Rare is the book about modern finance that has me nodding vigorously along with every sentence, pausing at points to muse that someone has finally, really, truly gotten it -- and that maybe it's time for me to give this Wall Street stuff a rest, and go back to writing about Tila Tequila or Jenny Sanford or whatever is driving page views these days.Such was the case with the London-based critic and novelist John Lanchester's trenchant new book, I.O.U.: Why Everyone Owes Everyone And No One Can Pay -- for the first hundred pages or so. But the a single sentence -- about the widespread indignation that London financiers harbored for being categorically blamed for the financial crisis -- stopped me cold.
"Bankers have been careful not to show just how much they've minded being the target of such generalized opprobrium."
Yeah, not over here they haven't. Financial shenanigans may be global these days, but if there's one arena where American bankers have held truer to modern capitalism's supposed esteem for "transparency" than their international counterparts, it's in reacting to the generalized contempt of an underemployed, debt-enslaved citizenry for whom the one small victory in this age of financial insecurity is the psychological security of finally having it a matter of public record that our financial troubles aren't entirely our own doing -- that they were, in fact, the deliberate design of the same rapacious industry that siphons $35 from our checking accounts for every inadvertent $1.18 overdraft.
And God knows why they care what we think, with their recordbreaking earnings keeping them in recordbreaking bonuses. Maybe a temporary curtailment in their NetJets privileges has damped the mood?
But they do care. Deeply. So deeply that certain members of our nation's financial oligarchy have, since the panic's initial terrors subsided, appeared congenitally incapable of concealing their outrage over all of the outrage directed at them.
There was Jake DeSantis, the AIG Financial Products trader who resigned from his job on The New York Times op-ed page with an angry letter chastising his boss for having the audacity to ask him to repay part of the hard-earned seven-figure retention bonus he received for his year working with the firm that singlehandedly sucked $183 billion out of taxpayers' pockets.
And there was Skip McGee, the Lehman Brothers banker who, in the midst of that firm's trillion-dollar bankruptcy, snagged a yearly retention bonus estimated to more than 20 times DeSantis's by agreeing to stay on with the Lehman broker-dealer unit's new owner, Barclays Capital. And who, a year later, was still seething so rabidly over an alleged comment that his teenage son's history teacher had made about Wall Street "sleazeballs" that he penned an apoplectic five-page letter demanding her termination. (The teacher kept her job, but the principal "resigned" last week.)
Still, I had heard of no plan for any sort of public up-close-and-personal plutocrat-on-plutocrat spectacle to give voice to the inchoate counterrevolution, no Millionaire's March offering group catharsis to the angry wealthy white. But on Tuesday, January 26, I received a mass e-mail from Schwartz Communications with the subject: "Wall Street Strikes Back at White House."
The Gathering Storm
The release arrived on behalf of one Thomas Belesis of SaveWallStreet.org, which billed itself as a "New non partisan organization that is dedicated to bringing the pride back into Wall Street" -- which, it humbly reminded readers, is "an economic engine for the city of New York and the United States."
The email promised the presence of "hundreds of brokers and traders" and "financial leaders from throughout the region" at a rally the following afternoon on the 23rd floor of 14 Wall Street, with leaders finally "speaking out about the recent comments of President Obama."
I forwarded the email to the DailyFinance listserv. "A Wall Street tea party? It can't be for real, can it?" someone replied incredulously. "A 'Billionaires For Bush' sort of thing?" Another editor, doubting the group's veracity but clearly hip to the British slang for "penis," wrote, "John Thomas Financial? Oy vey."
Befitting such a rare opportunity to hear firsthand the pent-up grievances of plutocrats, we arrived on time at 12:30 P.M. After explaining semi-politely to the lobby security guards that the Lost Decade of Press had left press passes in short supply, we were allowed upstairs to the offices of John Thomas Financial. A receptionist marveled -- Wow, everyone is coming to this thing! -- before ushering us through a maze of hallways, past numerous artistic renderings of the Charging Bull, a large wall-mounted aquarium, and four or five secured entrances onto the trading floor.
We entered a sprawling 42,000-square-foot affair containing the promised hundreds of traders and brokers, female attendees brandishing digital cameras, and something I'd never seen before: a soda machine stocked exclusively with Red Bull. What I did not see were any identifiable "financial leaders," barring former Treasure Secrectary Hank Paulson, who appeared to be holding the attention of at least some of the room, from the trading floors' numerous high-def plasma screens, as he spoke on CNBC about the latest round of Oversight Commitee inquiries into the interminable AIG scam.
It was not hard to divert attention away from the hearings, in part because the legislators line of questioning seemed to have lost considerable focus in the 14 months since the inquiry into whether Paulson's old deputy Neel Kashkari was a "chump."
The Clouds Break
There was an amped-up, if also somewhat listless energy pulsing through the room -- something like the last week of high school, if there were magnet schools for phys. ed. The dress code brought to mind the sort of attire the cast of Jersey Shore might wear to a casting call for The Apprentice: iridescent three-piece numbers buckling slightly to contain musculature (occasionally flexed, presumably for the few girls in attendance). One fellow's forehead was badly sunburned, and I was not reminded until much later that the existence of tropical locales and air travel might serve as an alibi. Where tans are mandatory, as they apparently are at John Thomas Financial, one can be forgiven for occasionally dozing off on the tanning bed.
In the middle of all this, before a microphone stand and flanked by roughly 15 other men, stood Thomas Belesis. Whatever role physical appearance played in the brand that John Thomas Financial was hoping to convey -- and it seemed from all indications fairly central -- Belesis appeared its platonic ideal, the entourage conspiring with his relatively limited stature to project the image of a man who warranted bodyguards. In addition to the good 18 or 20 cameramen assembled, several bronze-complected women dutifully aimed handheld cameras at him. Someone finally figured out how to turn off CNBC. And there was silence.
What followed were two speeches of profligate inanity. Belesis referenced the Declaration of Independence, although I believe he referred to the "Constitution" in doing so, and then possibly compared the humble beginnings of the nation with the humble beginnings of John Thomas Financial. Then, to raucous applause, Belesis introduced an attractive, tanned, silver-haired man named Bruce Blakeman, evidently some sort of would-be politician, although this was anything but evident during most of his speech. (Deeper digging revealed that Blakeman, a former member of the Port Authority Board of Commissioners, is best known for being the ex-husband of Nancy Shevell, a trucking heiress who dated Paul McCartney after his divorce from Heather Mills.)
In fact, it is hard to say what exactly was evident from his speech, other than abiding, nonspecific disapproval of President Obama. And he wasn't alone, although he was certainly rare, in the sense that as critics of the president he was clearly capable of making Sarah Palin sound erudite -- and I sincerely wish that were an exaggeration.
Because if Bruce Blakeman had even so much as flirted with coherence, a casual constituent might have extrapolated from the single titular "fact" to which he made liberal and repeated reference -- that the financial services industry deserved to be celebrated and nurtured by the government on the basis of its "disproportionate" contribution of 20% of New York state tax revenue -- that Bruce Blakeman's understanding of the meaning of "proportion" might be radically different from the norm. And that it would be only logical to argue, in a world in which Bruce Blakeman's definition of what was "proportionate" were the accepted standard, the government ought to fund its wars and schools and police departments and toxic-asset-relief regimens the way ATM machines do, by collecting flat annual fees from every man, woman, and child, regardless of income, wealth, age, or employment status. Covering the government's projected expenditures for the fiscal year 2010 would cost an estimated $21,000 a head, a sum which when multiplied by the median New York household size of 2.61 exceeds the state's median household income by about $1,370, or an effective median tax rate of 107%. Such a policy would seem at least as difficult to endorse as it would be to enforce.
All of which is, at any rate, just a rather verbose way of saying that it was unmitigated idiocy, not policy, that Bruce Blakeman was purveying here. When the floor was opened to 10 minutes of questions, it became clear that this had not deterred him from seeking to replace Kristen Gillibrand in the U.S. Senate -- but it did prevent him from articulating many objections to her voting record. Would he have voted for TARP? He wouldn't say. Health care reform? Sotomayor? Bernanke? He was not asked. "I can tell you one thing I wouldn't have voted for," he did say, finally: the American Recovery And Reinvestment Act of 2009. Why not? Because "it didn't work." And how had he arrived at this conclusion?
"I've been traveling around, talkin' to people from Buffalo to Rochester," he answered -- and then, to raucous applause and laughter from the audience: "And they ain't stimulated!"
The After Party
Shortly after the formal question-and-answer session, I found the women's bathroom equipped with a curling iron, a straightening iron, a tube of Oscar Blandi dry shampoo, a bottle of mouthwash and small plastic cups, and Victoria's Secret body sprays and lotions in an array of scents including Pure Seduction and Secret Charm. If the male-to-female ratio seemed as favorable to the fairer sex as it seemed among the staff of John Thomas Financial, it also seemed the fairer sex was not taking any chances.
When I returned to the trading floor, I found Belesis and some of his minions still surrounded by questioners. Dutifully, I walked over and did what I could to restrain myself from entering the conversation. To no avail.
"Sir, you keep speaking of Wall Street in terms of being an 'engine' of the economy. But isn't it more like the plumbing of the economy?" I asked. "I mean, do you really want Wall Street to be bigger and more powerful? What does it actually create?"
One of Belesis's more sober-looking charges interceded: Wayne S. Kaufman, CMT, whose business card identified him as John Thomas Financial's chief market analyst. "Well you know, the economist Robert Schiller, he recently wrote of the earthquake in Haiti, that if they'd had a better financial system, they'd be in much better shape." He went on: "If Haiti had a functioning government, they'd be in much better shape! If they had decent highways and a reliable power grid, if they any infrastructure at all, they'd be in infinitely better shape! If free markets are so virtuous, why did they fail to recognize that they could have gotten some great PR by doing a better job in Haiti? Did the free markets simply discount the likelihood of such a 25-sigma event..."
A slightly more rational member of the media interjected: "What specifically do you want from the Obama Administration?"
"Well, when Obama uses terms like 'fat cats'..."
This was not the first time the phrase "fat cats" had been invoked to stand as the supposed apotheosis of the administration's supposedly gratuitously inflammatory epithets clearly aimed at stoking class warfare. I cannot claim to comprehend the magnitude of the terms' supposed offensiveness to their ears; I can only say that I saw an episode of MTV's Jersey Shore in which a stranger at a bar (not mendaciously) accused Snooki of being "fat" and, in so doing, nearly touched off a second Peloponnesian War. And it was something like that.
"We're not opposed to all regulation. We just want to elevate the debate to a higher intellectual level, and away from unwarranted populist invectives like 'fat cats'..."
"Sir," I said, and then something along the lines of: "I don't know if you have read Too Big To Fail, but there's a very interesting passage at the beginning where it's noted that Dick Fuld's salary as the CEO of Lehman Brothers in 2006 was 10,000 times his starting salary as a bond trader at Lehman Brothers in the late '60s. If over the course of a generation, within Wall Street itself -- forgetting the rest of the country and the economy and all the other industries -- the gap between the wealthy and the rest of us has become so huge, well, how much would Dick Fuld have to have paid himself to merit the term 'fat cat' to you? The real unemployment rate is 18 percent -- how high does it have to go for the supposedly populist rage to become warranted, in your eyes?"
With this, I officially passed the line of Irritating and became Hilarious. "Okay," said Kaufman. "I think we're done here."
I did not necessarily disagree, although it had been my limited experience with institutions like John Thomas Financial that the task of entering terms like "John Thomas Financial" into the assorted search engines and databases with which the industry's dread regulators keep tabs on men like Blakeman and Belesis might stave off my own task's completion for a day or a weekend or so.
Googling John Thomas
John Thomas Financial was founded in 2008 by Anastasios (Thomas) Belesis, who prior to the rally had most prominently been featured in the media for supposedly dispensing financial advice to Duchess of York–turned–movie producer Sarah Ferguson, and receiving the 2009 Bronx GOP Man of the Year award -- a distinction for which former mayor Rudolph Giuliani appeared in a video saying, "Tom embodies the spirit of the American dream: the New York dream. The son of immigrants, Tom rose from humble beginnings to become a great success on Wall Street."
This is what it means to be a great success on Wall Street:
In June 2008, Belesis filed an affadavit in the New York State Supreme Court on the subject of his involvement with the InterOil Corporation, a former Enron subsidiary with a claim to a massive pool of natural gas off the coast of Papua New Guinea, a relatively fecund history of associating with share-price manipulators and, by the beginning of 2008, a major cash squeeze coming on. Belesis testified that he had essentially orchestrated a deal by which InterOil managed to raise $95 million through a private convertible debt offering in which John Thomas and other entities would eventually net nearly $6 million in fees.
Four days after the deal was signed, Wayne Kaufman appeared on CNBC to call InterOil his "favorite stock." The company's shares proceeded to jump above the strike price of $32.50 a share, forcing a conversion of the bonds to shares less than a month after the appearance. Within months after that, shares plunged below $10 a share. They have since rebounded impressively. The stock performance has been extensively probed by the blog White Collar Fraud.
According to the Financial Industry Regulatory Authority, prior to founding John Thomas Financial, Belesis plied his trades at seven firms -- Joseph Gunnar & Co., Harrison Securities, S.W. Bach & Co., Ladenberg Capital Management and First Asset Management, ATB Holding Co., and Gaines Berland -- at least six of which have been subject to sundry boiler-room probes over the course of Belesis's career, which began in 1996 at First Asset Securities, then known as Lew Lieberbaum & Co.
Lew Lieberbaum is probably the best-known of Belesis's former employers, thanks to a 1997 federal suit brought against it by the Equal Employment Opportunity Commission in which various female employees testified to having been subjected to a degrading work environment. The "daily torrent and virtual hailstorm of sexual harassment" on the trading floor has been documented in a 50-page complaint and gobsmacked media reports. Lesbian strippers were allegedly a regular fixture on the trading floor, and one dancer was asked to remove her labia ring so male employees could petition female employees to sniff it. Brokers were allegedly assigned to mop up the whipped cream and bodily fluids resulting from an exec's midday frolic with his secretary. A female employee said that refusing a male superior's sexual demands was grounds for termination; men regularly wiped food-covered hands on women's breasts; a junior partner sometimes picked his nose and then rammed his finger into female brokers' sandwiches. The complaint resulted in a $1.75 million settlement -- and sparked related cases.
Belesis's FINRA profile is similarly alarming. Investors have accused him of churning, fraud, excessive trading, breach of contract, and other violations. Regulators have ordered him to repay investors more than a million dollars. Belesis was fired from S.W. Bach in 2005 for misrepresenting his identity to a customer.
'For the Upmost Learning'
In response to a query about interviewing with John Thomas Financial, someone called BerkshireBull wrote on the Registered Rep message boards: "Never trust a man with two first names." Even if, as the John Thomas Financial website promises would-be trainees, "We utilize the finest institution for the upmost learning."
Because there is always another nickname, another Delaware corporation, another offshore bank account, another P.O. box registered in the name of another penny stock going to a hundred to dump on another sucker born every minute with guys like Tom Belesis. These are the guys who falsified the documents qualifying $7-an-hour strawberry pickers for McMansion option-ARMs, and their ubiquity in the American economy is the more mundane consequence of its epic failure to seriously police the financial markets. Perhaps what gets lost when we focus our ire on the too-big-to-fail fat-cat class is how many of the meatheads on the front lines of our financial frauds could never hope to set foot in a Goldman Sachs training class.
But they're an indispensable piece of the conspiracy, too, because their money is just as good as Goldman's at buying candidates like Bruce Blakeman, and their voices are even louder when they rail against big government and fill campaign coffers in hopes of dismantling the laws that might protect their victims because they truly believe the only mistake is getting caught, the same way they think that whipping out one's penis is the upmost in hilarity, because they are detestable children with a throbbing surplus of misappropriated self-esteem.
They have already proven that they will destroy the country if you let them, and the only thing you can trust them for is that they'll happily do it again and host a pep rally afterward to celebrate.
Revenge of the Wall Street Traders: The Fat Cats Strike Back