From The Publisher
Posted: 03/10/2008 - 11:37 AM
Author: Evan X
Of all the material I’ve read and all the experts that I’ve listened to over the years, the man who made maybe the most sense to me, in a trenchant way, was Richard Cohen of the Washington Post Writers Group. The relevant Cohen article was published in The Miami Herald on Wednesday, September 24.
I got that Herald on Thursday, September 25, in time to include Cohen’s article in last Friday’s issue actually, but I set it aside, in my loose file of material I can’t bear to discard. One reason I didn’t publish it on Friday last, or even Tuesday this week, was because you probably would not have paid the article the attention it deserved.
I retrieved the Cohen article on Tuesday, and after re-reading it, decided to edit it and include it as part of my personal column, so as to have it get a maximum of attention.
There is a Belizean version of the Nick Leeson/Barings saga: Something happened in Belize between 1989 and 1996 which set the stage for the Ralph Fonseca excesses and irresponsibilities of 1998 to 2004. I have friends who blame Said Musa for what happened, and I have accepted their arguments. In fact, sometime between 2002 and 2003, I can remember speaking as follows to Mr. Musa. “You know, we didn’t elect Ralph Prime Minister. We elected you. You are the one with the ultimate responsibility.”
Most Belizeans know that Said Musa and I had a special relationship. My friends feel that Said benefited far more from that relationship than I did, but that has never been an issue for me. I never envied Said his great successes, and always wished him well, until August of 2004. Since then, both my friends and my enemies have claimed that I always tended to let him off the hook. After reflection, I have to plead guilty to that charge.
As a Belizean national hero, Father of the Nation, and so on and so forth, Rt. Hon. George Price was Belize’s most powerful political leader in the last half of the twentieth century. Mr. Price was and is a living legend.
I believe that Said Musa, especially within the PUP organization itself, was always in the large shadow of the Leader Emeritus. I believe, also, that Mr. Musa knew this, and that he accepted it. That is my personal sense.
My friends believe, however, that Mr. Price was a political non-factor after 1996. I do not agree. I have always accepted Leroy Taegar’s analytical model where the PUP is concerned. In that model, Mr. Price remains an involved and intimidating factor after 1996. Mr. Price didn’t understand what Ralph Fonseca, Belize’s Nick Leeson (without the jail time, of course), was doing, but from the beginning to the end, all the evidence indicates that Mr. Price supported Ralph totally, unhesitatingly, and without reservation – to repeat, from the beginning to the end. Now, read Richard Cohen.
Of all the self-proclaimed experts I wanted to hear from about the financial crisis, the one I looked forward to the most was Nick Leeson, late of Britain’s Barings Bank. In 1995, he bet hugely on Nikkei futures (whatever they are) and lost something like $1.4 billion. Leeson was 28 and often drunk; Barings was 233 and in fiduciary senility. Leeson went to prison; Barings went bust – and Wall Street, without so much as a pause, went on its merry way.
Sadly, Leeson did not have much to say about the current financial crisis. Writing last week in THE GUARDIAN, he instead expressed bitterness that the former owners of Barings went on with their lives while he spent 4½ in prison. What he did not say, to the regret of us all, is how once again the kids were allowed to play with huge amounts of money without any adult supervision.
“I was astonished that nobody stopped me,” he wrote in his book ROGUE TRADER. “People in London should have known.” Indeed.
The theme in the current financial crisis is not, as John McCain would have it, greed, because that, like lust, will be with us forever. Instead, it is transparency. Leeson, you may recall, was dealing from Singapore in exotic derivatives that his bosses in London little understood. All they knew was that Leeson was putting huge profits on the books, not that those books had anything to do with reality.
Somewhat the same thing happened on Wall Street. The complicated, exotic and downright erotic financial instruments cooked up at the investment houses were, in fact, little understood not only by the buyers, but by the sellers as well. You can see that not only from what they said, but also from what they did: Lehman, Bear Stearns, AIG and others all held on to financial instruments that were worth less than they once thought. This was truly a case of the blind leading the blind.
“The problem is that nobody knows what any institution owns and what the terms of the securities they own are and what they’re worth,” New York Mayor Michael Bloomberg said Sunday on “Meet the Press.” What he’s saying is what others on the Street have been saying for some time: Nobody knows what these things – securitized mortgages, etc. – are worth. And, just to darken the mystery (and maybe your mood), no one knows the value of the underlying real estate either.
I started with Leeson for a reason. He is the personification of a generation gap in the finance industry. He was young and computer-savvy, and his bosses in London were neither. That was true on Wall Street, too. The very top guys really had little idea of what was going on below. Everything was going right. They were making lots of money, which they deserved – in their wonderful circular reasoning – because they were making it. This, I tell you, is the true magic of the vaunted market: It justifies both stupidity and greed.
The lesson of Leeson has yet to be learned. Financial markets have moved well beyond the trading of things that could be seen or measured or weighed. On Wall Street, older men employed the lingo of younger men to pretend they knew what was happening – but they didn’t.
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