Wall Street, 2009: Deaf, blind, and just plain dumb

In Gone with the Wind, Rhett Butler wryly notes that there is "just as much money to be made out of the wreckage of a civilization as from the upbuilding of one." Having observed the near-Roman excesses of New York's money men over the past couple of years, I might go even further and argue that the end of a civilization tends to be even more outrageously profligate than its beginning. After all, it's hard to imagine stern, conservative men like J.P. Morgan and Andrew Mellon giving in to the incredible excesses of the latest round of would-be magnates.

While tales like Stephen Schwarzman's million dollar birthday and Dick Fuld's five homes tend to capture the public's attention, these outrageous expenditures are only the tip of the iceberg. From $175 hamburgers at the Wall Street Burger Shoppe to John Thain's $1.22 million office redecoration, it has become increasingly clear that New York's financial workers have spent the last few years living in a completely alien world. What's more, they are either unable or unwilling to adapt to the changing realities of America's economy.

The thing is, the economy has fundamentally changed. The imploding real estate market and booming financial services sector, boosted by variable rate mortgages, overleveraged assets and dodgy CDOs is over, a relic of the early twenty first century. It is a part of history, much like Holland's tulip boom or England's empire. What we are left with is a massive amount of debt that needs to be dealt with, a housing market that dropped over 18% in November 2007, and a populace that is beginning to think that the best place to put its money is under the mattress.

In the midst of this, we have the selfsame John Thain rushing bonuses to Merrill Lynch's employees, presumably a reward for their good work in buying distressed mortgage assets after the market tumbled. Lest it seem like Thain is the only bad boy, we also have Citibank, another bailout poster boy, trying to buy a $50 million plane. In the midst of all of this, Wall Street paid out $18.4 billion in bonuses, the sixth largest payout in history, despite the fact that it just got finished begging Congress for money.

In a recent editorial, Adrianna Huffington compared Wall Street to Marie Antoinette, noting the financial service industry's seeming inability to recognize that the last quarter of 2008 was a complete game-changer. As Wall Street tries to regain the confidence of America's investors, it needs to begin by showing its ability to read and understand the market. After 2008's fiasco, many of us are wondering if the financial services sector could predict the onset of dusk, never mind anticipating major movements in the market. What's more, given their apparent inability to read even the most obvious harbingers of the national mood, it's pretty clear that they are not worthy stewards for our hard earned money. In other words, the mattress is looking better and better.
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