Angelina Jolie and Louie Zamperini – A Broken Story

I have rarely looked forward to a movie release more than I did Angelina Jolie’s Unbroken. Zamperini is a hero, a national treasure, and happens to share two things near and dear to my heart: A faith in the one, true God, and the fight on spirit that is the heart of Troy (yes, in that order). He was from the same city I was born in (Torrance, California). The story of an Olympic medal winning track star who became a World War II fighter pilot who survived 47 days stranded on a lifeboat at sea before being taken as a prisoner-of-war by the Japanese army and ultimately freed is a pretty remarkable story. Angelina sort of told that part (let’s give her 20 minutes for narrative and two hours for blood lust torture porn). She got about 5-10 minutes in of his childhood and family life. And then the movie ended. Having spent 75 minutes more than she needed to on Japanese torture, she had to roll the credits. She managed to skip over 70 years of his life, like the years where he dived into abusive alcoholism, severe PTSD, and then went to a Billy Graham crusade, accepted the Lord, went back the next night, and devoted the next 65+ years of his life to a sober service to God. Louie believed in good and evil, and he spent his life seeking the former.

Jolie was given the blessing of making a movie based on a phenomenal book, about a phenomenal person. Jolie doesn’t believe Louie’s faith is relevant to this story, so she broke it out of the movie. She stuck to her dumbed-down Hollywood vomit about generic love, peace, and harmony rooted in the goodness of man blah blah blah. It was ideologically childish, creatively irresponsible, and cinematically insulting. She broke the story of a man who couldn’t be broken, and in the transcendental truths of life found redemption. If you can’t make a movie about THAT, you shouldn’t be making movies.

All the Presidents Bankers

The far left, wild conspiracy crowd, Occupy Wall Street folks (the three of them remaining), and those who find Elizabeth Warren intelligent all should have a new best friend in Nomi Prins, whose new book, All the President’s Bankers, has put ink to page on the strangest narrative of the 20th century one will find anywhere: That rather than being a remarkable century of technological advances, growth of market capitalism, improvement in quality of human life, and expansion of overall wealth, the 20th century was actually one insidious global conspiracy between elite bankers (just a small cabal of them, mind you), and various powerful politicos (mainly Presidents). In fairness, the extreme leftist, Prins, is not so much launching a partisan attack as an ideological one. She is unable to hide the fact that she loathes free markets as much as she does powerful banking, and the book is a 425-page collection of conspiracy theories, wild accusations, and drama-laced inferences. She provides good historical anecdotes at times, and should be commended for various moments of intelligent critique (she lambasts the new Dodd-Frank, but mostly for the wrong reasons; she is ruthless to Robert Rubin; etc.). But the book does little to live up to the inexplicable hype that was initially given it.

One gets the impression reading her work that she does not so much possess a flawed economic worldview as she does fail to possess one at all. Her refusal to touch the greatest example of public-private malfeasance in human history (Fannie-Freddie) is quite telling: Prins is not concerned with government power run amok (indeed, she wants MORE government power over seemingly everything); and she certainly is not worried about monetary policy run amok (though she begrudges what she believes to be Greenspan, Bernanke, and Geithner’s contact with the banking community leadership, she doesn’t offer a word of indictment for the easy monetary policy of Greenspan’s 2000-2006 monetary policy); NO, what Prins begrudges is not big government or a big Fed, but rather big banks. And how does one prosecute a case against big banks when the legitimate arguments against them would take careful argumentation, logic, and critical analysis? Why, by poisoning the entire thing, of course, with inflammatory rhetoric and class warfare.

The idea that big banks do systemic damage when they lend money out (vs. borrowers doing systemic damage when they do not pay it back) is a popular enough idea that I can forgive Prins for repeating it on nearly every page of the book. Sometimes her logic runs away from her, and she says some things I am sure her editors regret. The major mistakes Prins makes are not uncommon enough to warrant any further consternation than her entire class of Warren-ites deserve. She painfully begrudges the idea that the top 1% have seen their wealth grow 98% over the last two decades while the bottom 20% have “only” seen their wealth grow 21%, a begrudgement that I assure you she did not run past those who have seen their wealth grow 21%. But besides random head nods to the income inequality fad, the real point of Prins book is to suggest that we have a permanent and insidious partnership in the deepest levels of American society between American banking and American government, and that it must stop.

What must stop, of course, is a government that is large enough and powerful enough that any kind of government doll and trough and Christmas tree even could exist … A credit-driven society where debt bubbles are allowed to form and then banks are blamed for their fallout (vs. the borrowers) is problematic on many levels. I see much wrong in the present system, as does Prins, but I see virtually nothing that Prins is suggesting serving as thoughtful solutions.

A financial system free of moral hazard is a possibility in our modern society. No free marketeer ought to desire a system where anyone is relieved of risk (or reward). An appreciation for what this type of system would mean to Main Street, and to the interest rate market, is a fundamental prerequisite to improving the present system. The glut of liquidity defining our modern financial system is a boon to big banks, and I for one would love to see the power that liquidity grants to financial institutions diminished. But until someone wants to address the source of that liquidity: A federal reserve tasked with financing a big government run amok, thoughtful writers like Prins and I will have to agree to disagree.

Double Down a Fascinating Inside Look at an Embarrassing Election

I was hesitant to take on the 475-page behemoth from Halperin and Heilemann when it arrived. I had pretty much left the misery of the 2012 campaign (and subsequent election results) in the past, and the degree of backlog I am suffering from right now in my reading list was not motivating me to take on this work (the book right before this was Geithner’s 550-page Stress Test and the one right after this is Prin’s 425-page All the President’s Bankers, which I should finish today). But I took on Double Down, and am glad I did. A few items worth noting by way of review …

The book is well-written, and frankly quite good at avoiding partisan biases and cheap shots. There was nothing from the authors that really got under my skin in reading the book. They were fair to Gov. Romney, objective in their treatment of Pres. Obama, and frankly, quite gifted at taking an 18-month campaign and making it interesting. The book’s sequence was quite compelling – going from Obama’s first several years in office as a precursor to why his re-election campaign was going to be so challenging – to the post-2008 preparations of Mitt Romney’s second attempt at the Presidency, to the circus clown disaster that was our Republican primary, and then through the entire Obama vs. Romney saga of the fall. It was thorough. It was well-written. And, for this conservative Republican who cares so deeply for his country, it was depressingly painful.

The reality of the 2012 election is that Obama was irresistibly beatable according to any political metric one looked at. His rank hypocrisy on the use of PAC money, the extraordinary skill and discipline of him and his team in prosecuting a campaign, his ability to raise money, the embedded benefits of incumbency, and his virtually 100% market share of a key voting bloc (African Americans), all started the race off with some significant hurdles to overcome for a would-be challenger; BUT, he was unpopular, the economy was not good, the charm and aura of all his BS promises had long since blown away, and independents had turned on him. Obama was beatable, and my reading of Double Down reinforced for me how unforgivable it is that this opportunity was missed by the Republican Party.

The biggest think that stuck out to me in reading the book was how painfully obvious it was very early on to so many in the higher chambers of Republican leadership that Mitt Romney was just simply not going to win this election … It would appear that the skeptics of a Romney candidacy were validated through their whole sequence of thoughts (all of which track my own, as I documented from 2009 on) … (A) That if Romney were elected, he’d be a fine and capable leader and likely govern the country quite well, with a managerial skill more than an ideological one, but with a “fix-it” corporate boardroom approach to much of our economic woes, which frankly may have been exactly what the country needed; but, (B) The country would have a very hard time connecting with someone as awkward as Romney personally and more importantly, as filthy freaking rich as Romney; that (C) He would be prone to gaffe after gaffe after gaffe, not because he was undisciplined, but because the types of things he was saying were totally intuitive and natural; and (D) At the end of the day Romney would not be a compelling enough reason to vote Obama out given conservative opposition to Romney’s own health plan and independent distrust of Romney’s alleged lack of empathy for them … I think this is exactly how the entire thing did play out.

Now, it is VERY important for me to point out: I am not aware of anyone who believes that, once the GOP field got set, there was a candidate up there (in the 2011-2012 context we were in) who had a prayer of beating President Obama OTHER THAN Mitt Romney. If they do, they are wrong. I will be the first to say that amongst that group of Saturday Night Live characters, Romney was the nominee who had to happen, though I say that partially because of Gov. Perry’s inexplicably poor showing, most unfortunate back surgery and subsequent medication reality, and his total lack of national strategy and campaign formation. On paper, Perry was formidable; in 2012, he was among the worst of the candidates. Romney was the horse the GOP had to ride on, and no criticism of his likelihood to win the election will ever change the fact that in that putrid field of candidates, he was the best we had.

But therein lies the rub: the election was really over at that time. History can never capture adequately how much damage the Republican primary did to Mitt Romney. He got caught in ridiculous gaffe after ridiculous gaffe (“I’ll be you $10,000 that …”; “corporations are just people”; “my wife LOVES American cars – she has a bunch of Cadillacs”); etc. etc. etc. I wince just typing it all. But gaffes asides, the “I don’t worry about the 47% one” not actually mattering until September of 2012 though uttered much earlier, the primary forced Romney to play small ball for months and months with people he should not have been on stage with. Did our party seriously ever entertain the idea of “9-9-9″ as a real economic policy from a pizza company CEO who no one bothered to check had a closet full of sexual harassment cases against him? Does anyone honestly think that a Congressman who took millions of dollars from Fannie Mae as a lobbyist after leaving the Congress in an ethics scandal and then moving on to his third wife after an adult lifetime full of affairs was going to become President (no matter how sharp and awesome his debate eviscerations of poor media morons was)? The book is most interesting in laying out the strengths of Rick Santorum vs. his not-ready-for-primetime candidacy. On one hand, with virtually no resources and no infrastructure, he won a bunch of states and made the primary last months longer than it needed to; on the other hand, he refused to let up from showing the country exactly why he was never going to be electing President even when he was picking up steam. I can actually criticize the Bachman, Cain, Perry, Gingrich, Santorum cabal all I want, all of whom I have met and all of whom I have some positive things to say about when we are not discussing their Presidential prospects, but the truth is this says something about why Gov. Romney was never going to win as well: The American people were doing everything they could possibly do to avoid nominating Romney. They tried on every single dress in the closet, some of which were NOT flattering, before finally wearing outfit Romney to the dance. A compelling and attractive candidate who the party could rally around in a meaningful way would not have lingered at 25-30% support throughout the primary. I agree he was our best shot, but this was the worst field in my lifetime, and that tells you so much of the story of 2012.

The book added value in filling in for me what a complete creep and reprehensible human being Jon Huntsman is. I also do not feel that I had a thorough enough understanding of how much damage Donald Trump was doing to the party and to Romney with his constant antics, and I now in hindsight agree with Mike Murphy that had Romney called out Trump in a “Sister Souljah” moment, it may have been good for his campaign. The book also gave me a better look at the facade of a person Barack Obama is, but the masterful campaigner he is, totally disinterested in governing, but obsessed with winning. It would be impressive if it were not so disillusioning.

I have to save my article about the 2016 race for another time and space. It will come down to our candidate, and it will be a long-shot. Gaffes will happen. The media will be unfair. But what can not happen ever again is for the media to be right. I am glad I read Double Down, painful as it may have been, and hope the knowledge of the past – the lesson of this immediate history – can be fully absorbed by the party of Lincoln. The progressive agenda is failing this country. But whether we conservatives like it or not, leadership will be required to re-assert a voice in the national agenda. Reading this book may give those on our side a renewed understanding of what we need to do better. History is on our side.

Geithner’s Stress Test Does Nothing to Relieve My Stress

I have been looking forward to reading the memoirs of Secretary Geithner ever since he left office. I am not a fan of the Secretary’s, but the core of my dislike for his work as Treasury Secretary is very different than the most oft-cited reasons for folks’ disdain. He is an intelligent guy, and no doubt was driven throughout 2007 and 2008 (thinking back to his time at the NY Fed) by an intense desire to right the ship of what was America’s economic catastrophe. I hoped his book would provide a better color or insight as to why they did what they did, and perhaps allow him to shake off a bit of the political lap-dog reputation he earned by essentially never once calling out President Obama. The book left me with a lower view of the Secretary than I had before, though I want to be clear as to why that is, and I want to re-visit much of what took place from 2007 through 2009 so that Geithner’s view on these things can be better digested.

Let’s start off with some of the early turn-offs. His calling of Dinesh D’Souza a “dick” early in the book does not set the tone for a serious tome. But then again neither does his snarky treatment of what he calls the “moral hazard fundamentalists”. He uses the term “Old Testament crowd” over one hundred times in the book. The idea that a serious policymaker cannot see the credible legitimacy to those who fear moral hazard precedence in policies of continued international finance backstops is a tough pill to swallow. Geithner has some legitimate points to make about some of the actions they took during the crisis, but I believe the weight of those points is entirely lost by the dismissive and patronizing attitude Geithner takes towards the other side.

One of the more difficult parts of the book to read is Geithner’s coverage of his years at the New York Fed prior to the crisis. I challenge any reader to tell me they got a different interpretation of Geithner’s version of the story than this: I was worried about excess leverage; I was worried about inadequate transparency in the derivatives market; I was uncomfortable with the lending standards in the housing market; I felt there was too much accommodation in monetary policy; BUT I was the victim of a Wall Street that wouldn’t listen to me, a Fed Chair who had his own ideas, and research I didn’t write telling me that housing problems would have no impact. The entire section is the opposite of the mea culpa I expected. It is a really feeble request for exoneration, or at least it reads that way, and it left me as a reader frustrated and not amused. I mean the amount of times he says that “I warned …” and “I expressed concerns …” and “I knew that …” is just insane. There is no documentation of his prescient but frustrated attempts to prudently save the world. There are lots of contrarian evidences (he voted FOR every single interest rate decrease; his Fed published the paper saying there was little systemic exposure in the economy to housing; etc.). We are to take his word for it that he was a “chicken little” being rebuffed by more powerful forces. His version of the story doesn’t pass the smell test. Geithner faced a Herculean task in this book to try and rationalize his post-crisis decisions; the section of the book focused on rationalizing his pre-crisis decisions is wholly unconvincing and frankly rather insulting.

There are a few little things the Secretary should be called out on. It isn’t a hyper-prevalent theme in the book but any time the subject of Fannie/Freddie came up, Geithner threw in an anecdotal comment about “the efforts the Clinton administration and Greenspan had made to reel in the leverage of Fannie/Freddie”. This is so demonstrably false and contrary to the indisputable testimony of history that one wonders who Secretary Geithner, an intelligent man, thought he was fooling. The book doesn’t so much set any records straight as it does attempt to assume facts not only “not in evidence”, but directly contrary to the evidence. It is unfortunate, because he had an opportunity in the book to defend some of the actions taken by the Fed and the Treasury which, while hyper unpopular, deserve some defense. But things like claiming the Rubin/Greenspan cabal of housing bubble-blowers were trying to rein in Fannie leverage is unforgivably disingenuous.

For Secretary Geithner, the “post hoc” of the stress test plan of 2009 being a resultant financial recovery is indisputable: The good things that happened in late 2009 had to have happened because of what they did in early 2009 (i.e. announce a stress test that would force more capital in still-troubled financial institutions and presumably generate confidence in stronger ones). But he is missing something that warrants attention: The adjustment to mark-to-market accounting made in March of 2009. Let’s say for a moment that Steve Forbes and Brian Wesbury and many others are off their rockers that the strictness of FASB 157 (mark to market requirements) were to blame for much of the financial meltdown, and equally insane to believe that its repeal was the major catalyst to a healing of the nation’s financial system … Wouldn’t their theory still warrant SOME discussion, even if just to dismiss and refute? In a 538-page book I find it painfully disingenuous that this subject doesn’t receive a single word of attention.

If I ever write a memoir I hope I will not use it to “settle scores”, but I imagine it is highly tempting to do so. Geithner has no reservations about using the book to play out his internal feud with Larry Summers, to pick on former FDIC chair Sheila Bair, and yet to reaffirm the impenetrable wisdom of the Holy President Obama at every opportunity (the man who, inexplicably, picked Geithner over Summers). The self-serving nature of this component to the book is unfortunate. I suspect, though I may be disappointed again, that when Ben Bernanke’s book comes out we will not be subjected to so many personal little scuffles and feuds. It is unbecoming.

My final major criticism of the book is the completely fallacious but totally taken-for-granted assertions about Main Street’s innocence in the Great Recession. Secretary Geithner writes over and over again that people were being evicted from their homes “for no fault of their own”. This is just patently false and while I have always understood the political wisdom of saying such nonsense, I am getting tired of it. Five years later can we be honest and admit that the vast majority of people who lost their homes themselves committed some act of financial irresonsibility? Is this seriously even controversial? Since we know it to be true, what is the merit in acting otherwise? Let’s all do a big first step together here and admit the real nature of the societal problem. The secretary does no one any favors by excusing the financial irresponsibility of all the actors in the Great Recession.

There are some fascinating parts of the book that I will briefly mention. The contempt Geithner feels for then-SEC Chairman (and my former Congressman) Chris Cox is not exactly disguised in the book. It seems to mirror the impression I get from Secretary Paulson’s book and other insiders I have discussed this with that they collectively feel Cox’s demeanor throughout the crisis was utterly useless. If, in fact, Cox did close out the famous night-before-Lehman-fell meeting with a speech thanking all the Wall Street firm heads “for their patriotic service to our nation”, I have to say that is one of the most awkward and wince-inducing things I have ever heard. Overall the impression I have been given that Chairman Cox spent the entire crisis as a deer-in-the-headlights is reinforced by Geithner’s book.

Geithner’s admission that he pressured Wachovia and Sheila Bair’s FDIC to take the $1/share offer from Citi (with billions of dollars of FDIC support) over the $7/share offer from Wells Fargo (with no FDIC support requested) is dumbfounding. His reasoning is perhaps worse: He feared that no one would take a government seriously that changed their mind for a better offer? Huh??? Who would take seriously a government that didn’t?

At the end of the day, Geithner’s book does something very important for those of us who are students of the great financial crisis of our day. Most critiques of the way policymakers handled various parts of the crisis impugn motive and make assumptions (sometimes very reasonably). What this book does for me is crystalize beyond any shadow of any doubt that at least Secretary Geithner, and I suspect a great deal of other monetary policymakers, view ongoing financial crises as part of the DNA of a modern economy. They do not believe there are structural impediments that cause boom/busy cycles; they simply believe that full blown financial panics are supposed to happen, and central banks are then supposed to act (whereby once one crisis is resolved policymakers are to wait for the next one to extinguish). I do not merely mean that there will be the natural ebb and flow of a business cycle, a contention against which there should be no argument. I mean that Geithner and his ilk believe in the core of their being that financial crises are part of the deal – they cannot be prevented – and a central bank exists to deal with them when they do. His book reinforces this view from page 1 all the way through. That lens is how the Secretary saw the great crisis of 2008. I do not agree with him on his fundamental premise, but if I did it would not be too hard for me to agree with his underlying conclusion. But there are structural causes for the various crises we have endured as an economic society, and those causes can and should be remedied. Reading Geithner’s book, a man whom I have no doubt is a decent person and faithful disciple of the economic worldview he believes in, I would say that it is safe to conclude that we are a long way’s off from any structural resolution.

P.S. – I would be remiss if I didn’t point out something Geithner says word-for-word on pp. 381-382 of the book, something that I believe tells me all I need to know about the fallacious thinking guiding our Treasury Secretary in the post-crisis recovery period. “The biggest driver of the foreclosure crisis wasn’t underwater mortgages. It was the weak economy. Too many unemployed and under-employed were having trouble making their mortgage payments”. This is the sort of “main street is a victim” mentality that drives most of the post-game commentary on the financial crisis, and in this case I believe that Secretary Geithner actually believes this. He is wrong, and in reality, he is obscenely wrong. Well over 90% of foreclosures came from people with the same jobs they had when they bought their bubble-priced home. People walked from their mortgages because they had negative equity and, well, didn’t care anymore. The modification data bears this out as 70% of people who got mortgage payment relief simply re-defaulted within a year. I don’t mention this to isolate Geithner’s errant thinking, as his narrative is the consensus but mistaken view, but it is telling that our own Treasury head could get something so important, so wrong.

P.S.S. – I would have loved to have spent this review defending some of the unpopular decisions Geithner made that do, in fact, deserve defense. His book forced me to take the review in a different direction.

The Buy Side Reviewed

I will let you in a little secret (though I think I admitted this in my review of Wolf of Wall Street already … I will read any book and see any movie that comes out regarding life on Wall Street. I can know ahead of time that it is going to be cartoonishly stupid, and they often are, and I will still read or see it. Some are quite serious in nature (see my lengthy list of reviews covering the financial crisis of 2008), and some are entertainment-driven (the Wolf of Wall Street is a case in point). Michael Lewis may be known to many of you for Moneyball and The Blind Side, but the book that made him famous, Liar’s Poker, literally began a genre of books describing the excesses of Wall Street behavior. I’m not sure that any book in the genre since Liar’s Poker have been quite as good, but many have tried with varying degrees of success. And I read all of them.

Part of me thinks I read all of this stuff because it just fascinates me what people think about the financial advisory profession. I am a corner office managing director guy at a huge Wall Street firm, but I eat dinner with my wife and kids almost every single night. I’ve seen plenty of folks misbehave, but not any more than at an action sports trade show or a real estate office holiday party. It is the BUSINESS of Wall Street I love – the business of advising on capital. In case you haven’t heard me say it before, I LOVE free market capitalism, and there is no free market capitalism without capital markets. Therefore, I love the business of capital markets. And in the United States of America, we call that business “Wall Street”, so there you go.

Anyway, now that my little secret fetish is out (regarding guilty pleasure movie watching and book reading), let me explain what I was expecting out of Turney Duff’s The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess, and let me tell you what I got instead. I was expecting another infantile tale of some piker who, imagine this, liked drugs and sex – a lot. I was expecting a book claiming that every single person in a 50-mile vicinity of the Hudson River lives the same way. And I was expecting a book where a failed piker would blame Wall Street’s business immorality for his lack of success in the business. What I got, on the other hand, was very, very different.

I am not sure I would call the book a mere story of a Wall Street burnout. First of all, the real-life narrative itself is quite rare. For a young man educated in Ohio, a state many Wall Street elites are unaware is a part of the union, to become a prominent buy side trader is rare enough. But for the path to that trading job to have been an admin assistant job on the retail side of the business is utterly unheard of. Mr. Duff describes his journey with skill and literary flair. By the time he ends up at Galleon Group, a massive hedge fund which has since blown up behind the insider trading convictions of its key personnel, I am already enjoying the book, and realizing it is not going to be at all what I expected.

Duff gives readers a far more sensible and credible explanation of what he did for a living than many attempts at describing the business do. Unlike the pathetic scene in Wolf of Wall Street where Leonardo Dicaprio starts yelling to the FBI about “collateralized debt obligations” (before there was such a thing, and something he to this day would have absolutely no knowledge of or participation in whatsoever), Duff does not merely throw out finance-sounding vocabulary to tease the readers and get back to the stories of sex and drugs. Yes, there are a lot of stories about sex and drugs (more drugs than sex), but the book doesn’t insult its readers with disingenuous or vanilla descriptions of high finance. It is comprehensible but sharp, and that is a tough thing to do.

The book does go into exhaustive detail of the demons which brought down Mr. Duff’s career as a trader. In fairness to the author, though, it simply does not read as a glamorization of that lifestyle. Jordan Belfort agonized his readers with an almost frat-boy like description of his shenanigans in the Wolf of Wall Street book (which he pretty much had to do because there weren’t ten pages of actual business material). Duff isn’t bragging. He’s confessing. And if you aren’t rooting for him throughout the final chapters of the book to find recovery, to find sobriety, and to find God, then you just aren’t human.

The book really is an addiction tale more than a business thriller, but it is compelling, honest, and extremely inviting. I spent some time reading some interviews Duff gave after the book came out and he blew me away with his candor. There is no attempt to demonize all of Wall Street – quite the opposite. There is no juvenile story of how “Wall Street polluted me and made me do it”. He is a recovering addict who has been blessed with an extraordinary writing skill. I, for one, hope he’ll write again. This “genre” needs more writers like him. Michael Lewis worked in finance for about ten minutes and has spent twenty-five years getting rich from his moralizing, hypocritical tirades (though he is a remarkable writer, I confess). I do not know what the future holds for Turney Duff, but if he keeps his hands off a highball and on a keyboard, I am positive the best days of his life are still to come.

Because life on Main Street and Wall Street both testify to the powerful adage: Don’t quit before the miracle happens.