewed on Bloomberg over the weekend; at around 7:30 on the stream he's asked about GM and is this the kind of situation where the government can't let a company like that go under? He says well, you know there is this big worry about when the "too big to fail" doctrine starts to spread to everything, then we're talking about nationalising the, seizing the, seizing the means of production.
I asked one investment banker what might cause half of North America’s top corporations to default. No ordinary economic recession or natural disaster short of an asteroid strike could do it: no hurricane, for example, and not even ‘the big one’, a catastrophic earthquake devastating California. All he could think of was ‘a revolutionary Marxist government in Washington’. That’s not a likely scenario, yet the cost of insuring against it had shot up ten-fold.
Two weeks after persuading Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the Bush administration has put that idea aside in favor of a new approach that would have the government inject capital directly into the nation’s banks — in effect, partially nationalizing the industry.
Having to report this - they can't not report it, of course, the headline of the year - the NYTimes doesn't bother to try to make sense of it, just re-runs the "incompetence and ideology" tale, or rather simply gestures to it exhaustedly, for the umpteenth time.
The cost of the Wall Street (1987) negative was around $15 million; it grossed $45million in the initial US box office release.
Gordon Gekko is superrich but not really part of the establishment. A figure of intelligent cynicism, abundance and personal rather than institutional power. ("Makes twenty times what Dave Winfield makes in a year.") Will and energy. Culture too – he possesses a refined aesthetic sense. The screenwriter claimed to have based Gekko’s style of pontificating on director Oliver Stone.
The impression of Gekko’s rogue status, playing a system ‘subversively’ from within, expert in it but adversarial with the regard to its rules (the spirit of competition in a pure form), is not only conveyed by his explicit lawlessness, which we might be free to assume the norm at his wealth level, but underscored in various oblique ways, so that the audience is prevented from identifying him as an embodiment of the ruling class, or even of the financial industry, or, despite the film’s title, of “Wall Street”. He is a disruptive element within it, necessarily created by it but not a microcosm. Most effective in creating this apartness, at least for a New York audience, we never see Gekko in his own real home in NYC: placing that home in any swank building in Manhattan would fix him too firmly and specifically in a network, a social setting, a structure of unassailable power and legitimacy. He is seen on the move, in limos, in restaurants, and in his rented office in a tower, like a Renaissance condottiere, and finally confronting in single combat his insubordinate protégé on a misty green field in Central Park. When we see him "domestically", it is only at his beach house in Montauk, a costly, luxurious but pale, impermanent haunt, not a residence, poised on an expanse of empty sand at the edge of the foaming, heaving, wintry Atlantic, wearing a bathrobe. He's a pirate king. Or Monte Cristo. Playing Shogun, wise master to his favoured apprentice "poor, smart and hungry - and no feelings." Of all Hollywood’s finance/corporate themed films, Wall Street is intended as the most didactic, the most unforgiving indictment, but it is the most in love with its heavy, tempter, bearer of evil forces. The figure of ruthless finance capital, unproductive rampaging speculative capital, doubles as the phantasy figure of upward mobility in meritocratic America, land of opportunity, and even, whisperingly, as a image of revolutionary potential. His fall enacts thus both a consoling phantasy punishment of crime (the comeuppance of insatiable parasitic destructive speculative capital) and, less overtly but in some ways more intensely, a registration of victorious Thermidor, of successful Reaction, the end of the revolutionary era and of revolutionary possibilities, the acknowledgement of the Reaganite immiseration of the working class and middle class, rendering this figure of the self made mogul, to which they aspire, false and thus requiring disposal and repudiation. Bud will not repeat Gekko’s (streetwise unconventional) trajectory, indeed Bud’s failure to do so will take Gekko, the figure of the American dream of seized opportunity, down with him as the film itself undermines the promise he represents (ethically, practically, politically), even while it poses, itself, with its auteur, as that promise confirmed and vindicated. This composite that is Gekko is thus additionally used as the mouthpiece for the director and screenwriter’s direct address to the audience, from ‘the dark side’ of self congratulatory ‘success’, which doubles as the Master’s counsel to his apprentice, but allows the filmmakers not only to conceal their complex attraction to the cruel but charismatic pirate king they have fashioned as their dark double, but to disavow and obscure the applicability of his lectures to their own industry.
Telling the story of Bud’s failed effort at embourgeoisement involves telling, obliquely but significantly, the story of an enterprise, Blue Star airlines. The film raises in an indirect quasi-allegorical mode the possibility of socialism – the Fox family, the working class, becoming the owner/manager of the airline, through working class solidarity - but contains that possibility within ‘there is no alternative’ verisimilitude which requires its depiction within the generic tale of personal advancement and cross class cooperation. The corporate raider is offered as a possible resource and instrument of social change, and his capital is sought within the plausible story as the practical means of obtaining control over the enterprise, but this sequence also conveys, in ‘the political unconscious’, an attempt by the agent of the working class to instrumentalise all the seductive qualities his figure embodies: initiative, determination, courage, the bold, rule-changing, ruthless revolutionary energy needed to accomplish this transformation, to “turn the airline around” and place it in the hands of “the heir of the working class”. How this turning around is explicitly envisioned and depicted (just expanding the enterprise and making it more profitable within the given framework) does not limit the possibilities of “turning around” and transformation the story implicitly raises (only to reject), precisely because of the presence of Gekko as a force of unbridled self will, capable of remaking the world, which introduces alongside the story of Blue Star’s trade unions and their pursuit of their interests the explosive element of human inventiveness and self interest, the possibility of something unexpected being brought about by people making their own history. Gekko’s indifference to customary constraints contrasts with the union representative’s mode of negotiation, but putting them in the same room, in Bud’s apartment, poses at least the question to the audience of what would happen were some kind of combination of qualities created, were the union representatives to possess the ferocious determination to prevail, to use powers falling to him by circumstance to transform reality to his advantage, that Gekko possesses and embodies. “Greed is right”: in his odd mix of social Darwinist and populist rhetoric is conjured the spectre of the collective greed of the working class which expresses itself – twisted and stifled by individualism and bourgeois ideology - in Bud’s ambition, greed for pleasure, leisure, justice and liberty, greed for utopia, transforming society, bringing about communism. The vision is conjured, already deformed and hamstrung by the dominant ideology, to be further mangled and repudiated by narrative. Yet its images, the vision, (of wealth, leisure, freedom, abundance, power, of the life for which Bud and not only Bud but the audience is greedy) however contorted, remain the most seductive. The film makes a tremendous effort against its own impulses to moralise about the lifestyle Bud desires and thus to trivialise the benefits it offers (liberty, leisure, plenty, pleasure) and especially to trivialise and rebuke his desire to escape a life of wage slavery in the cubicle by any means necessary. Hammacher Schlemmer gadgets producing meals that look a lot better than they taste, garish exhibitionist over-decoration of his condo, a lovelife divided been a call girl and a shallow woman he cannot fully possess, neglect of his downscale friends and cynical use of his upscale ones, disrespect for his father. But all this is displayed as advertisement as well, the loving Tom Wolfe exactitude of stereotype and props easily drowning out the overt disapproval and fun-poking. Selling a lifestyle and preaching against it at the same time, the commodified critique of “capitalism as its finest” – the “illusion” of value “become real” (in the aesthetic object, an abstract canvas) - indirectly absolves itself as it advertises itself, encloses critique of itself and extracts surplus value.
The (false) naïve faith and hope the film, with Bud and the union representatives, places in the heroic individualist capitalist energy (recognised and distrusted as despotic, amoral and fascistic by Carl Fox) is quickly betrayed – Gekko’s ‘revolutionary’ energy is revealed as necessarily destructive and selfish. With this fusion of lawless, inventive self-determination to heartless individualism, the film performs its liberal duties of repudiation of ‘extremism’ and revolution in the guise of mature dissent. Bud “saves” Blue Star in the most conservative, non-transformative fashion: he saves it as a capitalist enterprise, saves the workers’ ‘jobs’, by transferring his loyalty from Gekko the pirate who does not hesitate to destroy capitalist enterprises to realise his private/personal utopia, to the white knight, in this case literally a knighted Englishman, whose practise of corporate raiding is more ‘honourable’, cautious, stability-preserving and paternalist. (He transfers his allegiance from the capitalist to capitalism.) The alternatives between which the protagonist must choose are familiar contradictions: Gekko’s form of destruction of capitalist enterprises (competition) and Wildman’s preservation of them (class war). The narrative offers preservation of capitalist enterprises as clearly preferable to their obliteration but only by, ever so faintly awkwardly, latching the obliteration of production itself to the obliteration of capitalist ownership and exploitation. Another type of transformation is hinted at, though overwhelmed by the only two alternatives (‘restructuring’ with cheaper labour or asset stripping). The alternative to Gekko’s creative destruction, which fuses a vision of finance capital with an allegorical suggestion of the revolutionary abolition of capitalism with the effect of discrediting the latter while seeming to chide the former, is a kind of fantasy feudalism-in-capitalism and a recommendation of petty bourgeois reformism which holds out the promise that the working class can manoeuvre for its own survival between capitalist competitors; the spirit and structural imperatives of competition it turns out are not only the danger – when ‘taken to extremes’ –in capitalism but the solution, the stabilising force which makes capitalism finally the best of all possible arrangements and allows Bud to conclude ‘there is justice in the world’. But this declaration is ironic – that justice Bud realises through the mechanism of competition is revealed as the rigged justice of a system which blocks his upward mobility. - “Did somebody die?” - “Yeah”. The petty bourgeois myth of the ladder died. The working class whose standard of living and political power rises generationally died. The pirate energy whose potential is revolutionary if ever it would be fused with the working class died. The possibility of Utopia died. The audience is set up to be relieved that it is the phantasy of piratical upward mobility that has died, because led to fear it is Carl Fox who has died. But Carl Fox survives, is vindicated, the working class soldiering on, with dignity, the bearer of timeless values. The moral approval of the ‘culture’ and character of wage workers is offered by the dissident capitalist as consolation and compensation for the permanent inescapability of the condition of unfreedom and drudgery, the registration of the abolition of all utopian possibilities, the chastisement of the persistent ambition as inescapably criminal, depraved and doomed to fail. Like Nietzsche, but with different commitments, Wall Street forces a false identification of the desire for revolution/liberation with fascistic ruthless individualist supremacism and confuses and then replaces the championing of that communist impulse, humanity’s unquenchable desire for liberation, leisure, pleasure and plenty, (rooting for Bud), with hypocritical self congratulatory bourgeois admiration for the moral superiority of those whose desire it daily thwarts and obstructs (for their own good, to spare them the temptations and corruption the bourgeois himself must endure as best he can).
Glengarry Glen Ross, (1989) based on Mamet's 1984 stage play, is set in an environment of real estate sales. The film's negative cost $12.5 million. Domestic box office was about $10 million.
Mamet’s vision is routinely deemed more sophisticated than the pop culture product of Stone and the like simply because it is cruder, misanthropic, unpleasant to consume. Sermons mustn’t be uplifting, consoling and gratifying when the congregation is so depraved.
Other People's Money (1991) was also adapted from a stage play. By 1991 the theme is technological obsolescence and postmodernisation. (The company is saved by ‘populist’ technological/social advances – the metal wire being replaced by fibre optics is newly needed for automobile airbags.)
Trading Places (1983), a phantasy of the efficient market, when the free market by its invisible hand would reveal true worth so long as access to competition in the free market was not blocked by obsolete extra-market structures of hierarchy; the market envisioned as the lever of meritocratic upward mobility and guarantor of equality and ultimate justice:
