Sunday, August 30, 2009
The last time I spoke with Dominick, with whom I had an unevenly textured friendship going back almost forty years, was in June, perhaps nine weeks before he died. My publisher was pressing me to seek a blurb from Dominick, despite my admonitions that he was very sick, was in fact in Germany receiving treatment for his cancer, and I reluctantly sent him bound galleys. That would have been in May. I came home one day and Dominick - I never called him "Nick" any more than he would have called me "Mike" - was on my voicemail. He sounded worse than terrible. He couldn't do the blurb, just didn't have the strength, in fact, he said, "I think this may be it." I called him back immediately and got his voicemail. I left a message saying for God's sakes, all that matters is for you to get better, you must use every scintilla of energy for yourself. He called back a few minutes later; we chatted briefly; I told him I was praying for him.
The way we met was funny. It would have been around 1968-69, and I and a friend were on our way to Los Angeles for a weekend of fun and frolic. To make the flight pass more slowly, we had ingested some cookies baked in an upstate ashram that had a high cannabis content. By the time our flight was abeam Pittsburgh, we really no longer had need of an airplane. A bit later, it was suggested that he top off our exhilaration with a toke in the loo (we were upstairs in a 747.) The restroom door was locked when we got there, but a minute later it clicked open, and in a scene reminiscent of the Wizard of Oz, there was an enormous gust of marijuana snoke with a small figure in the middle. It was Dominick. We urged him to try what we had, and the three of us squeezed back into the small cabine and enjoyed a jolly puff.
As I say, ours was an uneven relationship. There was a bit of professional envy mixed in there, probably - make that certainly - more on my side than his. I didn't think much of his novels, and the world he wrote about for Vanity Fair didn't interest me. But I was also happy for him: he got the life and recognition that he craved, and he won the devoted admiration of thousands of fans and the deference of headwaiters. I think that when someone gets what they want, and get it more or less honestly, it's cause for a round of applause, even though it might not be what you want. It was a life that deserved a better ending.
Thursday, August 20, 2009
I'm in my ninth year as Medicare user, and I have nothing but satisfaction to show for it. I'm not alone. Even louder than the anti-government babble is the theme, "But don't touch my Medicare!" I've had two knees replaced on Medicare, and various other procedures. It works, and I have no sense that my doctors are gaming the system, even those who don't take Medicare but will do and submit the paperwork (not the same as those who've opted out of the system.) I can't understand why the principal thrust of health-care reform, which as it's now being argued looks to me like an absolutely unresolvable Gordian knot, with the interests of the impecunious being notionally served by the bought-off, hasn't focused on extending Medicare to the uninsured, possibly working backward by age groups (extend the program to people over 55, then 45-55 and so on.)
(Added later): The head of the Mayo Clinic checks in here.
And in counterpoint, this.
Wednesday, August 19, 2009
Tuesday, August 18, 2009
Monday, August 17, 2009
Thursday, August 13, 2009
For comparison, consider an illustrative family of three in which the father earns $30,000 as an independent contractor for a small plumbing company and the mother earns $25,000 from a small retailer. Neither small business provides health benefits. The couple has a daughter in second grade at the local public school and pays $100 a week for child care after school and during the summer. The family lives in a modest home and pays $1,000 a month in rent and $250 in utilities. It owes $2,312 in federal income taxes, $6,502 in Social Security and Medicare taxes, and $1,350 in state income taxes. It has two cars with payments of $300 a month each, and pays $2,000 a year in car insurance and $1,000 a year for gasoline. It spends $150 a week on groceries. The couple has avoided accruing any credit card debt, but they have no saving for retirement and no life insurance…
Right now, the federal government pays $14,777 to provide health insurance for each of Goldman Sachs’s managing directors and pays nothing to provide health insurance for this middle-income family. The Administration and Congress face a clear choice: can we modestly reduce the extremely generous government subsidies provided to the Goldman bankers and others similarly situated to help pay for a subsidy worth a fraction of that amount to families of modest means?
From the Center on Budget and Policy Priorities
And I like this.
Wednesday, August 12, 2009
"The president has a problem. For, despite a great election victory, Mr. Obama, it becomes ever clearer, knows little about Americans. He knows the crowds—he is at home with those. He is a stranger to the country’s heart and character."
And this strikes me as insightful and important.
And what have some of us been arguing all along, especially with regard to Lehman?
Tuesday, August 11, 2009
This is also excellent.
Running through some notes, I find this statement by the President to Jim Lehrer (July 21,2009):
And so our job is to -- with the resources that we've got -- try to maximize the help that we're getting to Main Street and to try to pressure Wall Street to do its part in making sure that credit is available so that businesses can start picking up again.
As my young texting friends would write: hahaha
Monday, August 10, 2009
Among my wiser friends, the consensus is that the credit crisis, if not strictly speaking over, is at least contained. I agree, much as I hate the fact that the containment has been accomplished with a methodolgy that allowed Goldman Sachs to game the program in way both contemptible and contemptuous. And I have this caveat: if the credit crisis has meaningfully abated, it is on the buy side only, on the wholesale, or lending, side of the equation. On the sales end, where people borrow, a combination of shock and avarice still holds sway. Foreclosures continue. credit card horror stories abound.
Apart from the bottom line, which I suppose is all that counts, it has not been a good fortnight for Goldman. First, Blankfein's memo to the troops, in which he sounds like Polonius ("rich, but not gaudy..."), is leaked. Then Mrs. Blankfein behaved as such people inevitably do, completely ignoring her husband's admonitions - the pressures brought on by wealth can be psychologically as irresistible as the exactions of poverty - and threw her gilded weight around at a Hamptons charity do. Next, GS president Gary Cohn publicly asserts that the frm was never in real danger, and holds fast to that point even as damage control rages all about him. This raises the interesting question as to what exactly was GS's position last fall? What exactly was represented to Paulson, Bernanke, Geithner etc. ? Was the decision to become a bank, take TARP money and gain access to the discount/guarantee funding pool, largely opportunistic, as I suspect, or a function of desperate need? what about the AIG contracts? Were they hedged, as Goldman now says, or were they not? if the former, why were they paid off by the taxpayer? I think we need to know; I think we can know. There has to be a paper trail. And, by the way, what is Goldman now? How long can it be a bank, when its banking functions are purely ceremonial? With TARP repaid, and Federal guarantees off the table, is it still finding ways to avail itself of low-cost taxpayer money? What about its "excess reserves"?
Finally, there's Sunday's uproar over Paulson's communications with his old firm, which has the conspiracy-theory beagles in full cry. This will need looking into.
Character, they say, is destiny. Where there's smoke, there's fire. I think Goldman was, is now and ever will be a firm of liars. That is to say, a firm that regards truth as fungible and flexible. I except a brief "Camelot" period when the firm was presided over by John Weinberg, but even then, behind the scrim of Weinberg's probity, the moral descendants of Gus Levy were busy laying the groundwork for the great future to come, a future only realizable if Goldman could achieve what it palpably has: topput in place a web of connections, overt and under the table, policy inputs and information sources that permit it to be on all sides of every deal, every regulatory initiative, every subsidy. When I imagine GS's "public face," I see a hydra-like creature whose multiple brainstems support faces whose features are a combination of Janus, the two-faced deity, and Alfred E. Newman, of "What, me worry?" fame. Nice work if you can get it.
Friday, August 7, 2009
On another subject, another friend, the Vanity Fair writer Vicky Ward, has a post on her Facebook page (when I write a phrase like that, I feel like that old Flanders and Swann song that went something like "We're ever so very contemporary at number 7B") that reads like a preemptive strike. Vicky's writing a book on Lehman, and reading between the lines on her comments on what others have written and published, I think she'll be giving us the Paulson Version. I've advised her to tread carefully.
Thursday, August 6, 2009
The other side of the debate is articulated by Heidi N.Moore on Twitter passim. (@moorehn).
The odd part is that the "wasn't in straits" argument is based on statements coming from within GS. So was TARP forced on them or not? Knowing something of Goldman's moral history and traditions, and the firm's almost supernatural ability to plumb for and cost out regulatory loopholes and preferences, my money's on the "not in trouble" side. Taking TARP money opened up the discount window without obliging GS to undertake bothersome conventional banking practices. If you factor in what appear to be celestial returns on capital since last fall, the blended cost of TARP plus Fed/FDIC "free money" looks quite bearable. Same for the Buffett deal, which also put America's beloved financier, even if the largest stockholder of one of the principal enablers of "financial weapons of mass destruction" (Moody's), in the GS camp. It'll be interesting to see how WB deals with the GS investment in his next letter to stockholders. In the last one, he barely mentioned Moody's.
Since highly-placed people at GS now deny the firm was "near death" (see here) the government agencies involved with GS at the time will presumably come forward to confirm or deny "the Goldman Version." This should be a centerpiece of any investigation of the bailout. Paulson should be subpoenaed.
Wednesday, August 5, 2009
Litton spawned what in the 1960s became "the conglomerate craze." The Litton model bred a host of followers and imitators. Inevitably, everyone started to reach, and high prices began to be paid for businesses in intractable markets or with intractable production or services problems. On Wall Street, we loved it. The money to be made was unreal: fees for "expertising" a takeover, fees for followup underwritings and debt placements etc. etc. A prize example was Walter Kidde Co.'s acquisition of United States Lines, a marriage made in hell since the moment it was suggested to me in the dormy house at Pine Valley. A rubric "intercontinental intermodal transportation" - meaning containers - was coined and away we went. What mattered, and only mattered, was that a deal could somehow be done. The fee was the sole object. Wall Street and America had, so to speak, parted ways. Or perhaps Wall Street was now in touch with an aspect of the American character, if there is such a thing, that had been suppressed by the patriotic, one-for-all fervor unleashed by World War II and its Korean stepchild.
By the end of the decade, the deals were getting crazier and crazier, and were being financed mainly by debt - to the extent that the Fed finally came up to the Street, called in the hot-shot bankers and decreed "game over!" Banks were to stop making "non-productive loans," and to get the point across on the corporate side, interest on such loans, mainly for takeovers, would no longer be deductible for tax purposes.
At about that time, say 1970, I committed the sin that I think finished my career at Lehman Brothers as much as any other, including the quarrel with Daryll F. Zanuck that got me kicked off the board of Twentieth Century-Fox. I got a call from a banking client, the CEO of an old-line, profitable New Orleans shipping company called Lykes Brothers. He had been talked by a woman in New York (the less said about her the better) into considering a bid for Jones & Laughlin, the famous steelmaker then going slowly and steadily broke in Pennsylvania and Ohio. He had investigated the situation and convinced himself that there commercial and financial virtues hidden in J&L that he alone saw and that he alone could trade on to revuild the steelmaker into a glowing temple on the hill. He wanted to make a bid. Would we handle it for him? I said I'd like to think it over and call him back.
I thought it over, and I called him back - to tell him that, much as we cherished his business, this was one we would sit out. I could see only bankruptcy, the disemployment of thousands, the ruin of communities: disgrace (a little-regarded outcome in American business and non-existent n Wall Street) for all concerned. I had no wish to involve my firm in such a situation.
You guess the result. He went to another partner; Lehman did the deal and earned a bunch of nice fees, and in short order all the dire outcomes I had predicted came to pass. J&L and Lykes went bust. The demographic carnage in the Rust Belt was something to see. I fell into disfavor at One William Street. And so it goes.
Wall Street cares nothing for the economic state of the nation at large. The recent rally and the profits in the banks tell us that. Still, it was a terrible lesson for an idealistic young man to have had to digest just at the cusp of middle-age, as I was in 1970.
Tuesday, August 4, 2009
Incidentally: some years ago, in a talk at some club, I predicted that the curse of the computerization of Wall Street would be the enabling of profitable trading of ridiculously small fractions of money. "Flash trading"? "Dark Pools?" It has come to pass.
What about a national sales tax, say 2%, on online purchases? It makes no sense that if I buy a classical CD from Arkiv, I pay NY sales tax, whereas if I buy the exact same disc from Amazon, I don't. Makes no sense - and offends my sense of equity. Half the tax collected could be ratably rebated to the states.
Corporate dividend payments should be deductible at the source. This would encourage distributions, keep the heat on managers and to some extent offset the cost of taxing benefit contributions.
Individual taxes, both on income (of any type) and capital gains, need to be indexed to reality. Or, as my mantra puts it, only tax AS rich what IS rich, on a sliding scale that begins low - at, say, $50,000 and moves upward in increments to a top bracket of, say, 50% on income in excess of $5 million and gains in excess of $50,000,000.
Monday, August 3, 2009
I like the way a team of writers recently put it in Der Spiegel:
"The taxpayer is paying for the chips in the casino," the head of the German operations of an international investment bank says quite openly, but anonymously nevertheless. "It doesn't get any better." The government, he says, provided guarantees for banks like Munich's Hypo Real Estate, whose securities are now being traded on the market at a huge discount. Investment banks, for their part, have bought the securities with money they borrowed from central banks at ridiculously low rates.
"The biggest beneficiary of the crisis has been US investment bank Goldman Sachs, which posted record earnings of $13.8 billion (€9.7 billion) in the second quarter. Its traders used money from the US government and the Federal Reserve Bank to speculate, behaving as if the bank were a gigantic hedge fund. Profits from proprietary trading almost doubled over the previous year, while earnings rose by a whopping 186 percent in the bank's bond, commodities and foreign currency speculation businesses. And Goldman CEO Lloyd Blankfein's appetite for risk is still growing. Value at risk (VaR), a measure of the risk of loss on a single day of trading, rose to $245 million -- the highest VaR in the bank's history."
To me, this kind of behavior with respect to measures designed to open up the credit spigots is inexcusable.