Hot Times at AIG

1) Jake DeSantis, an executive vice president of AIG’s financial products unit wrote a letter of resignation to Liddy, now posted at the Times. Makes for interesting reading, as it's by someone who clearly feels under attack from politicians and subject to public scrutiny. More simply, it's a voice from AIG other than Liddy's and therefore worth the read, though I frankly think the gesture itself (and the content) is a little too mea non culpa for my taste. Jake may want to consider keeping a low profile given the attacks on other such sufferers (which I by the way, don't condone).

2) A comprehensive piece by David Leonhardt who writes Economic Scene. He approaches the issue from a less personal standpoint, and lays out why retention pay is part of the faulty apparatus that had a role in bringing Wall Street crashing down. To be fair, this was written 7 days ago, and given how quickly things are moving, he may be revising his stance. But I doubt it.

3) I don't get many comments, so I was interested in a response to my post about AIG yesterday. Whoever "Anonymous" is, I think his/her comment has relevance in light of DeSantis' letter of resignation above. You can scroll down to read the post + our one-round exchange, but I want to post the comment itself here again.

Anonymous said...

AIG received $85 billion from the government. That is $85,000 (eighty five thousand) million. $165 million is less than 0.2% of that. People do not have the perception for comparing these huge numbers, everybody could imagine a million or ten million, but handling 85,000 million would be way too much for most of the population to handle.

If you get a loan of $2,000 and then go to Starbucks to buy a coffee for $4, nobody is going to complain despite the fact that it is 10 times more than what a coffee should cost.
People also tend to forget the difference between cause and correlation. Just because these managers were there when the crash happened, it does not mean they were the cause of the problem. So why not go and sue all former managers of AIG for every bonus they ever received? I guess nobody would like to do that either. And if you analyze the problem, you will eventually find that the cause is some hard to understand socio-economic mass phenomenon whose regulations require thoughtful handling.

Nevertheless it is more important to handle the 85,000 million wisely, than stigmatizing 0.2% that cannot be reversed at this time anymore. Yes, it might be an important step to calm down the masses, but it is not as important as the collective brain of the society (aka Blogosphere) thinks it is.

March 24, 2009 3:15 PM

Off With Their Heads?

The recent scandal about executives at AIG receiving bonuses of $165 million reminds me of the backdrop to the French Revolution. In a breathtaking moment of "let them eat cake" oblivion, these people have continued to leech the taxpayer's money. Only in this case it's even more repugnant, because the money they seized was a benefactory lifeline -- a privilege accorded by the government's triage as the financial markets collapsed.

I'm fearful of how much money has lately been sunk into companies run by people without principle. I understand too why there's a desire for bloodshed in the public outcry. What's come to light is the fact that even in a society founded on democratic ideals, capitalism enables every industry to develop its own monarchy--leaving the financial and economic fate of the populous in the hands of those who are entirely self-guided. We don't expect our fellow man to sabotage millions of his peers. But we also don't live in a culture that fosters ethical thinking or civic duty--both of which are essential to tempering the excesses of free market capitalism. At this juncture the government is our only ally, and, guillotine-style, we want them to bring a fist of justice crashing down.

It looks as though there's some progress being made: 9 top AIG executives have been persuaded to return their bonuses, totaling $50 million so far. But there are others overseas whom the government may not reach, and who in any case may be insulated from US jurisdiction. We also have to consider the fact that several executives have either refused to return their bonuses or have resigned in the wake of giving them back. This is a damning flip-off to the sufferings of the populous, as it signifies that those who've brought us to financial ruin haven't ceased to profiteer.

Nonetheless, as the furor has grown, I've realized that this is a moment when what we need is a temperate hand - not a Robespierre - at the helm. In his February 24th speech to Congress, President Obama said that he would not "govern out of anger." Although this may not satisfy our carnal desires to see executives carried to execution in a tumbrel, it's the only way to get out of this mess without dessicating the economy.

I realize that Obama himself has condemned the executives in question. This doesn't mean we get to see their heads roll. We have to follow the legislation that's in place to protect and manage our society, even if it means we can't legally block or tax these bonuses. The AIG issue is too dangerous and sensitive to mismanage at a time like this, when the public (and that includes me) is severely wound up, and the opportunity to bypass legal obligations for the sake of retribution is tantalizing close at hand. We saw what excesses that led to in 1789.

What we do need is to get on with it and find a plan that works. Paul Krugman doesn't think the administration is on the right track; he's probably right. But he's also right to say that "the public want Mr. Obama to succeed." I am anxious and angry about the financial situation, but rectifying it isn't in my hands. All I know is that at least I have a President I can finally trust. I trust Obama because he has the insight to see how quickly the winds are changing these days, and to pull back from potential missteps. I trust him because - unlike our French predecessors - he's trying to balance the people's needs with a plan to get our economy out of the ICU. Ultimately, we need these banks to function and we need credit to flow again.

I obviously don't have the answer. What I do know is that 1789 is a long way off but dealt some important lessons. We won't save ourselves if we govern out of anger.

Posterity and its Discontents

I was at a bar a few nights ago, when a very good-looking guy came up to me and started chatting. At first I was completely chuffed. And then something strange happened: he got onto the subject of achievement, and cited bearing children as an individual's greatest accomplishment. "You have a chance to create something that's 50% pure you, a part of yourself that will live on," he exulted. 

Inwardly, I cringed. I've never felt a strong biological impulse to reproduce in the way that he described, nor was I keen to follow what appeared to be a fanatical viewpoint. "I may consider adoption," I said, hoping for tolerance. "That's fine, but you should definitely have your own children," came the dogmatic reply. And that was that. 

Posterity has long been a point of human inquiry. Its earliest records are in classical literature, which the world over featured humans desperate to seize immortality and overcome the limitations of flesh. One way to do so is to procreate; that much is obvious. But procreation takes many forms--and of all of them, I am most interested in intellectual and literary offspring. 

In terms of my output, two blogs and an old collection of poems are the sum total. I have six diaries that peter out by the 2nd week, and twice as many notebooks, crammed with fragments of thought rather than polished prose. As with bearing children, I don't plan to produce a book, though I idle with the thought, and assume it may just happen. For now though, this blog is my primary point of authorship, and to date, blogging does not rank as literary achievement. 

Nonetheless, it came to my attention recently that four friends - some nearby, some far flung - have not only followed this blog, but been inspired enough by it to forge their own imprints. I have a sense for who among them will stay active and who may bow out, but I'm touched that all four cited "The Better Element" as having stirred them to creative activity. 

 

Whether or not we admit it, every writer desires an engaged readership. One of the luxuries of personal writing is being able to imagine your 'other' out there: the idealized reader with whom each printed word is a point of intellectual communion. It means that someone other than you is awake to your purpose and fortified by it. What could be more validating? 

Helen Vendler, the queen of close readings, makes a strong case for this in her book Invisible Listeners: Lyric Intimacy in Herbert, Whitman, and Ashbery. She reveals how these poets, each radically distinctive in style and content, used language to identify and appeal to their respective audiences. Herbert directed his spiritual misgivings to God; Whitman figured all of humanity or a single beloved as the companion he called "you"; and Ashbery, the most difficult to read, traced his lineage back to the Italian mannerist Parmigianino, with whom he shared an instinct to distort and aestheticize reality. 

These are high-flown examples, but my point is that any kind of writing--even on unromantic topics--wants for a greater return on investment than mere praise. It's lovely to be commended; sweeter yet to know that your words haven't died on the page, that they've stimulated reflection and reaction in others. Such feedback keeps our minds fertile and generative. Why do we publish personal writings, after all? Why are literary memoirs and diaries as vital as fiction? Because they're carriers of ideas and impulses that we hope will burn bright long after our bodies expire. Thus we vainly reach - even without children! - for that hard-won gift of posterity.

(A True) Independent Spirit

Here's Mickey Rourke accepting his 2009 Independent Spirit Award. The man has so much character, this clip is a short film unto itself. Thanks to JWI for sharing.

Blood, Sweat, and a Backroom for Tears

Best to start off on a note of honesty: I'm not a fan of professional wrestling. Watching a series of fights between men inflated to look like Bluto but dressed like '80s figure skaters has never ranked high on my agenda. I find the pageantry of such fights misplaced; the characters exaggerated to the point of drollery.

And yet strangely enough, these theatrics take place with greater sanctity at the other end of the cultural spectrum: the opera house. Consider Siegfried or Aida. Where else will you find protagonists bedecked in capes and masks, eager to stimulate the audience by means of vocal pyrotechnics? In opera, love and brutality are borne by human voices raised to an extreme register. Pro-wrestling effects a similar drama by putting bare bodies on center stage and inciting them to attack each other with choreographed rage. Neither medium falls short on hyperbole, and both rely on the celebrity of 250lb performers.

Darren Aronofsky's The Wrestler has elements of the operatic about it. It's a film with a virtuoso performance at its center, and it relays its protagonist's decline as a single - but universally applicable - instance of everyday human tragedy. I wouldn't call it brilliant cinematic fare, but it's worth viewing simply because it's carried by extraordinary acting on the part of Mickey Rourke and his two female counterparts.

As with Rourke himself, Randy The Ram's career peak takes place offstage, in the past. The movie opens with a montage of newspaper cuttings, audio clips and autographed paraphenalia that collectively represent The Ram in his prime. The music is pure '80s, laced with hair-metal bands of the Def Leppard and Quiet Riot extraction. I loved it. But Aronofsky has a point to make: tempus fugit...whatever the songs said, 1986 didn't last forever.

Instead it's 2006 and Randy's on the local circuit with 20 years of battering and drinking to bear. Aronofsky draws a pointed contrast to the power shots of the opening credits, making us wait to see Randy's face. He rests the camera at eye-level, tracking behind Randy as he walks out of his trailer and gets to dressing room, acquaintances and admirers coming up to clap him on the arm. There's no Citizen Kane-like projection here; the camera is handheld and hovers at Randy's shoulder for most of the movie. It's as though the body, which we later witness in its sturdy but bruised state, has ceased to matter: Randy's face - Mickey Rourke's, inescapably - is our ground zero.

There's something about this face. The features aren't beautifully arranged and the skin has all the suppleness of worn leather. But it's also a majestic face - the face of a haggard Achilles, of everyman, a face with which I fell into depthless empathy.

This empathy stayed alive throughout the movie, even as Randy took hits of cocaine and racked up $900 in steroids, even as a one night stand left him sleeping past the dinner plans he worked so hard to earn from his estranged daughter (Stephanie). I felt for him as he tried to step away from his former self by flirting with a local stripper and taking Stephanie to Asbury Park. Whatever his faults, Randy tries hard and does it with a smile. He plays pater familias to younger wrestlers who look to him for tips and a gentle boost of confidence. He buys Stephanie a peacoat and stands up to dance in an empty bar when a favorite song comes on the radio. He gets locked out of his trailer for failing on rent, and then takes a shift at the supermarket in order get back in. He trips up constantly, but tries so hard not to that you ache for him to get even one break.

At the end of the day, however, Randy is a demigod only in the ring, and it's there that he feels most alive--there too that he'll meet his end. It's a saccharine plot-twist, but even though The Ram has a weak heart that's going to give out soon, what keeps him coming back is the purity of his purpose. Like a good '80s song, despite the drugs, sex and lethal blows, you still have to believe this guy is all heart.

On Thin Ice

Michael Lewis wrote a terrific piece on the situation in Iceland for Vanity Fair. I remember back in October 2008 when disaster broke out on Wall Street and my sister tried to explain it all to me. At the time I thought it was strange that she kept mentioning Iceland -- possibly the last corner of the earth I would have considered a barometer for the financial crisis, let alone a powerhouse. As Lewis so eloquently makes apparent, no one has really probed the rise from obscurity of this "tiny fishing nation," which, since 2003, reinvented itself as a major player in the international financial market.

What strikes me at first is the spindly number that represents Iceland's total population: 300,000. Let's put this into perspective. In square miles, Iceland is about the same size as Virginia, which is home to 7,000,000 people. Iceland is also the second largest island in Europe. To be fair, unlike Virginia or Greece, Iceland's population density is thwarted by the fact that about half of its terrain is either pure wasteland or uniformly covered by lava deposits, relegating most of the population to the Southwest regions. Either way, 300,000 in this day and age smacks of containment.

To get back to the main issue, there are two points that really interest me about Iceland's situation. First: the numbers, and their sheer scale. In 2003, Iceland had three major banks with only a few billion dollars in assets, which accounted for 100% of its GDP. 3.5 years later, they had grown to represent $140 billion, and it wasn't even worth calculating how much of the GDP they accounted for, since they were so greatly in excess of it. As of October 2008, however, the roof fell in on the three banks. The Icelandic stock market crashed by 85% and the krona sank. It suddenly appeared that on the shoulders of 300,000 citizens sat a new debt of $100 billion of banking losses, as well as several billion dollars worth of personal debt. This now works out to about $330,000 per man, per woman - and per child. As Lewis dryly notes, Iceland's debt of 850% of their GDP is the one thing that Americans, saddled with a debt of 350% of our GDP, can point to without personal accountability.

The second thing that fascinates me is the broader socioeconomic framework in which this disaster took place. You have to wonder: a) how on earth did an unassuming society of fisherman reinvent themselves as financial wizards and b) what prompted them to step out of the centuries-long collectivist stupor they were in?

The answer to the first is perhaps simpler, or at least, can be explained. Lewis references a paper by H. Scott Gordon, written in 1954, on the "plight of the fisherman." As Gordon revealed, due to the fact that the sea and fish were public property, there were no profits to be made by fishing day in and day out for a steady catch. The fisherman's practice was to stake his livelihood on "a lucky catch"--a single catch that, with great risk but minimum equipment and expense, would return an extraordinarily high yield. Sounds a lot like investment banking...

Moreover, this effort to maximize fishing efforts was aided by a government intervention in the 1970s, which privatized fishing and allowed only the most capable fisherman to take to the seas. This, then, is the moment that Iceland modernized itself. It's also where the answer to the second question begins: with fewer opportunities to make a living on the seas, Icelanders finally had the time to renovate their culture. Until 2003 they focused on developing themselves economically, educationally and artistically--as Lewis says, Iceland became the country that produced Bjork (to my mind a dubious accolade).

But the parallels between opportunistic big catches in fishing and the high-risk/high-yield mentality employed in investment banking eventually revealed themselves. Sophisticated young Icelanders returning home with business degrees made an impression on their native peers and taught them about the possibilities of financial speculation. A blistering irony is that they were quick to borrow from the American mindset "that finance had less to do with productive enterprise than trading bits of paper among themselves." The miracle is that they got away with it. Lewis recounts his meeting with a young man - this is the story of men only, it seems - who took seven years to hone expert skills as a fisherman, but who landed a job as "an adviser to companies on currency risk hedging" without blinking twice. The traits synonymous to these two identities are clear: risk-taking, competitiveness, confidence and hyper-masculinity.

The final component of this article - perhaps the one that needs more addressing - is the cultural backstory. Lewis touches upon Iceland's history under the Norwegian and Danish monarchies, the cornerstone that fishing claims in their heritage and imagination, their collectivist impulse and their gender biases. But I want more. I'm still curious to know who the Icelanders are. How do they live and how do they view themselves within the world? What is it about them that emits a sense - even through the filter of Michael Lewis' voice - of unbroken authenticity, of feral intelligence?

I doubt their story is over.

SXSW: My Annual Romance

South by Southwest is an awesome festival. It's been around since what, 1987?, and although it's been accused in recent years of going 'lite' on the kind of people it attracts (Playboy parties, really?), I'm still a fan. I love that it has panache enough to showcase Neil Young back-to-back with Justice and The Lemonheads, and it doesn't hurt that it all goes down in Austin: definitely on the shortlist of places to be if you like to consume art and culture with a palatable shot of Americana.

I admit that I don't make the effort to follow the rise of new bands, and I'm unlikely to stoically wait hours in line in order to watch 16 bad shorts before a really brilliant director takes the stage. As a result, I appreciate all the enthusiasm and effort that goes into staging SXSW. At the end of the conference, even I, with limited band loyalty and low tolerance for mediocrity, will learn of some new voice worth getting to know, some new film that will leave me slightly breathless.

To that end it's a good thing that I barely recognize the acts lined up this year -- it means these bands and movies haven't had their moment yet, that they're still in the gestation period when success depends more on what matters - raw talent and craftsmanship - than what doesn't: packaging and hype. Isn't art, after all, in its most vivid and pulsating form when it hasn't quite crossed into the mainstream?

Vegetarian Times

The Japanese are strange. I determined this during a trip to Kyoto back in 2006, when it was impressed upon me that as a vegetarian traveler I was privy to a singular experience of Japanese behavior and traditions. Nowhere else in the world, for one thing, have I caused an actual outburst for the simple fact of refusing to eat meat. This arose one afternoon in Kyoto, when a harried friend and I grew tired of walking on the sunbaked pavement, and thankfully turned into a local restaurant. We sat down and, the tea having been served, began the arduous process of explaining my dietary restrictions. It didn't go as planned:

"This is Japan....Japan!" came the shocked voice of one restaurant owner when it was made clear that the all-beef special was not going to fly. As further recrimination, he strode into the kitchen and emerged victorious with his wife in tow: a small and sweet creature with her hair pinned neatly into in a bun. In another lifetime I saw myself benevolently patting her wrist and drawing up a chair for her to join our gathering of world citizens. At the time, however, she ignored any such charitable warmth I emitted, and cast herself as deputy prosecutor, seconding her husband's gesticulations with a series of wise nods and darkening glances in my direction. The latter I found particularly unnerving.

My friend, playing host at the time, gamely began a civilized discussion that, with due time and fluency, would have undoubtedly hit the salient points on freedom of choice, cruelty to animals, health concerns about beef and patron-server relations in the postmodern era. Instead, the exchange quickly dissolved into a 5-round back-and-forth of "no meat...no fish" and "but this is Japan!", with rising vigor on each side. Finally my friend fell back on our strongest defense: "I eat meat! Only she does not," she announced, pointing an incriminating finger my way. Unaware that I had been blacklisted, I smiled widely, hoping to lend a note of cooperation. "Oh! You are like the Japanese! This is Japan; we eat meat" came the delighted response.

Thus diplomacy won the day and goodwill resumed. From that point on, the owner became charm personified. He poured us more tea, cleared the table, and in true Japanese style, repeated our earlier exchange with a series of ill-timed and abortive giggles. His wife eventually presented me a handsome bowl of rice ("just rice?" came a final protest) and an assortment of root vegetables and pickles, neatly tucked into a series of minuscule bowls. I tried to ignore the pickles' resemblance to octopus tentacles (would they dare?), and instead watched as a cauldron of beef was planted in front of my friend, flanked by a side of what I imagine was more beef, fried. While she dove in with chopsticks and a broth spoon, I began my own meal with the delicacy of a trained surgeon.

Such was the luxury of vegetarian cuisine in Japan. I'd like to claim that it was delicious rather than just odd, but I'll at least admit that it was by far the sweeter for having been won.

Americans Only

My sister recently sent me an article from Forbes, on a provision in the stimulus bill that restricts how financial firms manage their hiring practices.

What happened in brief is that last month, two Senators - Charles Grassley (R-Iowa) and Bernard Sanders (I-Vermont) - added an amendment to the stimulus legislation, forbidding banks that are being bailed out from hiring foreign workers, in particular if the banks have laid people off in the past 3 months.

Makes sense? Or at least: it's not entirely unexpected, right? And yet I'm still confused by the role of politics in economic decisions.

I realize that the financial sector, like its good friend the auto industry, is not going to win sympathy awards anytime soon. There's a limit to how much we feel for those who have lost access to jobs and livelihoods sustained by stratospheric bonuses -- especially in light of how many innocent bystanders, with little to no safety net, have been devastated by the financial meltdown.

That said, I found this article interesting because it questions the soundness of the amendment that Grassley & Sanders put forward. Is it in fact a good thing if companies such as JP Morgan Chase and Merrill Lynch are forced to retrench and reevaluate their hiring policies? Hiring is hardly the cornerstone of high finance. In fact, I would suspect that it's among those factors least likely to drive the more serious restructuring of financial practices that we need.

What is of course going on is that there's a miserable unemployment rate of 8.1%, itself expected to rise over the year. With the reality of millions of Americans out on the market, it makes sense to keep as many jobs as possible available to them, to get them back in the workplace and to pull us back from the brink of breadlines.

What I do question, however, is where this kind of strategy works best and where it causes harm. Financial jobs require a highly-developed skill-set and aptitude. They invite high performers rather than average Joes. More to the point, in order for the US to remain competitive in any given market, shouldn't its priority be to give jobs to the best - rather than most available - candidates? The problem with such legislation seems to be that it runs the risk of devaluing and losing talent in order to fix a small hole in a threadbare economy. And do we really want the second string to take over management of our already ailing financial institutions?

Rescinding offers to foreign workers isn't a longterm solution. On one level it simply means that instead of Alice Su, who was quoted in the Forbes article, a similarly impressive American student is going to get a very lucky break. On another level, it means that some of the best and brightest young minds who have come to the US will simply go elsewhere and succeed in companies abroad. They don't need our pity -- it's more the case that we desperately need them and their first-rate abilities if we're going to work ourselves out of this mess. You don't see Obama soliciting economic advice from anyone who came in at #2.

The thing that puzzles me is that in terms of party lines, don't Democrats typically advise against outsourcing jobs - and if so, why is it that a Republican and an Independent senator have drafted an amendment banning the hiring of foreign workers? Why do Republicans typically preach free market economics, hailing any kind of intervention as 'socialist', but simultaneously grandstand on protectionist values that can only be mandated by a governmental body?

At the end of the day this legislation is, as I noted earlier, not a huge surprise. What's interesting to me is that beyond the clamp on Merrill Lynch's hiring policies, and outside of the challenge that now faces non-American graduates of business school, the article illuminates two contradictory impulses in American economic thought: free trade vs. protectionism. I guess the real question is: which one will the stimulus bail out?

You Are What You Read

Not long ago I went out for a long, luxurious evening with a friend. We migrated from a group party to supper at a cosy restaurant, closing out the night at a European bar. Over the course of several hours, we covered personal heroes, the best way to cut cheese, sibling relations, the Balkans, and the canon of his ex-girlfriends. I was at my social best; drink in hand, I steered us along a frank and humorous exchange that cast both of us in a flattering light. It was in the taxi home, however, that I made my fatal error: I stumbled onto the subject of books, and probed for his favorite title. As of that moment, the evening lost its innocence.

Discussion of literary taste has all the pleasantness of walking onto a minefield. One false step in any direction - too commercial? too stuffy? too stylized? - and you cease to matter. I'm sure this partly stems from the tendency of any bibliophile to anxiously tally up all the books they haven't read, to wonder when they can - if ever - declare preference for a genre or author, even a single book. Martin Amis, for one, identifies Ian McEwan's greatest achievement as "the first two hundred pages of Atonement."

Of course music and film share the book's ability to nuance our impressions of one another. You can tell from someone's Netflix queue and playlists what their taste runs to: whether they are experimental, Romantic, bloodthirsty, escapist, etc. It's not as though the bookshelf alone reveals character.

What book choices do contain, however, are clues to our literary past and our intellectual limits. Unlike songs or movies, books are prescribed the world over as bearers of wisdom both ancient and modern. You could get through 14 years of school without watching a documentary or learning the difference between requiem and rhapsody. But you can't get away without knowing what Romeo said to Juliet and why it mattered, without having thumbed even halfheartedly through Gatsby and Malcolm X.

What changes over time is whether and what we continue to read. It's unlikely, in a developed society, for us to avoid watching movies or listening to music--they can become so habitual as to form a pleasant soundtrack to our consciousness. "Lite" reading material has a similar effect. Literature, on the other hand, could not be more different. It demands pure concentration. It creates a vacuum in which we are fundamentally focused and present, a space that no one - not even our partners - can intrude upon. As a result, the only people who read without a mandate are those who've learned how vital literature is to the human experience.

It's this segregation that often prohibits me from discussing books. I don't want to discover, as I did with my friend, that people fail to sustain their intellectual development, that they've put Shakespeare back on the shelf and picked up Sophie Kinsella or nothing at all. Because to me it means that they've quit the process of frequenting new ideas, of divining subtler means of expression and exploring diverse authorial voices. The effect, in dramatic - but nonetheless real - terms, is a mind imprisoned by stale conceptions.

I admit that in this case I'm a partisan player. One of my greatest joys as a reader is the moment in a book when the surface layers of plot and theme yield to substrata such as style, form and language. By penetrating these depths I get to witness the writer's ingenuity and craftsmanship. I grow complicit in or antagonistic toward the book's agenda. I intuit that the same linguistic resources can produce wildly different tones. I discover that true to life, narrative doesn't have to move on a linear path. I learn what I consider precious knowledge: that words can be woven together so as to give each sentence has its own genetic code, its own quiet or raging pulse.

How could I bear not to share this with everyone?