Sunday, September 28, 2008



Greed has now become the preferred explanation for the Wall Street debacle. John McCain and much of Congress have joined in the chorus. There is no doubt that there are huge disparities in wages and bonuses between those working on Wall Street and those working elsewhere, and many have said to me in recent years that the compensation and profits made from hedge funds and investment banks are "crazy," "obscene," "unfair," etc. That has been true for some time. But why is this being called "greed"? And why now?

Standing back from the events of the last month makes it clear how many factors contributed to the crisis: the mortgage lenders who saw only more business for themselves, the investment banks who packaged the securitized debt, the investment advisors following the herd, the regulators who stayed on the sidelines, and, of course, the poor suckers who took out loans they couldn't pay. So we need someone to take the hit.

But it is not just the complexity of the problem that leads to this search for oversimplified explanation. We don't want to know how flawed and how risky our financial system is -- at the point when "free markets" and triumphed and all out pensions, health plans, college funds, and savings are invested. We want to believe that we should be secure. And if it turns out that we are not as secure as we thought, that risk has not been managed down to a negligible factor, someone must be to blame.

Gordon Gekko is famous for suggesting that greed is good. This is our revenge. Not only is greed not good, he himself and his ilk are bad. They let us down.

Thursday, September 11, 2008

Health Insurance for Wall Street

Lehman Brothers appears to be in its final throes, and the big question on front pages now is whether the government will intervene. A few days ago, of course, it rescued Freddie Mac and Fannie Mae – though the drastic treatment the mortgage giants got will compromise their quality of life for years to come. Six months ago, Baer Stearns went through a comparable life-saving operation. There are reports of other financial firms setting off red alerts.


At a time when markets are so interrelated and so many other institutions and individual investors have so much at stake, this may be the right thing to do. But more and more it does begin to seem that Wall Street is covered by a large and loose insurance policy. Some firms are just too big to be allowed to fail.

The mind thinks by analogy and metaphor, so here is one that comes to mind: Frannie Lou (I made the name up) lost her job at the moment she was diagnosed with cancer. As she was the family’s sole breadwinner, her 3 children face a bleak future. Food stamps will feed them, but she is behind on her mortgage, owes money on her car, and is scrambling to get child care. Without insurance, what will they do?

My example of Frannie Lou may not be the best analogy, but it is good enough to suggest how ordinary people are likely to perceive what is happening on Wall Street. Obviously, the collapse of Lehman Brothers would throw its 24,000 employees out of work, while Frannie Lou’s catastrophe affects only 4 or 5; the aftershocks of a Lehman collapse might destabilize our financial markets, while the collapse of Frannie Lou’s world would agitate and depress only her family and friends, and perhaps some others who would see in her fate an image of their own. To be sure, the employees and shareholders of Lehman will endure substantial losses, but the ordinary citizen, perceiving such an analogy, might well conclude cynically that government is only about the big and powerful – if our ordinary citizen hasn’t already made up her mind about that.

But what actually is the difference? Can it be explained, and who will bother to explain it? Usually such questions are characterized as matters of PR or “spin.” But what is “insurance” anyway? And who does get to decide who or what is insured? There is substance in the questions raised by analogy.

What we don't know we know about this is that there is an active under-life to such decisions and actions. They reverberate in our minds as they are assimilated, as people try to make sense of them. And this is where our political process enters into the picture. We need our leaders to shape our thinking and guide our responses. And we need to reflect on the kinds of leaders we need. How they answer such questions will help us to decide how useful they are.

Wednesday, September 3, 2008

The Other Side of Racism


Whatever has been said -- and whatever may be said -- about Sarah Palin as McCain's choice for VP, she is not a "stranger," some one who is unfamiliar and frightening to us.

On the contrary, her small town background and small town virtues, her pettiness, her limitations, even her go-go boots, are all too familiar. We may be worried about her lack of experience. We may be embarrassed about her views. But we know who she is.

This brings up the fact that we do need to be able to idealize our leaders -- at least to some extent. We do not want them to be too foreign, but at the same time they have to be better than we are. This is the other side of racism.

Perhaps this is my McCain's "gut" urged him to choose her, the antidote to the "stranger.' But what we don't know we know about such a choice is that to trust someone we have to think they are at least a little bit better than we are.