Who would have guessed that the most serious wave of socialism wouldn’t bubble up from the demands of the unwashed masses but would walk over in Canali suits from Wall Street?
It’s been a long, strange journey, and it may get both longer and stranger, but it does look like the nationalization of key financial sectors will change the traditional way that we view – and or willing to accept – “capitalism at any cost” federal policies and from the notion that government is essentially the vehicle for concentrating great wealth among the privileged few.
It’s no wonder that average citizens are outraged, and the pundits oft-recited talking point about “Wall Street and Main Street” has done little to reduce the volume level of middle America.
Anger And More Anger
It’s not that average citizens are just angry because a handful of people have made billions of dollars. More to the point, their anger is fueled by a simmering, and now open, resentment about legal eagles and financial advisors being able to game the system to make extraordinary amounts of money. In essence, they made billions by setting up a system that paid them to produce nothing concrete.
It was all on paper as they conceived and created a financial system that allowed them to charge obscene amounts of money for managing that same arcane system and for delivering up the paperwork and validations that were made essential by their creations.
Tom Wolfe was right. They were masters of the universe, and they should have been. It was a parallel universe that they themselves set into motion and in which they reigned supreme, as attested to scene after scene of dozens of functionaries sitting in New York boardrooms, being paid handsome sums in exchange for reams of paperwork (and frequent political contributions) as part of a financial sector that was a shadow industry with a parasitic relationship with government.
FWMD
At least when some of us lost money in betting on Silicon Valley, we were putting our money on the ability of American inventiveness to create breakthrough products that we could hold in our hands. And despite the bubble that burst, we benefit from these products every day in our digital village.
Meanwhile, Wall Street thought of new ways to find the gray area, to build structures that would have made Rube Goldberg proud and to develop financial products that make the explanation of quantum physics easy to grasp. In doing this, they devised ways that they could be paid exorbitant amounts under the pretense that they were really entrepreneurs.
In the words of someone who actually still knows where to find Main Street America, Warren Buffett, these were essentially “financial weapons of mass destruction,” because the people raking off the big bucks had no skin in the game, and if a public or private project tanked, they still walked away with their paychecks.
Big Numbers
These days, Wall Street looks to Main Street to move it away from the financial precipice on which we are all perched, but in the interim, local governments like ours are left to analyze and plan for the impact of the Wall Street crisis on them – on investments of various public pension systems that have billions of dollars in their accounts, the impact on cash flow and the impact on any borrowing planned by public entities.
The public sector offers graphic examples of the price of Wall Street sign-offs, advice, approvals and authorizations. In a three-year period involving 24 transactions by Shelby County Government alone, the amount of fees paid to consultants, bond advisors, bond companies, bond rating agencies and bond lawyers totaled $11,072,748.88.
One refinancing alone cost $3.4 million in fees, and over the three years, one law firm was paid $1.4 million, underwriting fees were $3 million, rating agencies were paid $680,000 and financial advisors made $1 million.
Rub The Rabbit’s Foot
It’s not as if somehow county government was unique in this gouging, because similar charges were connected with financial transactions for other local governments and governmental authorities.
Times are hard enough for local government. Already faced with drop-offs in revenues caused by rising gas prices and lower consumer spending, financial officials now know that they will face another tough budget process for FY 2010, but in the meantime, most are left to cross their fingers that the unfolding financial chaos does not upend budgets for a current fiscal year that is only three months old.
