Obama & Wall Street

The President’s address yesterday to the Captain Crunches of Industry purporting to run our financial system was reliably thoughtful and answered the tendentious and opportunistic criticisms—if they can be given such a respectable term—from the Know-Nothing party.

Some commentators say Obama should try to be more like FDR who denounced the plutocrats and money-changers to their faces. But luckily for a lot of people, it’s not 1933, and we don’t have 25 percent unemployment (yet). The bankers are still rolling in money, and although people are pissed at them, the country is teetering not on the brink of ruin, but on the brink of mass stupidity, which constrains Obama rather than empowering him.

Also, righteous anger just isn’t Obama’s style as we should have learned by now—and by the way, he got elected by avoiding it. If we wanted someone to kick Wall Street’s ass and love every minute of it, we should have elected Ralph Nader.

Obama is much more likely to go for the Kum-ba-ya moment as he did in the Cooper Union address by trying to convince the assembled Wall Street poo-bahs that it’s in their own interest to clean up their game. No doubt there are some in that unlovely number who agree with him—though we haven’t heard from very many so far.

Harry Markopolos thinks such decent-minded folk are in the majority among financiers, and he has more legitimacy to offer an opinion on the subject than just about anyone. Markopolos is the guy who tried to alert the Securities and Exchange Commission about the Madoff Ponzi scheme for a decade while that scam artist was looting many dozens of billions of dollars from Jewish charities, European banks and little old ladies with blue hair.

His book, No One Would Listen, is a gripping page-turner, and that’s saying a lot given that its subject matter is collateralized debt obligations and split-strike conversion strategies. I read it in two nearly sleepless nights because I could not believe my eyes and kept waiting for the nightmare he describes to end in the next chapter.

Markopolos lays out in fairly understandable detail how no one with a basic introductory course in financial instruments could have swallowed the idea that Madoff’s numbers were real. Yet he was allowed to continue to swindle sophisticated investors and unsophisticated marks for two decades. How?

The inevitable conclusion is that everyone knew Madoff was crooked but thought he was being crooked in their favor. They also must have assumed (with excellent reason) that no one would ever come after him, or that at worst, Madoff would take a dive while their inexplicable profits would be untouched.

As always, greed turned people into patsies just as reliably as the Nigerian oil company scams do. Not that individual investors necessarily saw what was happening (although steady 12 percent annual returns even while the Dow was tanking should have generated a little suspicion). But the big players had to know.

After finishing the book, one wants to reach for the bank passbooks and put one’s savings under the mattress like the far-sighted Argentine woman I interviewed during that country’s bank bust who laughed at the idea of entrusting her cash to professional thieves dressed in business suits. ‘I haven’t kept money in a bank account in my entire life,’ she snorted, despite owning a textile business employing 22 seamstresses.

Perhaps at the height of the crisis Obama could have cut through the b.s. and demanded a radical reform of our permanent banker rip-off, but once things settled back down to some semblance of normal, it was probably too late to do much more than the minor tinkering in the bill he was peddling yesterday.

It’s nice to see our 401(k)s bouncing back to almost where they were two years ago, and we can only hope that employment follows soon. But the finance and economic experts have been warning us that the underlying conditions that almost brought down the house at the end of the Bush spectacle are still there and perhaps in worse shape than before. We have a smart and reasonable guy in the White House as a result, but there is plenty of evidence that people may prefer the wackos given half a chance. It’s a good reminder that no matter how bad things are, they can always get worse.