Rochester, up at the forgotten top left corner of New York, and so many hundreds of miles from Manhattan, just wouldn’t do. It felt static, kind of dead in the water, so in 1981 it was off to LA – a new life, a new career, buying an old red Fiat convertible and renting a place at the beach, and there were palm trees and in the evening there was sipping twelve-year-old scotch and staring at Malibu far across the bay. And there were surfers riding the waves and roller-skating babes in tiny bikinis on the strand, and new bands in the clubs, and things happening. Back then it seemed the center of pop culture – not to be confused with actual culture – and that was cool. And it had its dark side – like with the city burning in the Rodney King riots in the early nineties, and with the gangs – the Crips and Bloods back then, and the Hispanic gangs out in East LA and the Tongan gangs down in Long Beach and whatnot. But the place was alive.
But it wasn’t Hollywood, the dream factory where ruthlessly ambitious but profoundly shallow people are paid enormous sums to provide a way for America to imagine itself, and imagine the world. If you’re going to burrow into the heart of the construct of America as it imagines itself, well, you end up here in Hollywood. So in October 1994 it was arriving here on North Laurel Avenue in the block between Hollywood Boulevard and Sunset Boulevard, just off the Sunset Strip. And now in the evenings it’s sipping twelve-year-old scotch and staring out across the searchlights at some premiere or other at the Chinese Theater, at the Griffith Park Observatory on the far hill behind it all, and thinking of James Dean there in that movie, while listening to the dull boom of fireworks from the Hollywood Bowl just over the ridge out back. Last night it was the Eagles at the Bowl – reprising Hotel California once again.
So this is the place, for now. And it’s a good place to be a quiet observer. Hollywood is closer to the center – a place to watch how people think about how they think about themselves. That’s what they do at the studios – Warner Brothers and Universal just to the north, Paramount down the hill on Melrose, and Twentieth Century Fox over on Pico – they provide us with our dreams, such as they are. Washington may be the political center of America, and thus the world, and midtown and lower Manhattan the financial center of the world, but those places are where people work on the nuts and bolts of things, not the big concepts of who we are and what we want and what we fear and all the rest.
Sure, that’s not real life – but that’s the point. Just as in information science metadata is the data about the nature of the data you’re using, Hollywood provides the metadata about the life you’re leading, or wish you were leading, or fear you really are leading. It’s part mirror and part speculation. It’s all about capturing the zeitgeist and thus helping define it – giving it form. Do that and you get rich fast. Miss the zeitgeist – making a bad guess to the tune a few hundred million dollars – and you’re out of here. Yep, Howard the Duck was one really bad guess at the zeitgeist – Universal production heads Frank Price and Sidney Sheinberg are said to have gotten into a fistfight after arguing over who was to blame for greenlighting that one. And Eddie Murphy guessed real wrong on The Adventures of Pluto Nash. Watching that sort of thing – the bad guesses – is endlessly fascinating.
But no one goes wrong with outlaws and gangsters – James Cagney or Al Pacino chew the scenery, and maybe Peter Lorre his doing his really creepy sidekick thing, but people buy the tickets. People love outlaws – maybe because they wish they could break the rule and be cool, and get a vicarious thrill imagining being the bad guy, and because they feel guilty about those urges, are fine with the inevitable ending where the bad guy gets what’s coming to him, as they know he should. But they love the ride.
Karl Rove knew that and marketed George Bush that way, as Rove understood that bully-worship is empowering, as nothing else is. This has something to do with surrogate power, with seeing someone doing or saying what you wish you could do or say, but cannot. When Bush told the rest of the world to shove it – choose your issue or treaty or international law or whatever (the constitution will do as an example too) – he was the cool outlaw. America had been slapped around and disrespected, and Bush got that bad boy vote. Rove read the American zeitgeist better than any Hollywood producer. He just forgot how all the outlaw movies always have to end.
Of course the movie that best captured American ambivalence about outlaws was Bonnie and Clyde. The film was so ambivalent – these two were bumbling idiots and so very pretty and amoral ruthless murderers, and sort of heroes but not really, but real folk heroes, and sort of pathetic at the same time – that Warner Brothers almost didn’t make the film. Not only was it too hyper-realistically gruesome, it was all mixed up. And the audiences loved it. They felt the same way about life. It caught the zeitgeist and fixed it in the mirror. And the editing was masterful – see The Woman Who Turned Film Violence into Poetry – on the late Dede Allen who edited Bonnie and Clyde – “Her signature isn’t brutality, it’s soul.” Allen’s death is generating a lot of talk out here this week. That woman was one of the ones who could grab the zeitgeist with both hands and show it to us, as it is. We hate outlaws, and love them.
And on a more minor level – where no one is getting mowed down by a Tommy gun – we hate being cheated, but there’s that grudging admiration for the clever guy who pulled off the scam, a little bit of wishing we had thought of that. It helps if you’re a third party, not the one being scammed, but it’s kind of like why we like magicians. We’re fooled and made fools and don’t know how it was done, and we want more.
And these days, with the Goldman Sachs business, where they’ve been charged with fraud, maybe there’s a little bit of that going around. For example, on Monday, April 19, the Wall Street Journal reported that the recent SEC vote to sue Goldman Sachs broke down along partisan lines:
The Securities and Exchange Commission decided to sue Goldman Sachs Group Inc. over the objections of two Republican commissioners, suggesting an unusual split at the agency that could politicize one of its most prominent cases in years… People familiar with the vote said [Mary] Schapiro – a registered independent – joined two Democrats on the commission, Elisse Walter and Luis Aguilar, in supporting the fraud case against Goldman. The two Republican commissioners, Kathleen Casey and Troy Paredes, were opposed, they said.
And then there’s this:
In a letter to be sent Tuesday to the SEC, Rep. Darrell Issa (R., Calif.) plans to ask the agency why the Goldman case was brought as the financial-regulation bill was pending, according to Mr. Issa’s spokesman. “Democrats are desperate to cast Wall Street as the villain so they won’t be held accountable for the country’s economic condition,” Mr. Issa said. “It must be nice for the Democrats that the SEC’s filing against Goldman Sachs so conveniently fits into their political agenda.”
And Kevin Drum comments:
Hmmm. Darrell Issa seems to think that describing Democrats as the party that wants to “cast Wall Street as the villain” will somehow be bad for Democratic fortunes. And that defending Goldman Sachs will be good for the Republican Party.
I suppose anything is possible. But I’m willing to take my chances on casting Wall Street as a villain – and the only way to find out is to test this out. So with that in mind, I encourage the rest of the GOP to join Issa’s crusade to defend Goldman Sachs against the depredations of Democratic SEC commissioners. In a few months we’ll see how that plays out for them.
Yeah, but Bonnie and Clyde opened to scathing reviews too, and it turned out America eventually loved those two dimwitted killers, or sort of did. Maybe Goldman Sachs is hoping for something like that, as is Darrell Issa.
But Andrew Leonard argues that won’t be so easy:
Securities fraud charges against the world’s premier investment bank are not undertaken lightly. Despite the propitious timing, this case has been in the works for years. The SEC was first alerted to potential improprieties with respect to the Abacus CDO in August 2008. Goldman responded in depth to the SEC’s “Well Notice” informing it of a possible enforcement action all the way back in September.
In fact, one of the subthemes of the Goldman debate raging across the Web on Monday was whether the investment bank was guilty of misleading its own shareholders by not revealing to investors in regulatory filings that an investigation might be pending.
Ah, they might have mentioned they knew this was coming. Michelle Leder gets into that and suggests that other banks in similar situations have been quick to declare the existence of a potentially hostile SEC lurking around, and Leonard adds this:
Given the market’s reaction to the news – Goldman’s stock fell by 13 percent on Friday – the SEC’s interest in the deal certainly seems like something investors might have wanted to know about.
It will be weeks before we know what impact the fraud charges will have on banking reform and possibly years before we get a guilty or innocent verdict on Goldman (if the bank backs up its current tough talk and refuses to settle). But there’s one thing that we do know right now – at least one government regulatory body seems intent on actually regulating. We shouldn’t underestimate the significance of this development.
We may love outlaws, but Sean Connery in The Untouchables was a big hit too, and there’s a counterargument here. Leonard points out that in an appearance on “This Week” on Sunday, Bill Clinton made news by saying that Larry Summers and Robert Rubin had given him the wrong advice on derivatives – but that wasn’t the real problem. Whether or not the right regulations were in place doesn’t matter as much as “the will to regulate” – and the Bush years were kind of kind of like Chicago before Elliot Ness showed up:
Clinton also said the Bush administration contributed to the financial crisis with lax regulation.
“I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go,” Clinton said. If Clinton’s head of the Securities and Exchange Commission, Arthur Levitt, had remained in that job, “an enormous percentage of what we’ve been through in the last eight or nine years would not have happened,” Clinton said. “I feel very strongly about it. I think it’s important to have vigorous oversight.”
Leonard points out that this is “extraordinarily self-serving, especially given the overall deregulatory impulses that governed his own economy policy” – but there something to it:
A recurring theme in current discussions of regulation has been the observation that all the best rules in the world are worth nothing if regulators don’t exercise their authority to oversee markets. The Goldman case is a classic example. If Goldman did what the SEC is accusing it of having done, those actions are illegal under current law. We don’t need banking reform to make such behavior is out of bounds. Political considerations aside, most independent observers looking at the facts, as laid out in the SEC’s complaint, agree: Potential investors in the Abacus CDO would undoubtedly have considered the fact that the underlying securities in the portfolio had been specifically chosen by another investor who was betting against them (i.e., that they would default) to be “material,” that is, something that they would want to know. Goldman is swearing up and down that everybody involved was a “sophisticated investor,” well, let the buyer beware. But that argument, while potentially legally defensible, is highly unlikely to assuage any future clients of Goldman who might be wondering just whose interests the investment bank is serving in any given deal.
And Leonard recommends Steve Waldman with this:
My first reaction, upon reading about the SEC’s complaint against Goldman Sachs was to shrug. Basically, the SEC claims that Goldman failed to disclose a conflict of interest in a deal the firm arranged, that perhaps Goldman even misdirected and misimplied and failed to correct impressions that were untrue but helpful in getting the deal done. If that’s the worst the SEC could dig up, I thought, there’s way too much that’s legal. Had you asked me, early Friday afternoon, what would happen, I would have pointed to the “global settlement” seven years ago. Then as now, investment banks were caught fibbing to keep the deal flow going (then via equity analysts who hyped stocks they privately did not admire). The settlement got a lot of press, the banks were slapped with fines that sounded big but didn’t matter, promises were made about “Chinese walls” and stuff, nothing much changed.
But Goldman’s PR people have once again proved themselves to be masters of ineptitude. Haven’t those guys ever heard, “it’s not the crime, but the cover up”? The SEC threw Goldman a huge softball by focusing almost entirely on the fibs of a guy who calls himself “the fabulous Fab” and makes bizarre apocalyptic boasts. Given the apparent facts of this case, phrases like “bad apple” and “regret” and “large organization” and “improved controls” would have been apropos. It’s almost poignant: The smart thing for Goldman would be to hang this fab Fab out to dry, but whether out of loyalty or arrogance the firm is standing by its man.
But Goldman’s attempts to justify what occurred, rather than dispute the facts or apologize, could be the firm’s death warrant. The brilliant can be so blind.
The rest is highly technical, but it ends with this:
Assuming the SEC has the facts right, investors in Goldman’s deal reasonably thought that they were buying a portfolio that had been carefully selected by a reputable manager whose sole interest lay in optimizing the performance of the CDO. They no more thought they were trading “against” short investors than investors in IBM or Treasury bonds do. In violation of these reasonable expectations, Goldman arranged that a party whose interests were diametrically opposed to those of investors would have significant influence over the selection of the portfolio. Goldman misrepresented that party’s role to the manager and failed to disclose the conflict of interest to investors. That’s inexcusable.
Was it illegal? I don’t know, and I don’t care. Given the amount of CYA boilerplate in Goldman’s presentation of the deal, maybe they immunized themselves. But the firm’s behavior was certainly unethical. If Goldman cannot acknowledge that, I can’t see how investors going forward could place any sort of trust in the firm. Whatever does or does not happen in Washington D.C., Goldman Sachs needs to reform or die.
It seems some outlaws just aren’t that loveable. And Leonard adds this:
Of course, the contemporary regulatory climate in 2007 gave Goldman every incentive to play fast and loose. Since at least 1980, the dominant ethos governing relations between Washington and Wall Street has been to let the market govern itself. No matter what laws are on the books, if regulators don’t even believe in their own purpose for existence, financial institutions will inevitably act in ever more reckless and greedy ways.
Defenders of Goldman Sachs have seized upon the news that SEC commissioners split along party lines when voting, 3-2, to sue Goldman for securities fraud, as further evidence that the case was politically motivated. But one could also take the split vote as proof that Republicans still don’t have a clue how disastrous their laissez-faire ideology has been for the financial health of the nation.
Heck, it is kind of like that Bonnie and Clyde thing – the absurdly pretty duo do pull off some cool heists, and you have to admire their style and élan, and you wish you were in that exciting lawless world where anything is possible – but then the blood is real. That Bonnie and Clyde movie took our guilty pleasure in admiring the outlaw and rubbed it in our face. The Democrats are up to something similar. So you Republicans love that laissez-faire wild-west no-rules economic world, with its scamps and scams, but its freedom and big bursts of wealth for the bold and clever. And how do you like the blood? You remember that scene from the movie.
Leonard puts it this way:
We’re not going to fix our problems, once and for all, with any form of politically feasible banking reform. But if regulators get the message from the White House that their job is to regulate and Wall Street starts looking over its shoulder wondering whether a wrathful SEC is looking for excuses to bring the hammer down, then maybe, just maybe, our fortunes will improve.
The movie to consider is The Untouchables, of course. And you might want to read all ten thousand words of Matt Taibbi laying out the history of Goldman Sachs and the five bubbles that ends with this:
It’s not always easy to accept the reality of what we now routinely allow these people to get away with; there’s a kind of collective denial that kicks in when a country goes through what America has gone through lately, when a people lose as much prestige and status as we have in the past few years. You can’t really register the fact that you’re no longer a citizen of a thriving first-world democracy, that you’re no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.
But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus ten billion free dollars in a paper bag to buy lunch. It’s a gangster state, running on gangster economics, and even prices can’t be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can’t stop it, but we should at least know where it’s all going.
We do seem to have been in collective denial about that laissez-faire wild-west no-rules economic world, with its scamps and scams – like in a Hollywood movie. And its freedom and big bursts of wealth for the bold and clever sure are cool. But now there are no third parties who can sit back and admire the slick movers and shakers from their safe seat in the dark theater. And Hollywood never was real life. And after all these years of living here, watching a whole industry try to catch our collective dreams and nightmares, for profit, it seems that only now and then do these guys lets us know we’re crazy.
But there may be a movie here. Someone must have approached Goldman Sachs for the film rights.