Fixers

by Michael M. Thomas

  None of the documentation I’ve read answers the question that’s bugging me. Why isn’t the SEC coming after Polton as a coconspirator? You’d think that if the regulators would have anyone in their sights, it would be Polton himself, given his centrality to every side of the deal—it’s a trade that he thought up, and from which he made around $1 billion. Yet it appears he’s being given a pass. How come?

  I’ve asked Lucia about this, but she has no more knowledge than I do. She has other issues to cope with. For example, will the Protractor litigation have to be included in the STST annual report come next March? How much do stockholders need to know? Worst case, she tells me, they could end up paying $2 billion in penalties, an amount that is peanuts when you have a $900 billion balance sheet, and therefore, in the lawyers’ opinion, probably isn’t “material.”

  OCTOBER 7, 2009

  I went down to Washington last Saturday to see a fantastic exhibition of Venetian Renaissance sculpture, stuff that may not rank with Donatello and the Florentine big boys, but is wonderful nevertheless. It seemed to be a good occasion to catch up with Orteig, so we arranged to take a spy-novel stroll along the Mall.

  He fed me some inside poop on how the administration is dealing with Citi. The big bank is no nearer being out of the woods than it was at the worst of last fall’s crisis. The game that’s being played is a high-finance, capital-markets version of “Let’s Pretend.” In this case, “Let’s pretend that our balance sheet is stronger and cleaner than a year ago.” This is probably why Citi stock is up some 50 percent off its lows, but then most finance stocks have had a tremendous rally. Hell, STST has nearly quadrupled off its bottom: it traded yesterday at $190.

  If Citi’s situation doesn’t improve in the relatively near future, Orteig told me, the bank could be facing true nationalization along the auto industry model: the equity will be wiped out; the debt will be worked out, with the bank’s creditors taking a massive haircut; and the really bad assets will go to the dumpster. Naturally, all parties want to avoid this, but it’s going to take a great deal of imagination and a great deal of taxpayers’ money.

  Orteig says that the man in the Oval Office is all over his aides to come up with some kind of rhetorical ploy that will (a) make it look as though he’s keenly determined to face up to the Citi problem, and thus deflect any charges of Wall Street favoritism; but (b) will simultaneously make clear that his hands are tied legally and so nothing can get done. I guess you’d call this having your cake and throwing it up, too.

  If you ask me, reading between Orteig’s lines, the only thing that’ll be done about Citi will be to feed it more and more money. This hould qualify Holloway for a private-sector paycheck that should run into a neat eight digits per year when the time comes, plus book royalties. He may not equal the $100-plus million payoff from his Washington stint that former Treasury Secretary Robert Rubin has gotten, but he’ll do just fine.

  Meanwhile, people like Marina Hochster are loudly complaining that the White House is frittering away its political seed corn on its health-care legislation. The moral standards on which Big Pharma operates are every bit as negligible as Wall Street’s, but are harder for journalists to run down. Keep this up and there may not be much of this great republic left to sell, but every little bit counts, right? That’s how people get to be really rich: watch the pennies, and the billions will take care of themselves.

  OCTOBER 13, 2009

  Today is a green-letter day in American history: it was exactly one year ago that Mankoff, along with Wall Street’s other biggest shots, trooped down to Washington to have $135 billion of the taxpayers’ money forced on them on giveaway terms. A decent portion of that largesse has since been largely repaid on a basis that Washington has persuaded the media to accept as having provided Uncle Sam with an annualized 25 percent return on his citizens’ investment. According to a friend who understands accounting, the word “annualized” is a synonym for “bullshit.” Still, why complain? STST stock is up over 40 percent this year.

  Speaking of the TARPworm, I read recently that Marina Hochster is now engaged in background reporting on a long piece that will try to prove that Wall Street has staged nothing less than a coup d’état under the umbrella of the very administration that the voters in 2008 expected to clean up the mess and put the scoundrels in chains. What more proof does any thinking person need?

  NOVEMBER 4, 2009

  I’m not exactly in the market for new friends, but yesterday in a bar I met a pretty interesting guy who may become one.

  Here’s the backstory. There’s a Spanish movie I’ve had on my must-see list that’s playing at the IFC Center, and as this was a rare free weekend, I arranged my Saturday to catch the midafternoon showing. As is my habit, I got to the box office two hours ahead of time to be sure of getting a ticket, figuring I could get a burger and a drink at the Greenwich Village Bistro around the corner.

  I took a place at the bar and ordered a beer and a cheeseburger. As is also my habit, I checked out the guy on the next stool: a fellow about my age—I guessed—with an Asian cast to his features.

  The book he was reading got my attention: John Le Carré’s The Honourable Schoolboy. I’m a huge Le Carré fan, and this novel is one I particularly like, although it isn’t as well known as The Spy Who Came In from the Cold or Tinker Tailor. It’s even more complex and veiled than those novels are, which is probably why I like it.

  “That’s a great book,” I said to him. “Too bad the BBC never adapted it.”

  Some people resent having their reading concentration broken into. This fellow didn’t. He put the book to one side, took a contemplative sip of his dark beer, and smiled. “You have good taste,” he said.

  With that, we got to talking, the way men seated next to one another in bars do, and eventually introduced ourselves. His name is Arthur Han (“everyone calls me Artie”). He’s a professor at John Jay College of Criminal Justice, where he teaches “Financial Forensics” and a seminar on fraud and other capital markets malefactions. He also consults on Wall Street, focusing on the interaction of politics and markets; it turns out we have a few clients in common.

  Somehow we got onto the subject of the corruption that seems to permeate every corner of American public and private life: everyone on the take, nothing that can’t be bent or bought. Corruption in politics—the influence of bigger and bigger money—seems to be an obsession with Professor Han. A number of times, he brought up a lawsuit called Citizens United that the Supreme Court is deliberating, and then summarized the pros and cons as if I were a moot court. A decision is expected as early as the first quarter of next year. If the plaintiff is upheld, as Han tells it, corporations will be free to throw unlimited, unregulated amounts of money at political campaigns. And if that happens, he declared, you can write “finis” to representative democracy, which is running on vapors as it is.

  “The Court’s as corrupt as the rest of Washington,” he declared. “People talk about ‘regulatory capture’ and ‘legislative capture,’ but they need to add ‘judicial capture’ to the list. It’s the most dangerous of all in terms of what it can do to our democracy.”

  Artie doesn’t think much of the present Court. He says that Roberts and Alito are like the Pacino and Duvall characters in The Godfather, capo and consigliere; Scalia is clearly certifiable; and the less said about Clarence Thomas, the better.

  “What about Kennedy?” I asked. “Everyone says he’s the swing vote, the make-or-break guy. What do you think of him?”

  My new friend grinned. “You know what Kennedy is? He’s every high school kid who figured out that the best way to get elected president of the student council is to kiss the ass of both the faculty and the captain of the football team. It’s hard to imagine: that the fate of our system is entrusted to men like these. It’s also interesting, and I think significant, that the troglodyte faction includes none of the women justices.”

  We shared a laugh at that. “Of course, nothing ever
changes,” he said next. “Corruption’s as American as apple pie. Take a look at this. It dates from 1854.”

  He reached into his shoulder bag and pulled out a sheet of computer paper, which he let me keep:

  Influences secretly urged under false and covert pretenses must necessarily operate deleteriously on legislative action, whether it be employed to obtain the passage of private or public acts. Bribes, in the shape of high contingent compensation, must necessarily lead to the use of improper means and the exercise of undue influence. Their necessary consequence is the demoralization of the agent who covenants for them; he is soon brought to believe that any means which will produce so beneficial a result to himself are “proper means,” and that a share of these profits may have the same effect of quickening the perceptions and warming the zeal of influential or “careless” members in favor of his bill. The use of such means and such agents will have the effect to subject the state governments to the combined capital of wealthy corporations, and produce universal corruption, commencing with the representative and ending with the elector. Speculators in legislation, public and private, a compact corps of venal solicitors, vending their secret influences, will infest the capital of the Union and of every state, till corruption shall become the normal condition of the body politic, and it will be said of us as of Rome: omne Romae venale.

  —Mr. Justice Grier, writing for the majority in the matter of Marshall v. Baltimore & Ohio Railroad Company, 57 U.S. (16 How.) 314 (1854)

  Artie watched while I read it, then said, “what makes this especially fun is that a year or so later, Justice Grier was himself accused of accepting a bribe in a matter that came before the Court. Needless to say, he got off.”

  From that point on, until I had to hotfoot it out the door to make my movie, we engaged in a kind of serve-and-volley mutual deploration of the terrible state of affairs that America has become. Disgusting this, horrible that—and why have all these awful people ended up with all the money and most of the power? An obsession with making money must entail certain character flaws, we agreed.

  But here’s the problem. The more I found myself nodding in agreement—and I did agree, believe me—and the more vociferously I voiced my own disgust at how low the affairs of the nation had been brought, the more shamingly aware I became of that troubling inner disconnect I’ve spoken of already. There I was, with an absolutely straight face and all the sincerity of which I was capable, condemning corruption—the manipulation and distortion of government for monetary ends—while having been the perpetrator of perhaps the most massive and consequential fix in the whole stinking history of U.S. politics.

  These were feelings I wasn’t exactly keen to revisit, feelings I’ve generally managed to suppress. Now, talking to Artie Han, I found them returning more stingingly than ever. Up to now, I’ve sold myself on the proposition that the Wall Street patch I’ve caused to be protected is only a tiny, not very consequential piece of a vast reeking whole, and that I had nothing to do with the GOP in Congress pledging to obstruct every single measure that OG may proposed, or with holding health care hostage, or with threats to cut entitlements, or with the making of pointless war.

  Anyway, I managed to put these thoughts to one side. When it came time for me to head for my movie, Han and I did the nice-to-have-met-you bit and agreed to meet again. We exchanged cards and coordinates. He lives in the West Village in a townhouse he shares with a partner—my guess is he’s gay, but who knows?—and a woman named Bianca Longstreth, a TV producer whose name I recognized from the credits at the end of a couple of Sunday night cable shows I regularly watch: spies, mysteries, and political hugger-mugger, interestingly cast, cleverly plotted, the writing sharp, literate, and relevant.

  Han seemed to think she and I might hit it off and he said something about fixing us up, but people are always saying that to me. Still, you never know, do you, and he seemed like someone who’s a good reader of people—just as I fancy I am—so I said I’d be delighted to meet her.

  This will have to wait until next year, as Han’s off to China this coming Wednesday to teach a course at a university in Shanghai. According to him, China is to corruption what Mecca is to Islam. He’ll be back mid-January.

  This morning I got an e-mail from him confirming our lunch date and also telling me to keep next March 21 free, because he and his housemates always give a party on the solstice to mark the end of winter. He adds that this would be the right kind of occasion to introduce me to Bianca Longstreth. I e-mailed back to say that I’ve put a hold on March 21, and that I looked forward to meeting Ms. Longstreth. “Assuming I’m still alive,” I added. The way life works nowadays, anything further than a week out seems to be tempting fate.

  NOVEMBER 17, 2009

  After much press room fanfare, with the Attorney General behind him to one side, Winters and Holloway to the other—all three looking pious with hands clasped in front of them—OG announced the formation of the Financial Fraud Enforcement Task Force, which promises to deal forcefully with the Wall Street miscreants responsible for the crisis.

  This brave new unit will operate within Justice, which means that any “enforcement” will have to be signed off on by Eliza Brewer, which in turn means there will be no meaningful enforcement. In other words, this “task force” is typical OG bullshit, claptrap to catch the groundlings (as was said in Shakespeare’s time).

  The in-the-know betting on the Street is that, come five years from now, the number of meaningful criminal prosecutions carried out by this lofty-sounding “task force” will be fewer than the fingers on one hand. We shall see. I look forward to hearing what my new friend Arthur Han thinks of this OG initiative. Not much, is my guess.

  NOVEMBER 18, 2009

  The high spot of my morning was a long e-mail from Artie Han:

  Chauncey: Greetings from Shanghai. Amazing city. Exhilarating and troubling at the same time. It was nice to meet you and have a chance to chat and I hope we can manage to keep in touch. I hope I didn’t bore you with my focus on Wall Street psychopaths. I don’t meet many laymen who are acquainted with Hare’s famous checklist of the attributes of the psychopathic personality. A lot of fairly original research on the subject has been done by Professor Clive Boddy at the University of Nottingham in the UK, some of which I’ve tried to incorporate in my seminar on Capital Markets Control Fraud. Professor Boddy kindly sent me a draft of a paper on (tentative title) “The Corporate Psychopaths’ Theory of the Global Financial Crisis” that he expects to publish early next year in the Journal of Business Ethics. Here’s a sample—I hope you find it interesting:

  … corporate collapses have gathered pace in recent years, especially in the western world, and have culminated in the Global Financial Crisis that we are now in. In watching these events unfold it often appears that the senior directors involved walk away with a clean conscience and huge amounts of money. Further, they seem to be unaffected by the corporate collapses they have created. They present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings, and investments, and as lacking any regrets about what they have done.

  They cheerfully lie about their involvement in events, are very persuasive in blaming others for what has happened and have no doubts about their own continued worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.

  Many of these people display several of the characteristics of psychopaths and some of them are undoubtedly true psychopaths. Psychopaths are the 1 percent of people who have no conscience or empathy and who do not care for anyone other than themselves.

  Han ends his e-mail with the following: “Don’t forget to keep March 21, 2010, open. I told Bianca a little about you, and I can fairly say she seemed vaguely interested, which isn’t generally the case. She’s run through most of the men in Hollywood and a goodly perc
entage of those elsewhere. Best wishes for all the holidays—AH.”

  NOVEMBER 30, 2009

  A troubling day. Here’s the story. A friend of mine, a curator at the Clark Museum in Williamstown, came down to lecture at the Met, and we had lunch in the museum’s fancy restaurant. The food’s not bad, even if you do pay for a soufflé approximately what the museum itself pays for a Rembrandt.

  During lunch, Iona and I chattered merrily about cabbages and kings, until over coffee I mentioned that I haven’t heard from the Hastingses, the couple I always stay with over New Year’s. Usually, by now, I have that invitation all buttoned up. I expressed concern that either Rex or Millie Hastings might be ill.

  Iona put down her cup. “My God,” she said, “you haven’t heard?”

  “Heard what? Don’t tell me …”

  “Nothing like that. No one’s sick. It’s worse than that—at least as far as some of us are concerned.”

  Then she went on to tell me a sad story about how Rex had been talked into a no-risk sure thing by “his man” at Merrill Lynch. It’s like stealing money, he’d been told. And so it had turned out—only in the wrong direction. Rex had literally bet the farm. Money had been borrowed to double down, stocks Millie had inherited from her father were sold, a second mortgage was taken out on the Hancock house. Then the margin calls started to come in, and finally the issue defaulted.

  “And now the bank has foreclosed on the farm,” she finished.

  “Rex has a lot of friends up there,” I said. “Surely he can work his way around that with the bank. Doesn’t his wife have money?”

  “We all thought that, but apparently not. As for the bank, they say they’re out of the picture. They sold Rex’s mortgage to some Wall Street firm that stuck it into one of those big pools and sold that to some bank in Tasmania. It’s supposed to be serviced by some firm in Florida but nobody there seems to know anything.”