The Evolution of Greed

From FDIC to bail-ins

You’re not going to believe this, but there was a time – actually about 65 years ago – when the financial world, at least the securities-trading world, the world we call Wall Street, was actually dependent on a foundational principle of honesty and integrity. Now I’ll just pause for a moment and allow the laughter, whistling and foot-stomping to subside before continuing. There. Everybody finished now?

Okay. I said foundational. If you think about it, it had to be that way and it was. Oh, I know all about the robber barons’ early financing, how Bernard Baruch and Joe Kennedy and a few others shorted the Dow in ’29 and even how Charlie Blyth was criticized for taking a $100,000 salary when he started what would be the biggest House on the Street. And I know that – De Caprio and The Wolf of Wall Street au contraire – after the SEC was created, bucket shops and dynamiters in black shirts and yellow ties pretty well disappeared, but that was penny ante stuff.

I was given my introduction to this phenomenon – this “honest-broker” anomaly – a bit obliquely from a Canadian perspective, because in the late Fifties I was Education Director with the IDA, a primitive trade association of securities dealers up there with the Mounties and Eskimos. The Canadian model then was small but for our purposes illustrative. I know, because I had an opposite number in Washington called Erwin Boehmler, who education-directed an anachronism known as the Investment Bankers’ Association of America. We communicated, we stole from each other and Erwin taught the same thing: that securities markets depended on total mutual confidence with each other among traders, underwriters, brokers and their clients and – wait for it – even the Government. If you’ll stop laughing long enough, I’ll just explain that it wasn’t as if everybody wanted to be honest in those days. They simply had the feeling that they had to be, or the whole thing wouldn’t have worked. And they were right, considering the way the world was then.

I honestly (there I go with the “H” word again) don’t know how a contemporary trading desk operates. Oh, I don’t mean those guys in white shirts on CNBC who pretend to be traders but can’t be, because if they were they’d be on the Floor of the NYSE or at their trading desks instead of hanging around the CNBC studio with Maria Bartiroma during trading sessions. But I do know how a trading desk operated in 1951, because I occupied one at 14 Wall, 30th Floor, even before the period I mentioned above, in Canada. How could you run a position sheet with every trade taking place by word of mouth only, unless you could totally trust the guy at the other end of the phone line?

That’s just a small example from somebody who was – as you’ve probably realized by now – living in a Model T world, as compared with today’s smart-car universe. But let me return to the Canadian model I mentioned. Back in the Fifties, when Eisenhower and Diefenbaker were playing golf together, when John pretty well did what Ike told him to do – such as scrapping the Avro Arrow fighter plane and buying American Bomarc missiles – government lobbying in Canada went like this: if the Minister of Finance and the Governor of the Bank of Canada wanted to do something like a treasury bill auction, a conversion loan or some tricky Canada bond issue, they called us, the securities guys in Toronto and Montreal, and we sent a delegation to Ottawa to help them out, because our guys – economists, high-grade traders, analysts and retail sales directors knew more about the market and the economy than they did. Admittedly. So they actually lobbied us. I’m serious. And it worked, too.

And in addition, we policed our own membership, with the occasional help of the Ontario Securities Commission, for example, who along about that time flushed out the Toronto Stock Exchange, so that the black shirt guys had to go west to Vancouver’s casino, which eventually also went the way of the Spokane Stock Exchange – which is to say, the way of the N’Orleans hookers and jazz musicians who were exiled from Storyville by the righteous dwellers on Bourbon Street.

This is pretty quaint stuff, I realize, and about as a propos to today’s billionaire banksters as Slick Willie Sutton is to credit default swaps. But it’s useful to remember the way we were, and perhaps to suggest that we could recapture some of that foundational honesty.

When I talk about the innocent honesty of former years, I know you’ll respond with an expletive to the effect that I’m forgetting the Rothschilds, the Fuggers and all the other fugging denizens of banking history that progressed from moneylending in the ghettos of Europe to the international funding of armament, dictators, wars and mayhem, and who still dominate international finance. Okay. Not to argue. But I contend that they are jam-tart, compared with the fraudulent gangsters (documentable) that currently are still copping felonious plea bargains. Jamie Dimon, Chairman of JPMorgan Chase has even admitted it. I’ll get to that.

We’ve heard about The Big Bail-out ad nauseam, of course, of how in 2008 the Goldmen, the Sachses, the Morgans, the Lazards and the Credit Suissers, begged the Government to save us all from a fate worse than death by bailing them, not us, out. So that Paulson, Geithner and a clutch of other graduates or alumni of the Street did so to the tune of $750 billion, endorsed by both Bush and Obama, hidden under a tarpaulin called TARP, without the proviso that it be used to (a) rid themselves of their mouldering inventories of fraudulent mortgage-backed securities, and (b) make small business loans in order to goose the economy.

Instead they used this stash from the taxpayers to gamble on Libor rates or to dice-toss on derivatives and derivatives based on still other derivatives. Such that this criminal fraud has never been suitably recognized much less prosecuted, even though Jamie Dimon himself in one of his weaker moments said he knew of at least 15 Wall Streeters – not counting himself – who should be in the slammer. He made the statement concurrent with his announced retirement to spend more time on a fish farm in Alaska.

He didn’t go, of course. He was too busy sticking around in order to negotiate a “fine” – I think it was $13 billion – with the Attorney General’s Department, as did many of the others. Fines in the billions to companies with assets in the trillions hardly qualify as durance vile. More like walking-around money. But everybody, including Eric Holder, bought it. Fines negotiated by the perps! To cover felonies that should require hard jail time.

And since then, the Fed’s desperate attempt to ease things quantitatively, by pouring even more billions into those same Wall Streeters’ inventories has done nothing to ease the economy, except for the “easing” of more Vegas – like playing of the derivative market.

So nu? The nice Jewish girl that succeeded Bernanke is looking elsewhere. Are there perhaps qualitative measures that might be taken in the market?

A good start might be Ellen Hodgson Brown’s idea of creating a PUBLIC Central Bank and even other little state public banks like the Bank of North Dakota. That would save a ton of interest to the Federal Government and therefore the weary tax payers. But, hey, that’s like socialism, right? Anathema to the American Dream

Could we suggest a “qualitative easing?” Perhaps making funding available to small business directly, instead of giving more bail-outs to the felons we’ve already juiced since 2009. A return to those ancient qualities of honesty and integrity? Even if it’s pretend? It used to work.

I haven’t even mentioned the popular recent solution to bail-out prone billionaires. First conceived in Cyprus, that famous world leader in solvency, later picked up by the Bank of England, the Old Lady of Threadneedle Street. This, as Stewart Ogiilvy has suggested , is the ultimate means of robbing the poor to salvage the rich.

Ellen Brown, the Los Angeles attorney and central bank scholar, states it this way:

It’s code language for grand theft. Instead of breaking up, nationalizing, or closing down failed banks, depositor funds will keep them operating. Enormous amounts are there for the taking. They’re low-hanging fruit. It’s a treasure trove begging to be looted. Legislative shenanigans legitimize it. Proposed FDIC legislation lets it ‘take control of banks it deems systematically important and write down your savings (and other bank accounts) as part of the bail-in.’

There’s another way, but I won’t hold my breath. It’s like recovering that demi-siecle philosophy I was telling you about, when we all acted with honesty and integrity.

Even if we were just pretending.

Bill Annett writes four newsletters: The Canadian Shield, American Logo, Beating the Street, and The Oyster World. He can be reached at: Read other articles by Bill.