In the midst of the financial meltdown, everyone desperately looked for advice from someone who might actually know what to do to extricate the world from looming horrific economic catastrophe. Unfortunately, no such person surfaced. However, after the worst was averted, many luminaries surfaced with a proliferation of books and articles. The all-knowing served up various dishes that were flavored by various bits of, “I told you so,” to “Nobody saw this coming. Nobody.”
That there was no economic superstar who, by near universal acclamation, could be relied upon to find a way out of the quagmire seems, in many respects, odd. After all, there was no shortage of living Nobel Economics laureates, several of whom had predicted such a catastrophe. Further, the government overflowed with advisors at all levels but, apparently, no go-to guy or gal. Instead, the government seemed to be stuck with the dry-heaving Secretary of the Treasury, Henry Paulson, and his missives to quickly develop an action plan that could be sold to Congress.
Warren Buffet, on the night before the House vote on Paulson’s first 3-page vague bank bailout proposal, stated on the Charlie Rose show that he had full confidence in Hank Paulson to steer the ship during this bubble crisis. And being assisted by Tim Geithner and Sheila Bair added to his confidence on Paulson being able to get the job done. Contrary to Buffet, many were skeptical about a former Goldman Sachs CEO playing the part of honest broker. To this day, serious questions about the mindsets and motives of the players handling the crisis remain unanswered. Joseph Stiglitz in his recent book, “Freefall,” has revealed some of the more salient conflicts-of-interest, which occurred before, during, and after the debacle. Suffice it to say here that the political and financial inter-relationships of many of the key players were fraught with ethical dilemma.
The dilemmas persist. Most of the key men and women involved in creating the problems, hiding them, and ineptly trying to solve them are still in place. Most of the investment bank CEO’s are still working at their old jobs. Most of the decision-makers who precipitated the crisis are still in power in the government – in elected capacities, appointed positions, or as advisors. Other than being sullied in the press and, occasionally in public, most of these people haven’t missed a beat. One of the major reasons cited for their being able to save their skins is that they are the best we have – that, without their immense talent, the financial world would be adrift and rudderless.
Is the American public being traduced?
I decided to do a little economic thought experiment to put to the test my hypothesis that honest, unacquisitive world-class financial talent should exist somewhere on the grid. Enamored by the little models and graphs of the modern-day economist (apparently, it is difficult for an economist to get anything published without some mathematical modeling), I decided to build a graph – entirely subjective, of course. I am not a scientist, an economist, or even a Cargo Cult Scientist, as Richard Feynman described people who write goofy things and then make them look like science with hard math and statistics. I am simply presenting an annotated scatter-point graph with my subjective data points and names. It was created for one purpose – to make one think about people and greed, particularly so-called smart and/or influential people.
Brinks Robbers – They found the vault, cash and coins – but damn, got caught!
Average Joe – Works, keeps a neat wallet, can use an ATM, and watches TV.
Einstein – Lived modestly. Today, would not insist on granite countertops and stainless steel appliances.
Gandhi – Salt, strikes, and sit-downs demonstrated his enormous financial insight.
Obama – Financial knowledge derived from advisors; well-above-average personal ambition.
Nobel laureates – We’re talking just the economists here.
Christ – Chased the money changers. Selfless.
Volcker – Greed is a funny thing. A little too tight with Wall Street.
B. Gates – Always trying to innovate, but must protect turf. Greed wins by 4 lengths.
Blankfein – Substitute any investment banker CEO here. All out gaming the system.
Buffett – Natural-born financial genius. $ 5 billion Goldman Sachs loan – ugh! Surely he could have bequeathed his vast fortune to someone other than B. Gates.
Madoff – 40+ years as a broker-dealer, investment guru, working with and under the nose of government regulators.
So, what’s to be gleaned from the graph, if anything?
One noticeable feature of the graph is the mid-to-upper-left void. From that I suppose one could deduce that being greedy, but not astute, leads to something less than prominence – perhaps, business failure, poverty, or likely, jail.
There is another, smaller void toward the lower right. This seems to be a lonely place occupied by only the Nobel laureates in Economics. I should think that if we are looking for financially knowledge and adept people, who have academic ambition superseding financial and/or political ambition, we may have found who we need to solve some of the complex macroeconomic problems that confound us.
Next time, no – maybe still this time – let’s do more than listen to the commentary from that lower right quadrant.