Question the Accuracy

law, business, economics, politics, and anything else deemed tangentially related

Jamie Dimon, Meet Charles Mitchell

Here at QtA we recently finished reading a most superb and recommended book, The Hellhound of Wall Street. The book tells the story of the Pecora hearings, the 1933 Senate hearings that put Wall Street on trial for the Great Crash and set the stage for the New Deal financial reforms.

One of the things that most struck us in the course of reading the book was the similarity between today’s bankers and the “banksters” of the 1920s and ’30s. Particularly, the similarity was striking between the comments made by Charles Mitchell, “banker of bankers” and Chairman of National City Bank (which now goes by the name Citigroup), and Jamie Dimon, current Chairman, President and CEO of JP Morgan Chase. 

Here is Mitchell in 1933 talking about the necessity of the bonus culture that then existed on Wall Street: 

                                          

“Unless the men of energy and perhaps ability can see within the organization for which he is working a point that he can possibly reach that has great material benefit attached to it, I say unless he can see that, his work is going to be somewhat … dulled.” 

Read what Jamie Dimon said that made him sound like a 2012 version of Charles Mitchell after the jump.

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Michael Douglas and the FBI Team Up to Close Pandora’s Box

In 1987 Michael Douglas starred in the film Wall Street. In an ironic twist, Douglas’ role as Gordon Gekko inspired thousands of young men to flock to Wall Street in an attempt to be real-life Gekkos. It could even be argued that sans Gekko there is no financial crisis and no Great Recession.

As silly as that may sound, QtA wouldn’t be surprised if Michael Douglas felt that way. After all, what else could explain this spot?

Douglas did the spot for free, apparently because he was tired of getting high-fives from traders and bankers while walking the streets of Manhattan. The spot is currently running on both CNBC and Bloomberg Television. It seems that the FBI feels that Raj Rajaratnam and Rajat Gupta were merely the tip of the iceberg and are looking for more informants.

While QtA commends Douglas for agreeing to do the spot, perhaps the best thing he could have done was never have performed the role in the first place. Alas, the role that launched 1,000 Wall Street bankers (and won Douglas an Oscar) cannot be undone and so this may be the next best thing. It would have been nice however, if the FBI could have gotten a better quality clip of Gekko’s “greed is good” speech. Should the FBI call, QtA has a copy that we would happily lend.

The Mistake of Manufacturing

An idle factory

A lot of political love lately has been sent manufacturing’s way. Politicians talk about bringing manufacturing back to America, making America great again through manufacturing, making things in America, etc. President Obama wants to send tax breaks to manufacturers. Mitt Romney wants to work to bring manufacturing back by being tough on China. Rick Santorum things manufacturers should pay no taxes. 

Here at QtA we say, “Phooey.” Any special attention or concession afforded to manufacturing is a mistake. Such inordinate focus on manufacturing may make for good politics but it surely will make for bad policy. 

Why phooey, you ask? Here are four good reasons:

  1. Talk about manufacturing is merely a way to avoid the more difficult and much overdue conversation about the painful disappearance of low- to medium-skilled middle class jobs. 
  2. There is nothing that makes manufacturing inherently more important from an economic standpoint than say, accommodation and food services, another sector of the economy.
  3. It ignores what it would take to make manufacturing a large part of the US economy again.
  4. It’s political pandering, and QtA does not suffer political pandering lightly.

As to the first point, it is a fact that middle class income on an inflation-adjusted basis has flatlined (if not decreased) over the past 30+ years. During that same time frame, the productivity of workers has risen dramatically - far faster than the pace of inflation.Economics tells us that productivity and pay should be linked, as should productivity and return on capital. Unfortunately, only capital has seen a bump in the past few decades. Which is to say, only the yachts have been lifted in this rising tide; the rowboats are left bailing water to stay afloat.

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