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Thursday, February 15, 2007

Blood On The Street

I just finished reading Blood On The Street by Charles Gasparino. The book is subtitled: The sensational Inside Story of How Wall Street Analysts Duped a Generation of Investors.

This is not a book to zip right through; at least it wasn't for me. But it also wasn't so full of Wall Street jargon and rules of economics that I couldn't grasp the material. I became educated about what Wall Street analysts do, and by the time I finished reading the book, I was shocked at how easily they did what they did to create such an intricate web of financial deals benefitting their own businesses while at the same time more or less robbing the small investor blind. To me, this kind of material is fascinating, and there were times I didn't want to put the book down.

Just as with any good novel, Blood On The Street has its own cast of characters, and they are nothing if not a very interesting bunch. Henry Blodget, Mary Meeker, and Jack Grubman feature prominently in starring roles, but there are others too. People whose names I recall seeing in the news countless times but with whom I never put a face much less a personality.

I've mentioned in Enema Portal For Groan Ups that I believe the world operates on the theory that whoever has the biggest dick rules. In addition, it's all just one big pissing contest to benefit the one with the longest stream. Blood In The Street only confirms my conviction that this is so. Even though Mary Meeker is the wrong gender, she's still perceived as someone with "balls". However, because she's the only one who kept some semblance of ethics throughout the internet stock market bubble, she was never a real contender for the top spot in the pissing contest.

Blood On The Street is the well researched story of how analysts on Wall Street, the people who are supposed to evaluate a company's performance so folks get an accurate idea of their worth and growth potential before they invest their hard earned savings, manipulated their findings to coincide with investment banking deals their firms were representing. It is also the story of the crash of the internet bubble and the resulting chaos that followed.

The point is made that when the stock market crashed in 1929, those hurt the most were the wealthy; those who invested to increase wealth they'd already amassed. But the crash of the internet market stuck the small investor. The people who invested retirement money and savings earmarked for college funds as well as retirement. This crash took away pension funds and money "little people" carefully saved for the future.

Blood On The Street also takes on the subject of the aftermath of this crash, and it takes a pretty strong stomach to read those results. People who should have gone to jail for what they knowingly did in violation of the law, those same people who became millionaires themselves, never really received the kind of punishment they deserved. Neither did the businesses involved. If a business makes hundreds of millions of dollars a year, fining that company $50 or $100 million is not going to make much of an impression on them. In one case, the penalty assigned to one company was merely 1/3 of the amount that place spent on postage and office supplies for the previous year. That is completely out of proportion to the hurt inflicted on unknowing small investors.

There's something else that struck me while I was reading this book as well. I remember when Bill Clinton was in the midst of all his legal problems and facing impeachment, MSM reported that he and his attorney met with a prosecutor to work out a settlement. At the time, it was reported that one deal was turned down by Clinton because, according to him, that deal was not acceptable. I remember wondering since when it is up to the guilty party what kind of penalty he gets for illegal behavior. Isn't that issue supposed to be decided by prosecutors when they specify what damages they expect to collect from the guilty party, or by juries in Phase 2 of a trial process? But since when does the one admitting guilt get to negotiate his penance?

Apparently that's how things are done now, because in reaching settlement with the Wall Street firms involved in the stock market scam, Eliot Spitzer negotiated a settlement acceptable to all parties. Now, I realize that by reaching a settlement a long, drawn out, expensive trial was avoided. But what was also avoided was specific indictments against people who most assuredly needed to be labeled as criminals. And because they are criminals, they should have no say whatsoever in deciding their punishment. That's a no-brainer. At least to me.

I highly recommend Blood On The Street to anyone interested in learning more about how Wall Street duped the general public and, for the most part, got away with it.

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