Santa Claus Is Alive and Well and Living on Wall Street

From Chapter 1, “Santa: The Early Years”:
“So here I am at the age of twelve, the only kid left in my class still believing in Santa Claus, because the authorities I look to told me that it was the truth, and I’m being ridiculed, persecuted, being made fun of in front of the girls, and then finally, I am told the truth. And my first reaction is—why have you been lying to me all of this time?!?”

From Chapter 2, “Santa Claus is Alive & Well & Living on Wall St.”:
When I was first told about investing in 401Ks (or as they’re called in Canada, RRSPs), the premise was this: If I put little gifts of money under the Christmas tree and wait patiently until Christmas day (when I retire), then someone named Santa Claus (living on Wall Street) will have added a whole bunch of presents (read: more money) under the tree, and when I wake up (on retirement day) and go running down the stairs in the morning into the living room and look under the tree, all those presents will be mine!

From Chapter 5, “The Wolves Are Guarding the Henhouse”:
Some have said of the stock market, “The wolves are guarding the henhouse.” In a December 20, 2008, post entitled “The SEC Did Nothing on Madoff,” blogger Mathew Gross wrote: “When the history of this financial meltdown is finally written—and it is not over yet, not by a long shot—central to that story will be the role that the Bush administration’s SEC played in allowing criminality to become the modus operandi of Wall Street. George W. Bush likes to quip that Wall Street got drunk, and we got the hangover. It’s a good quip, but let’s not forget (to expand the metaphor) that the SEC was the bartender, shouting over the din that the drinks were on the house.”

From Chapter 7, “Give Us Our Jobs Back”:
Unemployment is not the only fear. The adjunct to unemployment is the threat of losing one’s current job. … In a last ditch effort to save their homes, some will drain their savings and run up their credit-card debt, while some will (and do) find it better to just walk away from their now devalued homes—that is, in the states that will allow you to walk away, versus the states that allow the banks to hunt you down to get their due.

From Chapter 9, “Volume and Saturation”:
… The Gauthier Principle will be defined as: An affluent person or group of persons tasked with trying to fix a problem of which one part or symptom of that problem is a threat to their own affluence. They become sidetracked from the real problem by their desire to fix the symptom that is a threat to their affluence. Regardless of them recognizing or not recognizing the real problem, they will not divert from their strategy of solving the threat to their affluence. Generally, they will make you feel that their symptom is the real problem. Ultimately, their symptom cannot be fixed without addressing the real problem. From Chapter 10, “Outsourcing”: For the lengths that America goes to protect its borders from illegal workers—illegal workers who might take American jobs away from Americans—it seems ironic that we let foreign companies set up shop right in our backyard, and give our jobs to those same foreigners that we are so militant about not letting into our country. When a foreigner takes your job, does it really matter whether they are standing on your soil or their soil? Either way, they got your job. … So if America needs to protect itself from foreign corporate looting, I need to be fair to the foreign looters, and implicate our own heroic American companies who have looted the economy by outsourcing American jobs to foreign countries.

From Chapter 11, “Stock Options, or Legal Counterfeiting”:
How widespread is the practice of backdating? Erik Lie, a finance professor at the University of Iowa’s College of Business, has evaluated thousands of option grants and found that it was statistically improbable for them not to have been backdated at many companies: “A paper that Lie and Randall Heron, an associate professor at Indiana University’s business school, published on July 14 estimates that 18.9 percent of unscheduled grants to top executives from 1996 through 2005 were backdated or manipulated. The pair estimates that 29.2 percent of firms manipulated grants to top executives at some point between 1996 and 2005.” That 29.2 percent represents just under a third of all firms. … And how about a little Canadian content? It seems our Canadian darlings, Research in Motion (RIM), the makers of your BlackBerry, couldn’t keep their fingers out of the pie either. … So why would these greedy millionaires attempt this? They know that the punishment does not fit the crime. Why didn’t the RIM execs go to jail? … Here, from a 2009 Financial Times article, is a fascinating diatribe on the difference between the savings-and-loans scandal of the late ’80s and our current financial crisis: “How many financiers do you think ended up in jail after America’s Savings and Loans scandals? … between 1990 and 1995 no less than 1,852 S&L officials were prosecuted, and 1,072 placed behind bars. Another 2,558 bankers were also jailed, often for offenses which were S&L-linked too. Those are thought-provoking numbers. … Yet, in private many lawyers, and some government officials too, seem pretty cynical about just how many jail sentences or fines these initiatives will produce. … But, on the other hand, if there is no retribution against financiers, it will be very difficult to force a real change in behavior.” … And speaking of people not going to jail, what about those crazy banks who are laundering money for the drug cartels and laundering money for the foreign countries that are under trade sanctions and when caught, only have to pay a fine—no one goes to jail! Barclays was fined $298 million for laundering money for Cuba, Iran, Libya, Myanmar, and Sudan. ABN Amro Bank was fined $500 million, and Credit Suisse Group was fined $560 million for laundering money for Iran, Libya, and Sudan. Union Bank of California, American Express Bank International, BankAtlantic, and Wachovia have all admitted criminal conduct for laundering of money for drug cartels, and paid the government a cut of their—or is it the drug cartel’s—profits. I think in diamond terms, this is called “blood money.” In all of these cases, nobody went to jail.

From Chapter 12, “The Root of All Evil”:
These seedy analysts don’t want the rules changed because they are getting filthy rich from it! How do you go about getting the rules changed? With the AIG debacle, Matt Taibbi wrote in Rolling Stone that one of the key turning points came early in the game when regulators were convinced by a group of investors from JP Morgan that: “… if they bought CDS protection for enough of the investments in their portfolio, they had effectively moved the risk off their books. Therefore, they argued, they should be allowed to lend more, without keeping more cash in reserve. A whole host of regulators—from the Federal Reserve to the Office of the Comptroller of the Currency—accepted the argument, and Morgan was allowed to put more money on the street.” I have to reflect back to my comments in Chapter 3 about having trouble understanding exactly how investing works. In Rolling Stone, Matt Taibbi looks at the confusion this way: “The people who have spent their lives cloistered in this Wall Street community aren’t much for sharing information with the great unwashed. Because all of this shit is complicated, because most of us mortals don’t know what the hell LIBOR is or how a REIT works or how to use the word “zero coupon bond” in a sentence without sounding stupid—well, then, the people who do speak this idiotic language cannot under any circumstances be bothered to explain it to us and instead spend a lot of time rolling their eyes and asking us to trust them.”