Slouching Towards Wall Street… Notes for the Week Ending Friday 4 November 2011
Remember, remember the fifth of November.
A contemporary of Guy Fawkes described him as “capable of intelligent argument as well as physical endurance, somewhat to the surprise of his enemies.” The non-movement known variously as “Occupy _____” is displaying the same mix of qualities, much to the consternation of those who ardently wish they would just go back home. A broad cross-section of business, political and media leaders are waiting smugly for winter, counting on the residents of Zuccotti Park to clear out once it gets really cold. We believe they face an updated version of Keynes’ dictum: Wall Street can remain occupied longer than your ability to ignore it can be sustained.
The chorus of media and politicians’ jeers that “they haven’t even presented a list of demands” notwithstanding, the majority of the General Assemblies have now adopted resolutions calling for the re-instatement of the Glass Steagall Act, which would divide banking proper from activities that place capital at risk and clamp the chastity belt back on the nation’s deposit taking institutions.
Thus, in the space of less than fifty-two days — with no leaders, no recording secretary, and no Robert’s Rules of Order — this group has achieved near-unanimity on a major political point. Note to scoffing politicians who dismiss the range of Occupies as feckless complainers: exactly how much has Washington accomplished lately?
Those busy pooh-poohing OWS are afraid we might notice this. In less than two months, and without an army of lawyers and lobbyists, without the guidance of Wall Street or the major political parties, the ragtag tent squatters of the various Occupations have agreed, not to dismantle democracy or kill the bankers — not even to issue a resolution denouncing greed — but that the political process that led to the undoing of Glass-Steagall was a serious error, one that needs to be reversed for the good of the country. Those who keep warning us about the dangers of OWS may want to focus more on actual news, and less on their own opinions
At the core of the Occupy movement is a determination to re-create a society that listens to the concerns of its members. In its initial stages it is inevitable that this broad inclusiveness will also attract noisy bad actors. To apply a nautical metaphor common on Wall Street, a rising tide lifts all the boats. Thus, when the Tea Party was gathering steam across the nation, isolated nut cases became the focus of endless media coverage in an effort to prove the Tea Party is full of racists. Similarly, as we wrote last week, the marginal types that have gravitated to OWS are clearly not the core of what this movement is all about. It is no more legitimate to castigate OWS for being anti-Semitic, for example, than it was to excoriate the Tea Party for racism — though clearly these movements attracted visible fringes of dangerous hangers-on. Some of our correspondents object to our saying anti-Semitism does not lie at the heart of OWS. For evidence they point to the ubiquitous YouTube of a hoarse-voiced man in an undershirt and baseball cap, holding a large sign that says “Nazi Bankers” and shouting to the crowd “go Google ‘Jews Run The World’!” We might allay our correspondents’ fears with a quote from Libertarian figurehead Rand Paul who, when asked whether he condoned racism, replied “that’s one of the things freedom requires — that we allow people to be boorish and uncivilized, but that doesn’t mean we approve of it.” Also note that one million hits on YouTube does not translate into one million men holding inflammatory signs, though in an era where we are so quick to mistake our own prejudices for facts we see how easy a mental leap this is for many.
Those bothered by the buoyancy of nut jobs and bad actors should recall the corollary adage: when the tide goes out, you see who was swimming naked. We are not defending the anti-Semites and other hate mongers who have latched onto OWS, but we think of them as Left-wing Michele Bachmanns. Scary and possibly dangerous. Highly visible, but nonetheless marginal, and likely to be neutralized through a natural process as the center solidifies.
This week’s major accomplishment in American Establishment politics was the boost to media revenues afforded by Herman Cain. The revelation of allegations of sexual conduct against Cain unleashed a torrent of media blabbedy-blah that was clearly as gratifying to its purveyors as raw meat to a mastiff. Not only did every news report lead off with reports of the vague allegations — and of Cain’s equally vague denials — back to back to back politicommercial shows screeched about the National Restaurant Association (“the Other NRA”) insisting that they release the allegations against Cain.
These strident and generally insulting programs — many of which unbelievably run for an entire hour every weeknight — are the demon spawn of Ted Turner’s successful takeover of television. Turner took on the established networks, largely thanks to the courageous, outlandish Peter Arnett, who doggedly refused to be embedded by US forces and reported from the streets of Baghdad during the early hours of the invasion that ultimately brought down Saddam Hussein. In an assault reminiscent of attacks on Walter Cronkite for reporting on Vietnam body counts, Congress accused Arnett and CNN of anti-American news reporting. Arnett continued to thumb his nose at the government and Ted Turner saw his ratings surge on the wings of controversy. Arnett went on to act as visiting lecturer in media studies at a host of universities around the world, and to see his journalist daughter marry former White House attorney John Yoo — he of the Torture Memorandum. Turner, meanwhile, went on to change television yet again.
Turner’s next creation was Headline News. Where CNN took Arnett’s street-level reporting and made it news in defiance of the acceptable, and largely identical, reporting of the major networks, Headline News took mere opinions and sold them as news. Turner’s mutant journalism assault on the media unleashed parasites that have taken over America’s mind. Now not only does opinion stand in for news, real news is not presented analytically. With nary a mention of the array of knock-on effects a Greek default would have on America’s banking system, sober commentators pondered what Cain’s imbroglio “means for the Republican Party,” while more strident commentators called upon the restaurant lobbying group to “do the right thing” and release Cain’s accusers from the legal agreements binding them to silence.
It is mildly amusing to think is a “revelation” to find that a male executive in a position of considerable influence may have engaged in inappropriate sexual behavior with a female subordinate. Or are we to believe it is in the national interest to hear it alleged that a politician is a scoundrel? We are also not convinced that these women actually want these incidents replayed in public — though we suspect they have been offered tidy sums for exclusive stories. This will be another exercise in which the lawyers and the media win, while transparency, the democratic process, and all other participants lose.
Weighing in on the debate over morality in government, NewScientist magazine reports on numerous recent studies of corruption (5 November, “The Underhand Ape”). The discussion proceeds from the obvious argument that avoiding corrupt behavior is evolutionarily irrational, and goes on to cite experiments in which immoral behavior rose over repeated trials with the same participants, from an initial incidence of 4% to over 45%. To the point of candidate Cain’s latest woes, researchers at Erasmus University in Rotterdam “monitored people’s brain activity while they were being primed to feel powerful, and found that areas associated with disinhibition were activated.” Translation: men in positions of power do not exploit women sexually because power increases their libido. They exploit women sexually because they are normal males, but in abnormal circumstances that unleash in them a sense of entitlement to the free exercise of their appetites.
Theoretician Camille Paglia — she describes herself as a “dissident feminist” — alienated a significant segment of mainstream feminism with her contention that rape was about sex, not power. The distinction was raised again by numerous commentators in the aftermath of l’affaire DSK — though without credit to Professor Paglia. Now that corruption and the abuses that come with power are the stuff of academic inquiry, we may hear more on this topic.
Guy Fawkes was discovered in the cellars beneath Parliament surrounded by hogsheads of gunpowder, and with a watch and a slow fuse in his hand. Soldiers of King James took him into custody and asked what he was doing lurking in the underground chamber. Fawkes immediately replied that he intended to “blow you all back to Scotland.” The bold confession is said to have earned the respect of the King for whose demise Fawkes had fervently prayed, who nonetheless ordered Fawkes’ jailers to use the full extent of their imagination and savagery on him to obtain the names of the other conspirators. Fawkes was set to hang on the fifth of November. He reportedly leapt from the tumbrel at the last instant, breaking his own neck and dying instantly. This was no doubt a wise choice in view of the options. In the England of Fawkes’ time Catholics were traditionally executed by slow hanging during which, while still alive, they would be castrated, slit open and gutted, and their entrails waved before their eyes, all to the cheering of the crowd. Their bodies would then be quartered — sometimes the victim lived through part of this process as well. Finally the severed head would be hoist aloft on the end of a pike. The entertainment relied upon the natural and desperate will of even the most miserable among us to cling to life. Thus, Fawkes’ leap saved himself much suffering, even if it deprived the crowd of their spectacle — a combination of mild horror with a wrathful appetite for vengeance and the visceral thrill we get watching someone being physically destroyed and knowing it is not us. Today we have evolved beyond this state: we have football, Grand Theft Auto and ultimate fighting round the clock on cable television.
Words can sometimes mean their opposites. Consider the word “sanction,” which means either to formally approve, or to formally punish a course of action. The English word “guy” originally was used to describe lowly types and oddly dressed persons. On 5 November children would beg for “a penny for the guy,” to raise money to create the man-sized straw effigies that were burning in the streets. Fawkes’ name became a generic term indicating disapproval of a man’s appearance.
The resurrected Guy Fawkes Day is now observed as the day on which we proclaim our liberty from the tyranny of crony capitalism, not the day when we celebrate the preservation of our form of government.
It was said of Fawkes that, by attempting to blow up the entire English government, he was “the only man ever to enter Parliament with honest intentions.” Rather than clinging to America’s dwindling influence, we would do well to ask what in our present system is worthy of being preserved.
We know you object to pavilions and palaces, and we will respect your republican fallacies.
- Gilbert & Sullivan, “The Gondoliers”
In his masterful Washington: A Life, biographer Ron Chernow describes the ruckus that kicked up when George Washington bought up tracts of land along the Potomac, then flipped them for a substantial profit when the newly-formed government chose the site to build its capital city. In the context of Chernow’s massive and meticulously constructed book the incident is mitigated by Washington’s life-long struggle with a crushing load of debt, and by the man’s Abrahamic stature as both a political and moral leader.
Still, it does appear that Washington availed himself of both information and influence to enrich himself in a quick and riskless fashion.
Imagine our surprise when, in 2009, a number of SEC staff attorneys found themselves the target of an insider trading probe. What we found notable in the story was not the revelation that a government agency that wields significant influence in the financial markets may have attracted Bad Actors to its ranks, but that the Commission itself had neither procedures nor clear policies for policing personal trading by its employees.
A report in this month’s Atlantic magazine (November, “Capitol Gains”) recounts a group of university studies that found, based on exhaustive compilations of personal stock market transactions by members of Congress going back to 1993, Senators who invested in the stock market as a group had an average return 12% better than the market. Members of the House of Representatives outperformed by 6% over the same period. Before you start loading your rifle, the article cites a separate study by two political science graduate students at Harvard that, using more comprehensive data, and over a slightly different time period, determined that members of Congress underperformed the market by about 2-3 per cent.
The significant take-away from these studies is not in the numbers. Rather it is the fact that members of Congress pretty much do what they want, free of oversight or reporting requirements. There are only vague guidelines regarding disclosure of personal investments and potential conflicts of interest. Congress, in short, does not have a compliance officer. The article mentions Lloyd Bentsen who sold his stock in a dairy processing company scant days before the Justice Department launched a probe into the company’s operations, but also makes the case that many other Congressional trades that appear suspicious turn out to be much harder to pin down once the details and sequence of events are scrutinized.
Wall Street is in an odd position. It is over-regulated, yet under-policed. The automatic transitioning between major financial institutions and the halls of power is one of the building blocks of crony capitalism. So it should strike no one as odd, for example, that with a pedigree that includes Goldman Sachs, the US Senate, and the New Jersey governorship, Jon Corzine finds himself at the helm of a fir now being investigated by the FBI for possible misappropriation of customer funds.
In our experience, when powerful folk are questioned on apparent conflicts of interest in their dealings, they often respond with a mix of indignation that one might seek to impugn them, along with condescension and a dismissive “you really don’t understand how the system works.” We read such responses in the context of the studies cited above that show people’s brains appear to shut down certain moral restraining processes the more the individuals feel empowered.
The Atlantic quotes a UCLA law professor who points out that the law does not define lawmakers as fiduciaries. “There’s at least a strong argument that congressional insider trading is not illegal,” he says. This takes us back to Norregaard’s law — named after our seventh grade history teacher — that people in power only make laws when it is to their own benefit. This was a startling piece of information and our young mind had some difficulty digesting it. Now, decades later, we are less surprised to learn that no member of Congress has ever been the subject of an insider trading probe. New York Democratic member of Congress Louise Slaughter has put forward her STOCK Act four times since 2006. The Act proposes to explicitly make insider trading by members of Congress illegal, and to require disclosure of personal trading by lawmakers. The measure has never made it to a vote.
According to at least one method of calculation — the one gaining notoriety right now — only about one percent of Americans are reported to be “wealthy.” But about half the members of Congress are reportedly millionaires, and perhaps 20% of that group have net worths in excess of ten million dollars. The democratic delusion of The Few making laws to benefit The Many is a fallacy we hope to address in depth in coming Screeds. For now, we merely observe that no one should be surprised by events at MF Global — merely as an example, and not as a specific case. Right now the body that writes the laws, that give rise to the rules and interpretations, that created the compliance manual, that requires you to report all your trades to your firm, has steadfastly refused to accept this level of oversight on itself. While the media blather on about Occupy Wall Street, no one seems to care that Washington has been occupied for years.
A core notion of the Occupy movement is the awareness that our populous is woefully under-informed about how our nation functions. We have long shared the Occupiers’ frustration at the established media that has no interest in actually educating us, at lawmakers who refuse to acknowledge the nation’s needs, and at regulators who neither care to regulate, nor know how to do the job. Until people really understand how badly things are messed up, there will be no will to change. We are a nation that prefers entertainment to news — so our news has to be entertaining, otherwise we won’t watch it at all. As was recently quipped on one of the more entertaining television programs, more people in this country can name all the Kardashian sisters than can name the Treasury Secretary and the Chairman of the Federal Reserve.
The Occupiers seem to believe, as did Socrates, that once the people of this nation understand how things really operate, sweeping changes will follow. We fervently hope we will get to test that assumption.
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