Don’t pin the recession on AIG’s Joe Cassano
Cassano, who ran AIG’s financial-products division in London, “almost single-handedly is responsible for bringing AIG down and by reference the economy of this country”, says Jackie Speier, a US representative. “They basically took people’s hard-earned money, gambled it and lost everything. And he must be held accountable for the dereliction of his duty, and for the havoc he’s wrought on America. I don’t think the American people will be content, nor will I, until we hear the click of the handcuffs on his wrists.”
First of all, I want to apologize to readers for my long absence. I’ve been on a deadline for a gigantic Rolling Stone article and have not slept much the last three or four days. My eyes are at least four or five times their usual size; I look like one of those nocturnal lemurs from Madagascar you see on the nature shows all the time. In fact after I finish here I’m going to go feed on some grubs and bark. What’s funniest is that I actually put a post-it note on my computer days ago reminding me not to post to True/Slant while I was in a sleep-deprived state (“You suck! Sleep!” it reads), and yet here I am.
Anyway Eric Salzman over at the always-funny Monkey Business blog sent me this piece on Joe Cassano, which I found interesting and slightly troubling. Having written one of many articles identifying Cassano as a key cause of the crisis, I guess I and people like me should have seen this coming — that at some point down the road a general consensus would form blaming some rogue individual for the financial crisis. And while Joe Cassano is certainly as guilty as a person can be, the notion that he alone is responsible for this mess is not only appalling but extremely dangerous. The people who would believe such a thing are the same people who believe that this crisis might have been avoided if a few minor changes had been made. I’ve heard people say, for instance, that much havoc could have been avoidded if there had just been a law mandating margin requirements for CDS contracts, so that people like Cassano couldn’t make bets without the money to pay off.
This is bullshit. And it’s dangerous bullshit. The problem isn’t a few technical glitches in the system that allowed the Cassanos of the world to drive Mack Trucks of leverage through a loophole or two. The problem is, at its roots, a profound collapse of morals on Wall Street that would have found its way to financial destruction using any available set of instruments and laws. We are talking about people who sold giant rafts of bullshit mortgages to pensions, who stuck municipalities, innocent taxpayers, with time-bombs of subprime debt. And not just one trader here and there, but thousands of them, with the sober approval of the highest level executives in the biggest firms. On its most basic level what these people did is rip off huge institutional investors — old people, taxpayers, you and me — by finding ways to game the system and trick the big institutional fund managers into buying what they thought were safe investments, but were actually financial lemons that could barely make it out of the lot.
It doesn’t matter what tools they used. That’s immaterial. Is it true that the CDO made it easier to fool the ratings agencies, made it simpler to sell crap as AAA-rated paper? Yes. But the operative problem here isn’t the CDO but the fact that someone who makes a million dollars a year was willing to sell crap as a safe investment to pensioners. An honest man does not do this. Are there used-car dealers who would? Sure. But that’s why we joke about used car dealers, and only trust them about as far as we can throw them, and generally don’t buy used cars until we’ve had our mechanic look under the hood.
These Wall Street players are enormously compensated, which supposedly means that society highly values their work and is willing to pay them a premium to do it. Having been given that kind of responsibility and trust, these assholes should not then force us to police them as tightly as we police those who we expect to steal from us, like third-rate car salesmen, telemarketers, hookers and three-card monty dealers. With that kind of money they should be setting an example. We are paying them as though they are leaders of society, so they should lead. Instead they ripped us off like common criminals. I mean, the level of morals here is astonishing. In my entire life I’ve never met a drug dealer who would even think about trying half the shit that banks like Goldman Sachs and Citibank pulled during these years.
Well, that’s not true — okay, I did once try to buy weed from a guy I didn’t know in Washington Square, and got ripped off. I was young and stupid. The guy sold me a bag of oregano and immediately, I mean immediately, took off running and disappeared down 8th street. Guys like that usually have a life expectancy of about ten minutes, because eventually they pick someone who isn’t some lily-livered white college student to sell oregano to and they get their heads beat in with lead pipes. That’s what happens in the actual world. In the world of high finance, what happens when they catch you pulling that kind of stunt is they give you fifty billion taxpayer dollars.
Still, you can be sure that people will find a way to blame the Cassanos and Madoffs of the world for all our troubles, and business will try to go on as usual. And we’ll have more catastrophes. It’s the nature of the beast.