Mid winter of this Leap Year, the Bears contrary to natural law emerged from hibernation to populate Wall Street. This as well as a few lines included in a biographical sketch of Louis Auchincloss,  (New Yorker Magazine February 22, 2008) prompted me to add this supplement to the January column.



Auchincloss is a name most will recognize as the author of dozens of books, many of which are notable. He was born almost 100 years ago into a family of wealth and privilege that secured its position firm in the belief that God, Freedom and Capitalism were interwoven and that Capitalism could succeed only so long as its Nobility governed with honor. These principles seemingly embedded in their DNA created a boundary of conscience  (enunciated for our generations by the late William F. Buckley), that one dare not cross lest society fragment. Yet here we are almost a hundred years after the birth of Auchincloss, on the precipice of a deepening financial disaster that makes a mockery of this trust. Auchincloss’ book “The Embezzler”, set in the great depression of the 1930s is a fictional look at white collar crime. The following timely colloquy is taken from that book:  



Two friends, both bankers are conversing. One chides the other about making too much money. “Banking isn’t just money making. Banking is starting new businesses and saving old ones. Banking is helping the right man over a bad time.  Banking is keeping the heart of the economy pumping. If you don’t feel that way you ought to quite banking and become a stockbroker.”



We live at this moment amidst the rubble of the menage a trois that developed between bankers, brokers and insurers after the Glass Steagall Act of 1933 that prohibited such a ménage, was

verturned in 1999.



For the past 20 or so years “Reaganomics” aka supply-side economics has presided over the market place and been justified by the ensuing prosperity. Conservatives from the Reaganites to the myriad talk-show hosts have been layering his memory with wreaths of praise at the same time bleating about the threat that government interference of any sort that might blight the freedom of the market place.  But now after abusing the marketplace they pray for government interference.



For capitalism to work capital needs room to change hands, buy and sell, swill and swagger. But minus probity and character at the top it can’t succeed.  We pride ourselves on being decent and honorable.  But we are also endowed with a preponderance of Greed  that paradoxically seems proportionately present more often and more prodigiously in the wealthy than in those in need of money.



The same “conservative” voices carping continually about how the system is being undercut and destroyed by Welfare and the Welfare State cheer the exorbitant salaries and pensions that our Captains of Industry have extracted from the system as examples of successful capitalism.  Millionaires who so often earn more millions by getting fired or walking away from their failures are held  up as the prized products of the free market. It is hard to understand the psyche of those extremely wealthy individuals who continually want “more” and since they hold the reins of power are capable of getting “more”.  Money may be the only game they know and understand. We need them around to churn the system, but some of that money should be returned because it is really not theirs. It is a product of a system that consumes and often discards labor.  The excess produced by labor should be returned to the country. Not necessarily as taxes to be abused by the Congress and Administration, but to funds consecrated to rescuing the infra structure of our country, so much of it needs renovation and repair. This is a plea for high earners to pool some of their moneys to refurbish our place here. They are purported to be good managers. Make them prove it. Perhaps some of this wealth can be used to replenish pension funds destroyed by mismanagement and lack of foresight.



As for the present crisis, the sponging up of capital and drying up of the money pool was  crazy to begin with. All bubbles will burst, but a real estate “bubble” of this magnitude can’t happen all by itself. Sensible people won’t drive up prices all by themselves.  But people can be lured into irresponsible behavior as happened this time. The Internet Bubble was rational because it was built on the reality of science that was boosted by dreams and hope.  But to incrementally increase the cost of a building far beyond the ability of a purchaser to pay it off in a lifetime, or for an investor to make money on it because no business could afford the rent, is ludicrous if not madness. Buildings have a finite value that do not lend themselves to dreams and hope. 



The following quote from Franklin Roosevelt’s first inaugural address in 1933 says it all.. “The rulers of the exchange of mankind’s goods have failed. There must be an end to a conduct in Banking and in Business which too often has given to a sacred trust the likeness of  callous and selfish wrongdoing.” The article then points out that soon after the inaugural Roosevelt instituted something  supplemented “trust” with    the Securities and Exchange Commission to help govern wanton adventures in business by the unscrupulous. Unfortunately during this impending crisis the SEC was hibernating with the Bears.