Wall Street Lays An(other) Egg
Derived from Variety, October 30, 1929

By Henry J. Stern
October 10, 2008

It would be irrelevant to write only about term limits when the stock market is in free fall or in recovery, depending on when you receive this e-mail. We observe that irrational panic on Wall Street is no more sensible than the “irrational exuberance” that Alan Greenspan warned about in December 1996. That was long ago, but the phrase remains in people’s minds. But what did Greenspan do to prevent the sub-prime crisis that brewed while he was Chairman of the Federal Reserve? A minor result of the spiral of descent has been the diminution of Greenspan’s reputation for sagacity and foresight.

That leaves Warren Buffett, the Oracle of Omaha, the last iconic figure in the business world. He is a wise, generous and extremely modest man. He put shares of Berkshire Hathaway then worth over thirty billion dollars into a foundation named for Bill and Melinda Gates. Wikipedia says that was the largest charitable donation in history.

Some of Buffett's managers were convicted of misconduct (perhaps unjustly, the case is on appeal) in the transactions which led to Eliot Spitzer throwing Hank Greenberg out of AIG, the company he built.. Unfortunately, in today’s world of show trials, a conviction doesn’t necessarily mean that you did anything seriously wrong. Greenberg, accused of overstating AIG's profit, was succeeded by bunglers who led the insurance giant to its knees, requiring the largest US bailout in history, so far amounting to 115.7 billion dollars (That’s $115,700,000,000). Would that have happened if Spitzer had allowed Greenberg to stay, rather than intimidating the board into removing him? Who knows, but the subprime problems might well have been avoided in part.

Is the AIG result, only visible years after the act, part of the price we pay for Spitzerism? Ask the holders of stock which is now nearly worthless. One difference between Spitzer and Senator Joe McCarthy is that Spitzer, acting through Darren Dopp, had the press cheering him on, while McCarthy was rightly opposed by most of the media. A whisper from “the sheriff of Wall Street” could devastate a company’s stock price, causing it to lose billions in market capitalization. Businesses paid fines of hundreds of millions of dollars to avoid that fate. While he was in power, Spitzer was unchallenged, because we all know that some corporations do shady things. See any movie about business to confirm that assumption. But were the Attorney General’s sanctions proportionate to the wrongdoing to which he had been led?

Unfortunately, we only found Spitzer's downside after he was elected governor, and started treating his colleagues as criminals, although some of them were. Senator Bruno misused the state plane, although staying within the letter of the law. Spitzer could have grounded him, as Pataki had done previously because they disagreed on a political issue on which Bruno may have had an economic motive. Instead, Spitzer set off a Clouseau-type investigation of Bruno and then lied about it, shifting the blame to subordinates.

One thing leads to another, and the circle of wrongdoing and misconduct grows ever larger. It is safe to assume that for every crooked lawmaker exposed, there is another who has escaped detection. There is not even much honor among thieves, as we see from former Assemblyman Brian McLaughlin’s wearing a wire to record self-incrimatory remarks by Assemblyman Tony Seminerio, one of the nicer people in Albany, who, envious of the money that lobbyists and consultants were earning, set himself up as one of them. What Seminerio is alleged to have done is a serious offense, malum in se, not just malum prohibitum. You can watch others get rich, you can envy them, but you cannot take their money, even if it is given willingly. That is bribery, a felony.

Term Limits, In Brief Today

What the City Council is programmed to do, extending voter-approved term limits without a referendum, may not be criminal, but it is "disgusting." Who said that? Why, Michael Bloomberg did. That was before he tied his own future to theirs. Why the world financial crisis dictates that thirty-six local councilmembers due to rotate out should occupy their seats for another four years is a difficult question to answer. It would be nice to have Mayor Bloomberg continue in office, and we believe he should have the opportunity to run. This result can and should be accomplished by public referendum, which many of us would support as it applies to city-wide officials, who are known to the public and whose districts have not been gerrymandered.

We don’t need the councilmembers, who attached themselves like leeches to the mayor as the price they charge for City Council approval for this end-run around the Charter. The attempted maneuver is possibly technically legal (the Court of Appeals will decide) but morally indefensible, especially after one has pretended for seven years that such an action would be an outrage.

It is a pity that Messrs. Bloomberg, Lauder and the publishers fail to see what fair-minded people so clearly understand. It is not an issue of two terms or three; that is debatable. It is cheating, by changing the rules in the middle of the game, at a window of lack of opportunity for the other side to take its case to the voters. The oligarchs are decent people, but their collusion in this matter is an insult to the democracy under which they became rich and powerful. We hope they reconsider.

Sam Roberts on Hymie Shorenstein

A semi-relevant story, one of the great political anecdotes of all time, was told by Sam Roberts in the New York Times on August 25, 2008. It is a fascinating column, to which you should link if you are at all interested in politics. In a graceful and charming way, Roberts tells the story that made Hyman Shorenstein a figure, or at least a footnote, in American political history.

Clyde Haberman on Michael Bloomberg

Another remarkable column on the mayor's concern over the succession, written by Clyde Haberman appeared in Monday's Times. Its title, BLOOMBERG'S GIFT TO THE PEOPLE: MOI is a sendoff of Miss Piggy as well as Louis XV. We can't match his style, but we want you to enjoy the insightful yet humorous column that this Pulitzer-prize winner wrote for our edification and diversion. Just link to Clyde and read the column for yourself. Then, if you have time, tell us what you think.

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