Author: Steve Fraser
Review: Bloomberg
We love Wall Street, we love it not.
Wall Street and America have a special relationship, writes Steve Fraser in ``Wall Street: America's Dream Palace.'' And like many relationships this one has often been amorous, jealous, dishonest and dysfunctional.
Just like my marriage, you might say. Perhaps, though the drama that erupts when the outside world passes judgment on the Street can make Ozzy and Sharon of reality TV look like the Ozzie and Harriet of sanitized 1950s broadcasting.
Fraser, the historian who wrote ``Every Man a Speculator: A History of Wall Street in American Life,'' opens his new book in 1792, when the financial empire of speculator William Duer collapsed, sparking a panic.
Duer was a lawyer who served in the Continental Congress and moved on to less noble achievements, such as manipulating the nascent U.S. bond market. He barely escaped a mob of angry investors chasing him through the streets of New York City.
Fraser uses Duer to represent one of four financial prototypes: the aristocrat, the confidence man, the hero and the immoralist. Before his downfall, the aristocratic Duer lived in a Hudson River manor and married New York City socialite Catherine Alexander at a ceremony performed by George Washington. Duer ultimately died in debtor's prison.
Americans long scorned aristocrats for flouting the belief that you should earn your way to a comfortable life through hard work that produced goods or services. Financiers were seen as parasites profiting from the productivity of others.
J.P. Morgan
That disparaging view of Wall Street began shifting with the election of President William McKinley in 1896, a vote Fraser calls ``a decisive victory for the nation's business class.'' By 1912, when J.P. Morgan was in Washington to testify before Congress, he ``was treated by the media as if he were a visiting dignitary from abroad.''
Aristocrats can be cheats, though Fraser differentiates them from con men, who thrive most when the economy is booming and investors let their guards down. Cons flourish whenever a new technology -- radio, aeronautics, microchips -- comes along and people start believing that they've entered a period of ``permanent prosperity'' in which old laws of the business cycle no longer apply. Are you having a flash of deja vu?
Heroes also capture the public imagination. Nothing besots Americans more than a mogul from a modest background. Fraser cites the ``awestruck'' coverage of such financiers as Michael Milken, who wound up pleading guilty to six felony counts of securities fraud and conspiracy in 1990.
Breathless reports
Milken went to the slammer in March 1991 and emerged in January 1993 after a Federal judge reduced his sentence from 10 years. Yet today his past transgressions seem largely forgotten: His Milken Institute Global Conference in Los Angeles in April drew VIPs from politics, industry and finance, along with breathless press reports.
Fraser also profiles Wall Street's hedonistic ``immoralist,'' someone who trades for the sake of trading and sinks into a life of gambling, sex and drink. Financier Jay Gould, for one, was so detested that ``even when he died in 1892 no one could think of a kind word to say.''
These days, Americans are more forgiving of rogues. The idea of making money for the sake of money seems less parasitic when so many retirement plans are adrift on the stock market. Besides, Fraser says, the ability to get upset about a Milken depends ``on the capacity to be profoundly shocked,'' which is in short supply in our days of credit meltdown.
Cloacina?
Though there are wonderful insights to be had from ``Wall Street,'' the text suffers from a penchant for pretentious vocabulary. New York, for example, was ``a cloacina of all the depravities of human nature.'' This is a great read if you're studying for college-entrance exams.
The book staggers under adjectival excess, too. Isn't there a simpler way to describe an ``extravagant aristocratic arrogance and supercilious playacting of the country's burgeoning class of financial nouveau riches''?
Let's give those modifiers a rest, shall we?
Though Fraser sheds light on America's affection and hatred for its financial tycoons, he sometimes sounds as pompous as the powerful crowd he probes.`
Review 2:Let me save you $20 and a few hours of your time by rewriting this book it two sentences:
1. Wall St is, and has always been, run by a crazy little clan of megalomaniacs that exist solely to rape the American proletariat of the little wealth they manage to accumulate.
2. Every major financial crisis the US has suffered going back to the 18th century is a direct result of the insatiable greed and utter lack of any humanistic instinct that pervades Wall St.
These are some pretty grandiose claims, and to back them up, the author employs some pretty interesting logic. Let's take the 2000 internet bubble as an example. Our author makes the claim that the bubble was inflated by those evil Wall St people peddling their sure-to-fail internet companies to the unsuspecting public. OK, I guess we can overlook the fact that people knew from the get-go that these companies were highly speculative, given that they earned no revenue and had no real plan as to how they ever would (and if a person doesn't realize that this makes for a pretty risky investment, I hope they're a lot better at their day job), but for the sake of argument I'll stick it out. The author goes on to claim that the reason the common man was duped into buying all this uber-risky stock was that those crafty Wall St investment bankers had in their pockets the research departments that were tasked with putting out unbiased reports on the stock. Now, this again overlooks the fact that we're talking about companies with $0 revenue, and I'm not really clear on how the research analysts massaged that little detail away, but this is nevertheless one of the author's more plausible claims. My biggest issue comes with one of his proposed solutions to the issue. He claims that following the stock market bubble and the subsequent Enron/Tyco type blow-ups the government basically did nothing except enact the impotent Sarbanes-Oxley Act. What does the author suggest? He would have considered re-enacting the Glass-Steagall Act. For those who don't know, this act from 1933-1999 outlawed banks from having both commercial and investment banking activities under the same legal roof. Well I hate to burst your bubble, Steve, but this would do absolutely nothing to solve the conflict of interest between investment bankers and research analysts, the issue you cite as the main cause of the whole debacle, as both divisions fall within the investment bank, neither is a commercial banking activity. Sarbanes-Oxley, on the other hand, forced banks to establish very strictly enforced "Chinese Walls" between investment banking and research operations, a solution that actually address the problem. And as for SOXs impotence, if the author doubts the efficacy of post SOX Chinese Walls, I challenge him to go to any bulge bracket bank and attempt to contact a research analyst from within investment banking, either your call/email will not go through at all, or it will be automatically redirected to the compliance department; and good luck trying to have a face to face chat. But all this requires an assessment of facts and an honest analysis, something our author doesn't really seem so keen on.
I think the best illustration of his true motive in writing this book is to note that after all his villanizing of men like JP Morgan, Andrew Carnegie, and other Gilded Age tycoons, he never bothers to mention that later in life and upon their deaths many of their fortunes were given away. And without their generous philanthropy New York wouldn't be home to many of the great museums, libraries, schools, hospitals, and art galleries it is today. I wonder how much the authors beloved FDR left of his substantial wealth to charity?
Lastly, the book isn't even written well. It's extremely verbose and full of arcane language. Am I supposed to be impressed? I'm not, I have a thesaurus too. Perhaps the thinking was, "the facts don't bear me out, maybe I can confuse them to death."
In the end, it's really to bad the author couldn't set aside his very obvious political sentiments to write an honest history of Wall St, that's really what I wanted, not a politically motivated smear campaign, which is what I got.
