Terror on Wall Street, a Financial Metafiction Novel (7 page)

CHAPTER SIXTEEN

  THE PROFIT IN POLITICS

Harry wrote three words on the board in succession:

1.  Problem

2. Cause

3. Solution

    
“We will be joined by some experts tomorrow who will tell us what they have learned about the damage that has already been done to the average investor, insurance firms, and pension funds.”

     Harry paused for a moment at the board, staring ahead as though he were deep in thought.

     “Professor?”

     “Yes, Mr. Brammon?”

     Harry realized that he had been staring into space.

   “Oh, excuse me … um, before we bring the experts in, I want to hear why you think we got into this mess, who’s to blame, and how another event can be avoided. Mr. Brammon, let’s hear from you first.”

      “Well, professor, I think that Wall Street is responsible for the problem and that it can be solved with additional rules and regulations.”

     “What about you, Mr. Rodriguez?  Do you think we can blame the whole thing on Wall Street?” 

     “Well, I think the problem is much deeper than you suggest. For years your country has been, little by little, destroying those elements of your economic system that had made it successful. In a free market system, funds flow to places where the highest returns are available.  This automatic system assures that goods and services are provided at the highest quality at the lowest prices. When you start tinkering with how resources are used, you run the risk that you introduce inefficiencies.”

     “So you agree with Mr. Brammon that the government is to blame, not because it didn’t regulate enough, but because it regulated too much.”

    “The government and the central banks that control the money supply are all to blame.  In a capitalistic system, returns on investments are allocated according to the risks involved, and the higher the risk, the higher the monetary reward. In my country – Mexico – our economic system does not work this way and so our people are not so fortunate.”

     “That’s an interesting theory, Mr. Rodriguez; but can you prove it?”

    “Sure I can.  Just look at low income housing, for example.  For the last fifty years, your politicians have been paying lip service to “housing for the poor,” and have invested large sums of taxpayer dollars into providing low rent housing for them (built by rich billionaire slumlords, of course, who were only happy to take the government money). The results were just more slums.

     “Then, after your housing projects failed, you started messing around with the housing market by guaranteeing mortgage loans. From a politician’s point of view, government guarantees were a cheap way of buying votes. It doesn’t cost anything – that is, until there are large loan defaults.”

    “I think you’re onto something, Mr. Rodriguez.  Ms. Baxter, I see you’re raising your hand.  Do you care to weigh in on this?”

     “Yes, I do.  Whenever you guarantee a loan, you also open an opportunity for a capitalist to figure out a way to profit from the guarantee. Anyone who knows anything about investing knows that the higher the risk, the higher the expected return.  Before we knew it, Wall Street was offering securities based on these ‘guaranteed’ loans.”

     “That’s right,” added Carlos.  “Whenever you start out offering a situation without risk, you attract the attention of Wall Street and the financial services industry. Banks, for example, under the Glass-Steagall Act, were prevented from getting into the housing finance business. Banks lobbied for years to have this restriction removed and, after twenty years and some $300 million later, they succeeded. The $300 million they spent bought the votes they needed to repeal the legislation.” 

    “Are you saying that our political system is corrupt, Mr. Rodriguez?”

     “It’s a matter of public record: just log on to the website that keeps records of campaign contributions and see the paybacks for lobbyists.  Even the former chairmen of Citicorp said that Glass-Steagall protected the economy. ”

    “What about the rules that the FHA has when guaranteeing housing loans?” Bob asked.

     “For the seller of housing, the government guarantee costs ½% of the loan and for the 20% down payment, the builder just jacks up the cost of the house and adds it to the selling price. Didn’t cost the buyer anything. In fact, it was cheaper to buy a house than rent one.”

    “Mr. Brammon says that regulation can get us out of it.  So, is it more regulation that we need, or less of it?”

    “I think we do need a Constitutional amendment to take the profit out of politics by imposing term limits,” said Snookie. 

     “But isn’t it true that nothing happens in a Congressman’s first two years?” asked Ike.

     Harry stepped in.  “Under the good-ole-boy system, maybe.  But if they all served for the same terms, there wouldn’t be such a buildup of power by a handful of people.  And it wouldn’t be profitable for big business to contribute to them.

     “Don’t you think we also need legislation to limit campaign contributions and to prosecute politicians who use their political position by breaking our laws?”

     Snookie raised her hand.    “Of course.  Politics should be a field that attracts statesmen, not future CEOs and board members.  Almost everyone in politics nowadays has at least one conflict of interest.”

     “Well, we have a lot to think about on the problems and their causes, class. But be ready tomorrow to also discuss possible solutions.”

     “He doesn’t ask for much, does he?” asked Ike as he and Snookie packed up their books.  Snookie looked at Ike with absolutely no expression. 

     “Ike Pendleton,” he said, reaching out with his hand.  Snookie took it firmly, like a man, as she said, “I know who you are.  Professor Mason introduced everyone.”

    “That’s some shake you have there.  I just wanted to offer you a more personal introduction.” 

     “I don’t date fellow students,” Snookie replied, and she turned and walked away.

     Carlos nudged at Ike with his elbow as he walked up the aisle to the exit.

     “Dude, did you get moded!”

CHAPTER SEVENTEEN

THE SIMPLE THINGS

. 

When traffic came to a standstill, Ike and Snookie decided to get off the highway and try to find gas.  It used to be easy.  Stop into a gas station, which you could find on almost any block, gas up your car, and step inside to grab some snacks in the mini market.  All of that had changed.  The first challenge was to find a station that had power and was open.  When they finally did, there was a line.  The government hadn’t even had the chance to impose rationing, yet.  And the price was subject to fluctuation as you waited in line.

     Ike and Snookie pulled in behind a line of cars waiting two blocks ahead of a large filling station.  After about an hour of waiting, the station put up a sign,
Out of Gas. 
Then all hell broke loose.

     First there was an orchestra of horn honking.  Then several cars screeched out of the line and peeled off down the road.  It was even worse at the front of the line.  There a big man, wearing a tank top which exposed huge biceps covered with tattoos, protested.

     “I’ve been waiting here for over two hours.  You can’t be out of gas!”

     He ran to the double glass doors of the station, which were locked, and furiously pounded on them.

     “Open up!  You’ve got a whole mini market full of stuff in there!”

     The man banged harder on the doors and the terrified Indian clerk inside cowered behind the counter.

     “You god-damned sand nigger!  Turn the pumps back on and open up the store!”

      The man’s anger was building to a crescendo. He paced back and forth in front of the store, swearing.  Then he hammered on the on the window again.  Finally he ran to his pickup truck, got in, fired it up, and drove it head on into the store, crashing through the glass.  He jumped out of the car and Ike and Snookie heard a series of shots. 

     Ike got out of line and accelerated away. 

     “We’ve got to get out of here!”

     “Is it really worth risking your life for a tank of gas or bag of potato chips?”

     “I guess, if you’re hungry enough.  You saw it yourself.  There was a run on the markets.  And when they ran out of food, the people wouldn’t accept it, so they just tore them apart.”

***

As they approached the outskirts of Gary, Indiana, the plumes of smoke that used to belch from the smokestacks of the factories had been replaced by clouds of smoke from a city that was burning.  Gary had always been kind of run-down, but now it looked like a war zone.  Armored vehicles from the National Guard patrolled downtown.  Police fought off rioting crowds in the city center, using water cannons and tear gas.  Ike and Snookie looked at the horror from outside as they searched for an open gas station.  As soon as he found a safe place, Ike pulled over.  They had come to a crossroads already, in just the beginning of their journey.

     “Looks like nothing’s open here, either.  Better get back on the road.”

     Ike looked at the map.

     “We can either go south on the 65 to the 70, through Indianapolis and Columbus, or north on the 90, through Toledo and Pittsburgh.”

     “What’s better?”

     “Your guess.  They’re probably both bad.  The southern route is 60 miles more, so we’d burn less gas on the northern, if we have gas. It also goes through Indianapolis.  We should avoid the big cities.  They’re probably worse than Gary.”

     “I guess we go the northern route, then.”

CHAPTER EIGHTEEN

HARRY’S WORKSHOP

Harry worked on his index cards in his study while Jennifer played with Jackpot.

     “What’s Cramer saying today, Jackpot?”

     “
Market is down.  Cramer says buy!”

    
“Harry, does he actually understand what Cramer is saying, or does he just repeat his phrases?”

     Harry looked up from his cards, appearing perturbed.

     “What?”

     “I’m sorry, Harry, I didn’t mean to interrupt you.”

     Harry paused and put the cards down. 
The most important person in my life, and I’m snapping at her.

    
“On the contrary, dear, it is I who am sorry.  What were you saying?”

     “I was saying: does Jackpot really listen to Cramer, or is he just repeating phrases he likes?”

     “Oh, I’m sure he listens.  In fact, Jackpot has as good a chance of beating the market as any top broker in any of the big investment banking firms.”

     “Really?”

     “Of course.  They don’t know any better than Jackpot.  Or Cramer, for that matter.”

    
“Cramer says buy!”

    
Jackpot ruffled his feathers and started making “door knocking” noises.

     “Someone must be at the door.  I’ll get it.”

     Jennifer went to answer the door and Harry went back to his index cards.

     “It’s Mr. Rodriguez.”

     “Show him in.”

     Carlos Rodriguez walked into Harry’s office just as he was hiding his index cards.

    
“Cramer says buy!”

    
Jackpot furiously nodded his head up and down.  Carlos motioned to the bird with his thumb.

     “Hello, professor.  Cramer?”

          “Everyone asks me about that.  Have a seat, Mr. Rodriguez, and meet Jackpot, Jim Cramer’s biggest fan.”

     “Hello, Jackpot.”

    
“Hello, Jackpot.”

    
“He’s cute.  You should introduce him to Ike’s monkeys.”

     “I’m afraid Jackpot has no time for monkey business.  Now what’s on your mind, Mr. Rodriguez?”

     “I’m having a struggle with my thesis on free market capitalism.”

     “What’s your quandary?”

     “My hypothesis is that a truly free market system will work, but I can’t find any models for it.”

     “You won’t.  There aren’t any.”

     “None?”

     “None.  Supporters of pure capitalism such as you, Mr. Rodriguez, argue that only a free market can create healthy competition by fostering more business and reasonable prices.”

     “Yes, yes, it can.  But I need to show that.”

     “The critics are against you on that.  They point out that when companies are truly free from market regulation, they grow and form monopolies which, in turn, requires government regulation to force competition and reasonable prices.”

     “So you’re saying that a free market system won’t work?”

     “On the contrary: I believe in some type of free market system.  I just don’t think you’ll find an example of one completely free from government intervention.”

     “And when you mix government and the economy, you get interference from politicians.”

    
“Politicians are crooks!”

     “Well put, Mr. Rodriguez - and you, too, Jackpot.”

    
“You too, Jackpot!”

     “With our current political system of lobbying, you get lopsided government regulation such as deregulating the banks and then regulating the currency, which inadvertently forces the banks into other investments.”

     “Yes, and by loaning them money at no interest, you’re really letting them into the casinos with the house’s money, aren’t you?”

     “House’s money!”

     “I see what you mean.  Giving the banks free interest loans is like the government subsidizing the banks.  That’s loco, man!”

     “Now you’ve got it, Mr. Rodriguez.  And I think it may be useful for our Washington project.”

     “Do you really have an invitation from the Senate Finance Committee?”

     “Yes, I do.  They’ve been known to call on me from time to time.  Especially when they’re in trouble.”