Another quarter just ended, another massive wave of layoffs at the well-known business journalism firm where I still work. This one came without much warning, unlike the layoffs that came right as 2009 began, when 25 staffers were let go. But today's was stealthy, and 50 people were let go, including some truly incredible people that I admire, trust and respect. It's very hard. It's not war, what happens in cubicle-land, but it's not pretty either, and real lives are at stake just the same.
My former boss, I'll call him Sam, was laid off today. Sam is one of the greatest financial minds I've ever known. He literally knew everything I ever asked him. And when I'd ask him for help he never made me feel bad, never belittled me. He was truly my friend, as well as my boss. Seeing him go is very tough. But when I said goodbye to him today he said he's just glad I wasn't let go, because I'm a dad.
I mean, c'mon, how much classier can one guy get? Sam was always gruff, but the kind of gruff that you couldn't help but love. I owe him just about everything. He interviewed me to work under him while I had been at the magazine, and wanted to get out. He decided he wanted me about two minutes into the interview. He pushed for me to get a bonus in 2008 that really, really helped around here. He trained me to work by his side, and taught me more about business than I could have learned in two years of b-school for journalists, should such a thing exist. He also is directly responsible for producing a lot of the native grown talent that writes for our website. Many people got their start under Sam as raw rookies, barely able to write a paragraph. Sadly I'm not exaggerating. He'd whip them into shape. I did the whipping, too, over the course of the year and a half we worked arm-in-arm. It wasn't easy, but teaching people how to write--again, I am not exaggerating in some cases--was intensely rewarding. As a result many of Sam's students remained loyal to him, and trusted him, even as they went on to bigger and better.
So he's gone, and my well-known financial journalism firm will be the worse for it.
How did this all come to pass? It's easy to say no one knows for sure, but there are some real culprits here. All you have to do is look to a piece of legislature called the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999. Spearheaded by Texas Republican Senator Phill Gramm, it dispersed with the Glass-Steagall Act, which had been in place since the Great Depression, and kept banks, brokerages and insurance firms from being under one roof. GLB basically reversed that in the name of competitiveness generally, and specifically so that Citigroup could become the behemoth it became. Now that Citi is trading for $2.60 a share, or less than the cost of using one of their ATMs, we see how that worked out for everybody.
And it's not like GLB passed without a fight, 45 Senators voted against it, but that wasn't enough. So in the name of keeping up with the rest of the world, ironies abound sadly, we threw our best safeguards on the fire, and put nothing in their place. In retrospect, this disaster was inevitable. Imagine screwing anyone and everyone without a condom for 10 years. You might just get a disease. You might get AIDS. Well, that's pretty much what our financial services industry did for a decade, and, guess what, our world economy got AIDS. There is no real cure except for time, which is a euphemism for lots of businesses dying off and people losing their jobs and for wealth to be destroyed.
Also, guess what? Once these safeguards were removed our financial markets acted, well, unregulated, in the sense that they no longer were regular. We had two booms within just a few years of each other, with matching crashes. Volatility went haywire, even as our pensions evaporated. Just as investing became more dangerous than ever we were all told we had to become our own financial advisers. Seemingly time-tested and ironclad strategies like buying indexed mutual funds in domestic stocks, bonds and some international stocks suddenly made as much sense at laying down long odds at the dog track: even if you won it's still a dog. And very few people have won in the past year. A decade's worth of stock gains are gone. We've all heard about Japan's lost decade, like it's something to avoid. Guess what, it's already happened. Now we have to see if we'll have two lost decades.
The greatest irony of the passage of GLB is that it was banks, brokers and insurance firms that pushed for it the hardest, but they've reaped the whirlwind too. Of course they all made easy billions for years before the Grim Reaper stopped by, and left us losers holding the bag. Did they know it was going to play out like this? No, but the truth is, they didn't care much if it did. Instead they just were overjoyed that they had greater leeway to sell truly terrible products like variable annuities, which are annuities wrapped in an insurance product of some kind; expensive to buy, sold but not bought. Can anyone explain to me why anyone would need one? No, they can't, because you don't. But millions of people own them, and they're seeing the variable part of this rotten deal fall apart. You see annuities are by definition supposed to give you annual returns that are steady and predictable, why would anyone be fool enough to want that to change? I don't know, I truly don't. I never will.
When GLB passed I was just starting out as a financial reporter, at Compliance Reporter, a newsletter. I knew it was a big change, and I had a strong feeling it would not be good. I probably have a story somewhere that attests to this, as I reported on the passage of the act. But at the time none of my friends cared. I once brought it up at a party and was met with stony silence, like I had mentioned euthanizing puppies. My generation didn't care. And I didn't really know what to do about the story--it was so big, yet seemed so dull--so I kind of forgot about it for a while. Until I couldn't forget about it any longer. I understood the act, kind of, but not the whole thing. But don't be mislead, as mentioned, there were people who saw a lot of this coming, but they were ignored. And the people who pushed for this have never paid the piper.
One person who saw a lot of this coming is a former source of mine, and one of the smartest people I've ever met in this business world, or any world: Pam Martens. Pam worked on Wall Street for two decades, and saw the filth from the inside. She was the lead plaintiff in the groundbreaking Citigroup "boom-boom room" sexual discrimination class action lawsuit against Citi, until she was fired by her own attorneys for being too uncompromising. She gave me one good tip after another when I was at Securities Week from 2002-2004. And she warned about the problems to come from de-regulation at places like Citi--i.e.the dangers of letting places become too big to fail--like a true Jeremiah. But, sadly, she was also a Cassandra, i.e. right but ignored when people could have done something about it. So, Pam, it's a great, great shame that more people didn't listen to you five years ago. May they listen to you now.
Bill Singer, a longtime securities attorney, also gave plenty of warnings about the dangers of driving the small firms out of business in the securities industry. I met Bill in 1999, what a fateful year!, on my first day at CR, and he gave me a front page scoop right off the bat. I didn't understand what any of it meant, but when I called other sources they seemed impressed with what I told them. (The story involved something called SOES firms, and its pretty technical and outdated by now.) But mainly Bill advocated for the little guy. And, again, he was right. This mess never could have gotten so horrible had there been more small firms. What happened is almost that in the financial services world we created something akin to a mono-culture, shared among maybe five or six firms. And when one went down they all went down, because they all shared in the same garbage. More small guys, more competition, more, yes, capitalism could have prevented a situation where there were five major banks, and one huge insurance firm called AIG, and they all got infected with subprime crapola, passing it off amongst one another in myriad ways. But it was all, in the end, the same shit. When the firms all became huge they became doubly dangerous. Bill saw it coming.
So there are a few heroes to go with the much longer list of villains. GLB is still on the books, and Glass-Steagall remains gone, despite the fact that when it was in place our banking system never had a large, systemic breakdown. And yet, somehow, when I ask questions like, hey, why don't we just bring Glass-Steagall back, people look at me like I'm nuts. Why that would be wrong, somehow. It would be admitting the sheer scale of our folly, it would be admitting that those old guys in 1938, or whatever, were about 12 times smarter than we are, with our computers. Maybe they were just less greedy.
I get the same look, by the way, whenever I ask the same question about why don't we simply rebuild the Twin Towers? We just can't. No one knows why, and everyone I talk to wants it to happen, but we just can't. It would be admitting that we got it right the first time and can't do better.
But I'd rather admit defeat and be right, than pretend there is a better answer when there is not. Banks and brokerages need to be kept at arm's length. Insurance companies need to avoid both of them. Where I put my money and where I invest my money should not be the same place. This makes it harder to rob me. Don't worry, Wall Street, about your so-called barriers to investment. You still all became millionaires when they were in place and most of you still had jobs, unlike today. We'll call you.
Tuesday, March 10, 2009
Cromwell, in a more sedate moment
Please, don't tell the ASPCA, but my cat, Cromwell, is a drug addict.
We often joke, in fact, around Stately Baby Daddy Manor about how our cats could get hooked on catnip, even though it's perfectly legal. We picture our cats kind of becoming the catnip equivelent of crack whores, panhandling for change, little sores around their cat mouths, promising to do the vilest things for a little taste of the green stuff.
It had been a joke, of course, until we found out what real addiction was like.
Oh, the signs and symptoms had been there all along. We'd buy a bag of organic dry food, pour out half of it in the ever-feeder -- just so the cats could have a little snack during the day -- and, poof!, it would be gone in just a few hours.
"That's crazy!" we'd say. "They must really like this stuff!"
Then we'd pour in the rest of the bag and it was also gone just as fast.
Then when all the dry food was gone we'd notice something unsettling: the cats would start to act, and there is no other word for it, twitchy. Kind of like Sinatra in The Man With The Golden Arm, they'd mope around, jumping out of their furs, whining. Then they'd get strangely energetic, running around, mewing, it was all wrong, all kinds of wrong.
Of course we'd feed them the wet stuff too, but suddenly that wasn't doing it anymore. And all our cat loving friends and various crazy cat ladies we also know, would cluck their tongues as we enabled our drug, I mean carb, addicted cats.
"You know, cats don't need the carbs in the dry food," they'd say. "Do they eat carbs in the wild? No!"
"But the cats like it!" we'd answer. But maybe they didn't exactly LIKE it, more like they had no choice. They were having carb-fits, they were hooked, and it might be for life.
And, as these things go, the dark side got darker.
It's been a busy few weeks, as usual around here. Stella, once again, stopped sleeping for several days in a row, perhaps more to remind herself how it feels than out of any actual need to stay awake. So this made us extra grouchy, and forgetful.
Lo and behold we ran out of the dry. And we just kind of forgot about it. The cats were well fed, after all, and that's all that mattered, right? No, it's not.
Cromwell, in particular, started to act kind of weird. He would stand in front of Stella's door and mew, trying to wake her up. He'd look at her like he wanted to shoot her when she crawled after him, which she now does all the time. He didn't sit on our laps like he normally does, and he took to beating the snot out of Talisker on a regular basis. Talisker, the goof, loved the attention, so at least that wasn't a problem.
But then, yes, it got darker. Two days ago I was on the phone with Randi during my lunch break at work. She was home, and she described a chilling scene.
Stella, you see, crawled after Crommy again, and this time she irritated him so much it looked like he was going to take a swipe at her. Cats, at least our cats, have claws, so that's obviously no good.
And then the Brooklyn Baby Momma's voice got strangely fearful.
"Oh my god, Cromwell looks like he's going to attack me!"
She then preceeded to tell me how he was gathering up his haunches, and following that he sprang across the room right at Randi, only to vear away at the very last moment. Too close!
"I'm afraid he might do it again!" she said.
"Well get off the phone with me and take care of Cromwell!" I said.
She hung up on me, and that's all I heard for a little while. When I called back in 10 minutes things were more calm, but only superficially.
"God, he hasn't had dry food for days, right?" I asked. No, he hadn't. We resolved to right that ASAP. After all Cromwell might be a drug addict, but we made him that way. So it's our job to keep him happy. Thus we became The Pushermen.
And dry food was bought, and consumed by our cat. He's been much happier since, in fact he seems like he's back to being his old self. His old, carb-addicted, self. But then again, I'm hooked on carbs too. I know how he feels. He feels fat.
Okay, maybe he doesn't feel fat. There's no way for me to know. He's sleeping right next to me in what had been Stella's stroller, but what in reality has become just the latest in our infinite series of cat beds. We have our bed, of course, that's a cat bed. As is the sofa, Stella's crib -- when they can get away with it -- our pack and play and now the stroller. We have no actual cat bed though. But he sleeps the sleep of the contented for now. And until we once again run out of Friskies.