Yesterday we had the story of Bear Stearns, a Wall Street investment banking house going under and being bought out for pennies on the dollar. The reports included news that one investor (a single investor mind you) had lost $1 Billion in the debacle. Yet, it was hard to feel sorry for anyone associated with this failure, except maybe the receptionist at the front desk or a few secretaries and janitors. The news media always finds a way to get a shot of two or three people carrying their sutff out of the building in a box. Somehow it misses the exit of the fat cats in their Bentleys.
These are the same people about whom a year or two ago there were probably stories written about how they had just collected their $100 Million bonuses from all of the wonderful business they were doing by figuring out cool new ways to package up high-risk loans into investment pools and selling them to investors. These are people who lived by greed and who have now seen their fortunes wiped out by greed. How can you really feel sorry for that? They made huge amounts off these exotic investments that they created and managed, so why not loose huge amounts too?
So, Bear Stearns is gone and more may follow. The world will not end. The world as we knew it might end, but that was not a sustainable world anyway. Maybe the high rollers who worked there and created this mess can set up a card table and get three walnut shells and a pea and start another game. That’s what they had going this time anyway – a shell game, a scam.
I am not naive enough to believe that we don’t need investment bankers or that they don’t perform valuable services in our capitalistic system; however, I am naïve enough to hope that the world of investment banking doesn’t have to be filled with the kinds of fast-buck shysters that are getting clipped right now. There are other investment banks that didn’t jump into sub-prime lending and that didn’t leverage themselves to the hilt and that won’t go under in the current crisis. I, for one, wish them well and hope that they come out on the other side of this mess as some sort of example of how to run a good, honest business and still make it in the modern world.
All too often the “square” guys who are trying to do business is a fair, honest, open and conservative manner are held up to ridicule by the hip, “with it” firms that are played up by the press as defining that cutting edge of new ideas – an edge that sometimes, like now, comes back to cut both ways. The real unfortunate losers in this whole thing are the little, invisible investors whose 401K’s and savings are impacted by the scams that these shysters pulled on everybody.
It is also unfortunate that the guys at th top in situations like this seem to always find a way to avoid taking blame or getting hurt too bad. In fact many of the guys running failing operations this time are the same guys who headed up savings and loan companies when the S&L crisis hit several years back. You could say, "Won't they ever lear?" I'd say they've learned very well how to steal people's money in a way that appears to be legal. These are not dumb people who made dumb mistakes. These are very smart people who figured out how to gamble and win for themselves by using your money. And if they lose a gamble...Oh Well.
The good ole boys of Enron, who considered themselves to be smarter than anyone else and many of the other barons of greed, like the leaders at Worldcomm and Adelphia and Global Crossing and Arthur Anderson and so many other companies all ended up getting their due in the end. And off to the side, out of the glare there have always been the other players, the guys who weren’t gaming the system trying to make the extra buck. They get hurt by the scandals, too. All stocks in a segment tend to get hurt by the few bad eggs; but they’ll still be here tomorrow – plugging away to try to make an honest buck. Hopefully the Bear Stearns’ of the world will just fade away, and we may all actually be a little better off for their departure.