1 Boring Old Man

In the 11th Century, there was a period [Interregnum 1250–1273] when there was no Emperor of the Holy Roman Empire. Prior to that, tolls for use of the Rhine River collected by the clergy or nobles were authorized by the Emperor. In the absence of an Emperor, feudal lords began to collect tolls on their own, blocking the river with chains. They were known as the Robber Barons [Raubritter]. The term, Robber Barons, was resurrected in the late 19th Century to describe the U.S. Industrialists and Financeers who amassed their fortunes in Age of Monopolies. Their motives? Anyone who has ever played [and won] the board game, Monopoly®, knows the answer – it’s fun. History has been kind to them, in part because of their philanthropy. They gave a lot back, and some were genuine heros [J.P. Morgan, who bailed out the country after the 1907 Crash].

I doubt that history will be so kind to our modern Robber Barons. After weeks of playing around in the world I don’t understand – economics, banking, mortgages, corporations, etc. – I’ve decided that this current financial crisis was caused by specific people – not mob psychology, not the changing face of world economics, not even the diabolical Bush Administration directly. It was caused by people with names who have gigantic Bank Accounts. People who, unlike the philanthropists of 100 years ago, have given us little back but heartache.

Some held up their hands and identified themselves in Congressional Hearings. Others gave interviews explaining that it wasn’t their fault – there was so much pressure. But a lot of them have stayed out of the limelight. They’re the C.E.O.’s and C.F.O.’s who have been paid outrageous bonuses by their corporations and financial businesses while waiting for the Crash – ignoring the Housing bubble and the credit default swaps that were surely going to pull down their companies, though leaving them with their ill-acquired bonus wealth. The bonuses kept coming, in many cases, even as the company was going into bankruptcy.

Like their 11th Century counterparts, there was a huge hole in leadership in our country starting with the "Contract with America" Republican Congress of Newt Gingrich in 1994 and the wounded leader second term of impeached President Bill Clinton, and persisting through the ‘Big Sleep‘ years of Bu$hCo. Into the hole marched the Robber Barons. I doubt they all knew each other, or even knew that their collective weight would bring down the roof. Some were near the bottom – mortgage brokers jumping on the surge in their markets, eager to lend and then sell their mortgages. Some were the investment bakers who repackaged mortgages and sold them as securities, or financial agencies who insured the securities. Some were bettors on the credit default swap market, day trading in the world of Derivatives. And then there were the big guys [holding up their hands above].

When there’s a hole as big as the one that the deregulation of the financal markets opened up, you don’t have to evoke a conspiracy theory to explain why so many people jumped into it. People smell money. The closer you are to it, the stronger the smell. After all, the brain’s limbic system, seat of the emotions, evolved from the primitive organ of smell. My last couple of week’s worth of posts have been about how the hole got created – a man-made hole like the one in the ozone layer. But when it opened up, people dove in without invitation.

The prophets of Deregulation like Ronald Reagan and Phil Gramm always talked about "freeing things up" – using America’s Freedom motif to see financial regulation as excessive force or infringing on someone’s rights. Maybe they even actually thought they were championing freedom. Who knows? But what they failed to see was that there is never any freedom without walls, something every thoughtful parent knows. In fact, the art of parenting is defined by nurturing restraint. "Spoiled" children are kids who have been neglected by their parents – raised without optimal restraint, so they know no boundaries.