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House of Morgan

Too Big to Fail, Too Big to Manage

A little over one hundred years ago J. Pierpont Morgan ran much of the world’s business from an elegant office at 23 Wall Street in New York. The investment and commercial banking operations that J.P. oversaw financed railroads, mining, energy, steel and insurance companies. Morgan was big, so big that when the U.S. economy was on the verge of tanking in 1907, Morgan put a wad of money on the table and saved the day.

In the days before “too big to fail” became part of the national dialogue, the House of Morgan literally was too big and too powerful to fail. Morgan was the banker to the robber barons of the Gilded Age and as such earned the scorn of many a progressive politician. By the early 1930’s, with the old man, J.Pierpont dead since 1913, the House of Morgan finally got its comeuppance. The Glass-Steagall Act, also known as The Banking Act of 1933, passed the Congress, was signed by Franklin D. Roosevelt and the big banks, particularly The House of Morgan, had to separate investment and commercial banking. Glass-Steagall was a clear cut response to The Great Depression and the widespread belief that reckless speculation by some bankers had played a contributing role in the international economic crisis that began in 1929.

It’s worth noting that the Glass in Glass-Steagall was Sen. Carter Glass of Virginia one of the old-style southern conservative Democrats who dominated Congress during much of the New Deal period. Glass, a newspaper editor by profession, served in the U.S. House of Representatives, helped write the Federal Reserve Act and then served as Treasury Secretary under Woodrow Wilson. Franklin Roosevelt wanted the tough, no nonsense, very conservative Sen. Glass to come back to the Treasury in 1933, but Glass preferred to stay in the Senate and devote his attention to improving banking regulation and modernizing the Fed. In short, Carter Glass was an expert legislator in these areas who applied decades of experience to sorting out how the federal government – and this guy was no big government liberal – ought to regulate banking.

American banking was governed by Glass-Steagall until 1999 when the Clinton Administration led the charge to eliminate the last visage of the New Deal-era regulation that separated traditional banking activity – loans, credit cards, deposits – from the substantially more speculative and riskier investment banking that centers on underwriting securities. Then-Treasury Sec. Lawrence Summers called the elimination of the 1930’s law an “update” of old rules, which would create a banking system for the 21st Century. Just how is that “update” working out so far you’d be smart to ask.

Enter Jamie Dimon the man who now presides over the 21st Century firm that J.P. Morgan invented in the 19th Century. Dimon, whose bank lost at least $2 billion recently by speculating in what are not incorrectly called financial “bets,” will testify before the Senate Banking Committee on June 7th to provide, as chairman Sen. Tim Johnson (D-South Dakota) said, “a better understanding of this massive trading loss so we can take the implications into account as we continue to conduct our robust oversight over the full implementation of Wall Street reform.”

Sounds like Congress is finally set to get to the bottom of all this risk taking by Wall Street banks, but wait, don’t bet the house payment just yet.

So far Dimon’s explanation for the big losses his firm suffered has been what we might call the “we were stupid” defense. This from the guy universally regarded as the smartest operator on The Street. Dimon has called the trading – bets more precisely – on extraordinarily complex corporate-bond derivatives – hope Sen. Johnson knows what those are – a “terrible, egregious mistake” and he’s humbly admitted JPMorgan Chase has “egg on our face.”

Dimon is displaying excellent crisis management skills by admitting the obvious, his bank screwed up, but he is also the guy who has repeatedly condemned the Wall Street reforms contained in the Dodd-Frank legislation. That legislation, passed in the wake of the most recent economic collapse, stopped well short of re-imposing the kind of controls that once existed with Glass-Steagall, but Dodd-Frank nevertheless earns the widespread scorn of most Wall Streeters as well as conservative politicians beginning with Mitt Romney. Romney has condemned the JPMorgan risk taking, but also says he’ll work to repeal Dodd-Frank.

Here’s a guess – call it a policy bet – the Dimon appearance before the Senate committee will involve a great many speeches both chastising big bankers and federal regulators, but nothing much will change. Dimon will gracefully sidestep any real responsibility for the betting errors, in part, because everyone knows that even the smartest guy on Wall Street can’t possibly keep track of all the esoteric trading his minions are engaged in across the globe. Many commentators will again bemoan the reckless greed that drives the kind of speculation JPMorgan and its competitors engage in but, when all is said and done, legislators will not be able to tighten the regulatory screws on the excesses of Dimon’s firm and other banking houses, because they too have placed a bet. The Congress – both parties – are gambling that continuing to woo the campaign financial largess of Wall Street, while not engaging in real regulatory reform won’t continue to imperil the American economy. I hope they win the bet, but I wouldn’t put money on it.

Two things to know from the messy details of this new Gilded Age: vast amounts of money is being made by what can only be called the wildest, most uncontrolled speculation since J.P. Morgan reigned on Wall Street and, through all the months of anguish and pain that followed the financial meltdown in 2008, not a single Wall Street player has had to face the legal, let alone the moral, consequences of the kind of reckless behavior that Jamie Dimon says put egg on his face.

The New York Times reports that the fellow who made a bundle while JPMorgan was losing a bundle is Boaz Weinstein, an aggressive hedge fund manager – he made $90 million last year – who was smart enough and gutsy enough to understand that JPMorgan’s “egregious mistake” was another gambler’s opportunity. The Times says of Weinstein: “In the hedge fund game, a business in which ruthlessness is prized and money is the ultimate measure, Mr. Weinstein is what is known as a “monster” — an aggressive trader with a preternatural appetite for risk and a take-no-prisoners style. He is a chess master, as well as a high-roller on the velvet-topped tables of Las Vegas. He has been banned from the Bellagio for counting cards.”

If you believe modern capitalism is a zero-sum game where someone wins and someone loses, little of value is produced, few jobs are created, and vast amounts of money are at stake for a handful of gamblers, then the capitalism of Dimon-Weinstein is just what the regulator ordered. If, on the other hand, if you believe in what I’ll call old fashion capitalism where money is borrowed and invested in real enterprises that employ people and make things, then you might think that Washington, D.C., with its unwillingness to confront Wall Street gambling, is continuing to whistle past the next economic meltdown graveyard.

How else to explain that no one – not a person – has suffered even mild public rebuke, let alone jail time, for the series of decisions in housing and finance that brought much of the American middle class to its knees in 2008 and since. Not only has no one been held accountable, fundamentally – as the JPMorgan bets confirm – nothing has changed with the big banks. In fact, as David Rohde explained recently in The Atlantic, “The country’s biggest banks are getting bigger.”

“Five U.S. banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs – held $8.5 trillion in assets at the end of 2011,” writes Rohde, “equal to 56 percent of the country’s economy, according to Bloomberg Businessweek. Five years earlier, before the financial crisis, the biggest banks’ holdings amounted to 43 percent of U.S. output. Today, they are roughly twice as large as they were a decade ago relative to the economy.”

Using World Bank numbers, JPMorgan Chase’s market capitalization is greater than the GDP of 130 of the world’s countries, including New Zealand, Iraq and Vietnam. Given such size and scope, it’s little wonder the big banks behave like sovereign nations.

So, the biggest get bigger and ensure their position as “too big to fail” and even alleged smart guys like Jamie Dimon admit that banks too big to fail are, by definition, too big to manage. The big winners in this modern capitalism are guys like Boaz Weinstein who is a good enough gambler to get himself banned from Las Vegas, a place that really knows how to manage risk, but is, as the Times article says, “practically a featured attraction on Wall Street. [Weinstein] attends galas and charity events, and is sought out to speak at big events. Pictures of him clasping a drink at last night’s party appear with regularity on business Web sites.”

By comparison old J.P. seems like a genuine piker.


Jerry Kramer

Time to Right a Wrong

Forty-three years ago this past Tuesday, the Green Bay Packers issued a terse statement that began with these words: “Guard and author Jerry Kramer announces his retirement after an 11-year career that stretches back to 1958.”

Kramer, just 33 years old, had compiled an outstanding career in his slightly more than a decade on some of the most storied professional football teams in the history of the National Football League. Of course, he’s in the Green Bay Hall of Fame. Kramer was also a perennial All-Pro and Pro-Bowl selection, won the 1962 NFL title game by kicking a field goal, and greased the skids on the famous Packer sweep with the kind of speed and agility – Kramer played at 245 pounds – that is rarely matched by any offensive lineman, then or now.

If you don’t believe me look at some of the old film of Number 64 pulling from his right guard position and outrunning a Jim Taylor, a Donny Anderson or Paul Hornung to get in position to put a staggering hit on an opposing linebacker or cornerback. The legendary Vince Lombardi ran an offense based on a limited number of plays and he expected flawless execution every time, particularly when it came to the thundering Packer sweep. Lombardi considered Kramer the best of his generation as his position.

Jerry Kramer, for perhaps a variety of reasons, none of which withstand analysis, has not been voted into the NFL Hall of Fame in the 43 years since he hung up his pads. He deserves it. His time has come and, in fact, is way past due.

Kramer is the only player named to the NFL’s 50th anniversary team not in the Hall. Forty-nine other guys made the cut. For some reason he hasn’t. NFL films consider him the Number 1 player not in the Hall. Good enough for me, yet perhaps the most powerful evidence that Jerry Kramer’s gridiron greatness has slipped through the Hall of Fame cracks is contained in the endorsements the 76-year old Montana native, Sandpoint, Idaho High School grad and University of Idaho Vandal has received from his peers. The guys who know Kramer’s gifts the best, who played across the line from him, who tried to knock him on his backside, think he is clearly a Hall of Famer.

Gino Marchetti was as good as anyone who ever played defense in the NFL. In his 13 years with the old Dallas Texans and then the Baltimore Colts he was year-after-year a consensus All-Pro. Gino was voted into the Hall in 1972 and thinks Kramer should be there, too.

“I was truly shocked,” Marchetti wrote recently, “to find that Jerry was not a member of the NFL Hall of Fame. I know personally that there was no one better at his position.”

Frank Gifford, Roger Staubach, Alan Page, Chuck Bednarik, Paul Hornung, Bob Lilly, Doug Atkins, Bob Schmidt, Bob St. Clair, Willie Davis, Raymond Berry and Larry Csonka – Hall of Famers every one – say the same thing.

Before his tragic death in 2011, Hall of Fame tight end John Mackey said of Kramer, “We who played with him in pro bowls and against him during our careers vote 100% for Jerry to join us in the Hall.”

Athletes normally do not easily praise the virtues of their opponents 30 or 40 years after the battles are over. That so many of Kramer’s peers, Hall of Famers themselves, speak so highly of his talents is an astounding testament to his greatness. That alone should be enough to lift him into the Hall.

There are three theories about why Kramer hasn’t received the call to Canton, Ohio the home of the NFL Hall of Fame. One theory says he had the misfortunate to play on the great Lombardi Packer teams with so many other Hall of Famers. Those great Packer teams of the 1960’s won three straight titles, five overall and the first two Super Bowls. They were great and richly blessed teams, but saying that a great player like Kramer should suffer because he happened to play on a team with a locker room full of great players is like saying Beethoven only wrote nine symphonies, while Mozart wrote 41 and therefore they can’t both be considered great. Poppycock.

The Lombardi era was great because the great coach found, developed and then got the most out of a team of superb players, including Kramer. The theory that there are too many Packers from this era already in the Hall is bogus. In a place where only accomplishment should matter, there is room for a Mozart, a Beethoven…and a Brahms.

The second theory holds that the football writers who vote on Hall of Fame matters are of a sufficiently younger generation that they just don’t know enough about Kramer’s playing days and therefore they discount a guy who has been nominated several times in the past. But not knowing isn’t right.

Baseball writers finally got around to selecting the worthy Orlando Cepeda for the baseball Hall of Fame in 1999. Cepeda quit playing 25 years before. A careful review of Kramer’s career by the current selection panel will show, beyond a doubt, that his career is worthy. Cepeda waited for a quarter century, Kramer has been shut out for more than 40 years. It’s time.

Finally, in a perverse way it’s been suggested by some that Kramer the author – his best seller Instant Replay is still one of the best sports books ever – hurt his Hall of Fame chances because of his candid take on what life was – or may still be  – inside the NFL. If there is any truth to this theory it too is poppycock. Kramer was not only a rugged, physical, smart football player, he happens to write well, even elegantly, and his keen observations on Lombardi, his teammates, the media and football showcase that he was far from a one dimensional pulling guard. Kramer’s substantial literary accomplishments are just frosting on this offensive lineman’s career cake.

The latest effort to Get Kramer to the Hall isn’t the work of Jerry Kramer. He has said he’s often introduced as a Hall of Famer and he’s quit correcting the record simply because so many people think a guy with his credentials must just automatically be were the greats go to be remembered. He’s not losing sleep over the snub and his ego is in check. Kramer isn’t a guy to live in the past even though his stories about Lombardi and the Green Bay dynasty are still the stuff of football legend.

No, the effort to get Kramer his due has been spearheaded by his daughter with a little volunteer help from my firm and a whole bunch of people who like the big guy and feel like getting his plaque up on the wall in Canton would amount to one of the world’s little wrongs made right. The University of Idaho joined the parade this week.

In the whole scheme of things securing a moment of Hall of Fame recognition for an old football player hardly ranks with world peace or a cure for cancer on the list of society’s great causes. But recognition, especially when it is so obviously deserved and truly does reflect the enduring importance of excellence, is never a minor matter whether you’re talking art, literature, science or sport.

The Oscars wouldn’t be complete if Jimmy Stewart hadn’t gotten one. Steinbeck and Hemingway and Faulkner got their Nobel Prizes for literature. Heck, Philo T. Farnsworth, the inventor of television, has a statue in the U.S. Capitol. 

Idaho’s and Green Bay’s Jerry Kramer performed on a different, grassy stage. His science was speed and finesse, his art courage and determination. Kramer used all those skills when he popped the most famous block in football history in 1967, opening a hole for Bart Starr to leap into the frozen end zone at Lambeau Field and beat the Dallas Cowboys. They’ve always called that game The Ice Bowl. It was 13 below zero at game time. Kramer will tell you it was a great team effort that did in the Cowboys on that bitter cold last day of the year and, of course, it was a team effort, but only one guy made the critical block.

It’s time now – past time – that the guy who iced that memorable victory, just one of his many greatest moments, had a chance to ice the champagne. Kramer needs to be in the Hall of Fame and when he is the football gods will smile because those gods know what’s right and this is right.

You can support The Get Kramer to the Hall effort by writing to the nominating committee on Jerry’s behalf. The address is:

Pro Football Hall of Fame

Attn: Nominations

2121 George Halas Drive, NW;

Canton, Ohio 44708


Never Ending

What We Know That Just Ain’t So

Mark Twain is reported to have said, “It isn’t so astonishing the things that I can remember, as the number of things I can remember that aren’t so.”

This just may be the single biggest problem with civic life in the country today. We all tend to remember things that just aren’t so. Couple that with an astonishing inability to simply agree on a common set of “facts” around major issues and you have arrived at bedrock in the current unproductive state of politics in America.

An entire cottage industry in political journalism has grown up around the need to “fact check” everything candidates say. This is a welcome development in my book, but unfortunately too many of us simply will not take a fact, even one carefully checked by a pro, at face value.

Is Social Security about to go broke? Is Barack Obama a Muslim? Is the president’s birth certificate a fake? Did the stimulus save jobs or just cost money? Is Fox News fair and balanced? How about climate change, is it really happening? All questions that we have the ability to answer with what an old editor once called “the steady accumulation of facts.”

Scientists have done a lot of work on why people cling to beliefs that are clearly contradicted by evidence, by facts. I’m no behavioral scientist, but my read of the analysis is simple: we believe in things – political opinions included – that tend to reinforce our world view. Don’t like Obama: he must be a Muslim or not born in the U.S.A. Don’t like Romney: must be a heartless corporate raider or a hopelessly rich guy completely out of touch.

You can believe that Obama is a Muslim or Romney out of touch, but opinions are not facts. Facts should help shape opinions, facts should not be cherry picked to support a fully formed opinion, which explains much of our political discourse.

At the heart of this “my opinion is better than your opinion” approach to politics is the widespread inability to see the other side’s point of view and to even consider whether the guy across the aisle just might have a valid perspective. When the opposition is so easily written off as misguided and lacking in seriousness what is the motivation to listen, consider and compromise? There isn’t one. Perhaps the highest form of self awareness, a good thing in any leader, is the constant, nagging suspicion that, hey, I might be wrong.

Consider briefly the “birthers,” those folks who in the face of all evidence continue to insist that the duly elected president of the United States is unqualified for that position because he was not born in the country. Note to history buffs: Hawaii has been a state since August 21, 1959. Obama’s long-form birth certificate, affirmed by every responsible official in Hawaii and released by the White House to put a sock in Donald Trump, is dated August 4, 1961. Maintaining the fiction about the president’s birth in the face of such evidence is a little like arguing that the moon is a flat disc because, hey, it looks that way from my neighborhood!

To continue to believe the birther nonsense requires belief in a conspiracy so immense even I must be in on it. Don’t tell anyone.

Yet, as CNN political reporter Peter Hamby points out, people with seriously responsible positions – I’m not counting The Donald – continue to traffic is the “opinion” that the birth certificate is questionable. The Iowa GOP is including such opinion in its platform and the blowhard sheriff of Maricopa County, Arizona is of the opinion that he needs to investigate.

Mark Twain would probably remind us – he can’t since the rumors of his death are no longer exaggerated – that people have always held fast to crazy beliefs. It is a bipartisan problem.

Some of Franklin Roosevelt’s enemies persisted in believing he was Jewish and part of a vast international Jewish conspiracy. You can find the “evidence” to support this opinion all over the Internet. And, of course, Sarah Palin didn’t give birth to her baby Trig and George W. Bush had the lowest IQ of any president. These “opinions” serve one really handy purpose – they delegitimize, they say you can’t take that person seriously because of some dark truth that, were it to come out, would show the world that – fill in the blank – is an imposter.

“The great enemy of truth is very often not the lie – deliberate, contrived, and dishonest – but the myth – persistent, pervasive, and unrealistic,” so said John F. Kennedy. Of course, JFK didn’t really die in Dallas in 1963, but is probably living in a retirement home in Florida or Lyndon Johnson killed him, even better the aliens got him.

Persistent, pervasive, and unrealistic. Kind of like our politics, all opinion and not many facts. Of course, we can chalk some of this up to simple old partisan mythmaking; the tried and true political strategy of telling an outrageous lie about your opponent and making them try to explain it away.

Little wonder we have such trouble addressing the country’s real problems, but that’s just an opinion.


Long Reads

Good Reads in the Long Form

I’m old enough to remember when the mailman brought LIFE magazine to our house. It was a big event every week. The magazine was a coffee table size, for one thing, and almost always featured an interesting, even arresting, cover photo or illustration. I’ve been a sucker for magazines ever since.

TIME is on our coffee table along with The New York Review of Books, The New Yorker and a new favorite The Week. I’ve lately become a fan of The London Review of Books. It’s fun and interesting to read a British take on U.S. literature and to read about many books – and subjects – that you may never find in a local bookstore. I’ve been a subscriber at various times to Harper’s, The Atlantic, Foreign Affairs, National Geographic and long ago to Boys’ Life. I like magazines.

I particularly like the long form stories that are a New Yorker speciality and I made a happy discovery recently that a great website – Longreads– regularly compiles the longreads from many different sources.

The Longread site has links to articles on everything from comedy to Russia, from San Francisco to Science and links to the articles that are finalists for the National Magazine Awards.

If you like magazines, this site is almost like visiting an old fashioned newsstand and browsing the titles. Good stuff.



Idaho Voters Stay Home in Droves

The closed Idaho primary election was the big loser yesterday. Most Idahoans – maybe close to 80% of the eligible voters – voted with their remote controls and stayed at home in front of the television rather than visit the polls and be forced for the first time to declare a party affiliation.

The Idaho Statesman’s Dan Popkey quotes Secretary of State Ben Ysursa today as saying, “Our biggest Election Day question used to be, ‘Where do I vote?’ Today, 90 percent of the calls we got were people upset about the closed primary and the party declaration being a public record.”

The extra partisan Republicans who pushed so hard for so long to close the primary may have forgotten that the enduring characteristic of the Idaho electorate in independence and privacy. Idahoans of either party, or no party, of the Libertarian Party, don’t like to be told what to do. They like choices, multiple choices, even if the vast majority of the time they end up punching the card for a Republican. The closed primary feels like an intrusion.

There were numerous sharply contested races – most in the Republican primary – yesterday and in most cases incumbents won. Where they didn’t, in Elmore and Kootenai Counties, for instance, there were mostly local reasons. So it is difficult to define any broad theme to the results yesterday beyond one of the oldest truths in politics, as Idaho Public Television’s Greg Hahn points out, “The power of incumbency is great.”

I’m left to ponder if Idaho Democrats – we know who they are now – will find a way to capitalize on the widespread lack of enthusiasm for the changes in the way we select candidates? A tiny sliver of sunshine for Democrats may exist in the spirited, but clean legislative primary races run in Ada County. Two young, committed first time candidates won contested primaries, for example, in District 19 in Boise’s reliably Democratic North End and they won the old fashion way – shoe leather, good messages, networking and endorsements.

If Idaho Democrats are ever to begin the long slog back to something like relevance, it will be because of committed, attractive younger candidates and a long-term strategy to woo Hispanics, college kids and the high tech community. Idaho Democrats need to re-invent themselves for the 21st Century. At least after yesterday, they have a place to start – a few thousands names of folks who actually stood up publicly and said: “I’m voting Democratic.”


Election Day

A Watershed…or More of the Same?

Idaho voters will find something new today if they make the effort to get to their neighborhood polling place and it’s going to be very interesting to see whether they like declaring their party affiliation in order to vote. Here’s betting a number of us will feel just a little less comfortable in the privacy of the polling booth today than we did the last time we did our civic duty.

The most conservative elements in the Idaho Republican Party have been hankering for this change for a long time. The party may come to beware of what it wished for. Idaho’s impeccably fair Secretary of State, Ben Ysursa, is predicting a 23% voter turnout today; a dismal number if true that could permit a tiny sliver of the population to define the Idaho GOP for years to come. As has been the case for most of the last 20 years, Idaho Democrats are largely an afterthought. They feature a handful of contested elections for the state legislature, but most of the action will be on the GOP side of the ballot.

“This is the meanest dang campaign I ever saw,” Sen. Denton Darrington, a southern Idaho Republican told the Associated Press. Darrington is retiring after 30 years in the Senate rather than face a fellow Republican in a primary caused by a re-worked legislative district. “It’s the strangest, weirdest political season I’ve ever seen, and that’s a lot of years.”

I’ll be watching for trends in the Republican primaries in far northern Idaho, Canyon County and the Magic Valley where generally more middle-of-the-road incumbents are being challenged from the right. Several of these races have featured what feels like genuinely unprecedented levels of third-party, independent expenditures, a trend across the country that has finally come to Idaho in a big way. There have also been a number of last minute reports of confusing, or perhaps deceptive, mailings, endorsements, etc.

This has been a primary largely devoid of issues with most of the back-and-forth centering on who is the more reliable Republican conservative. Strangely missing – and this is true for Democrats as well as Republicans – has been much if any talk about the broad future direction of the state, job growth, expansion of the economy or education. This election has been fought, I suspect quite unsatisfactorily for all but the most partisan Idahoans, in the deep trenches of ideology.

One great irony of this new, closed primary environment is that the desire to limit participation in the GOP primary to the hardcore Republicans flies in the face of the historic success the party has long enjoyed. Generally speaking if you look closely at the election results in major races over the last 30 years, you’ll find that the larger the turnout the better Republicans do. One dirty little secret of the success Democrats enjoyed in controlling the Idaho governor’s office from 1970 to 1995 was that none of those winning elections for Democrats occurred in a presidential election year when turnout tends to be the highest. The only times Democrats have been successful on a statewide of congressional district basis over three decades or more is when they have faced damaged Republican incumbents, been successful in identifying and appealing to disaffected GOP voters and then hoping a lot of folks stay home on election day. A low turnout favors a Democrat in Idaho. Republicans, by closing their primary, have potentially begun to squander the broad numbers advantage they have enjoyed for years.

Dominate political organizations don’t always handle success very well for the long term. They overreach tending eventually to focus on the comfort of ideology rather than the hard work of ideas that relate to how the broad electorate lives and works.  Democrats, of course, or even a third-way movement that the state may be more and more ready to embrace, has to show some gumption if a reasonably alternative is to be offered. But this much is true: the ruling GOP club is going to be smaller tomorrow than it is today. We’ll see if that is good for the GOP brand in Idaho for the next generation or whether today’s election marks a point where the long arc of partisan politics finally starts to bend in a new direction.