The Economic Crisis: Lessons Unlearned

Thomas Frank signs off from the WSJ Opinion page. Needless to say, I’m disappointed. A pretty stinging assessment of the last 2 years. 50 hot ones, comin’ at ya.

This is my last weekly column for the Wall Street Journal, and writing it has naturally put me in mind of my first efforts in this space, back in the summer of 2008.

Those were the days when economic disaster was beginning to unfold; it hit a crescendo in September of that year when Wall Street teetered and the government came to the rescue with a TARP.

By November, the nation’s mood had soured enough that a senator from Illinois won the presidency even though he appeared to defy political convention in countless ways. And all the while, the front pages overflowed with shocking tales of the corruption of the old order, the gross venality of the subprime lenders, the sabotage of the regulators, and the manufacture of poisonous triple-A securities.

It was an awful time, but for someone in my situation there was also—please pardon the expression—hope to go along with the disaster. We were descending further into the worst recession I had ever seen, but at least we were finally going to be done with the farcical intellectual and political consensus of the preceding decades.

Never again, I thought, would journalists fall over one another to flatter CEOs, nor would pundits build careers by finding clever ways to equate the workings of markets to democracy itself. Management theorists would cease to be public intellectuals, and the political advice of stock pickers would henceforth be treated like the toxic sewage it clearly was.

“The market god has failed,” I wrote in this space in February 2009, and I thought its flop augured not only a massive reconfiguring of the relationship between investment banks and the rest of society but a complete overturning of the comfortable assumptions of the pundit class.

At first, there were reasons to believe such a thing might come to pass. Alan Greenspan’s famous October, 2008, confession of “shocked disbelief” at the lenders’ lapses sounded like a turning point to me, and it felt equally momentous when Richard Posner, a famous proponent of the Chicago school of economics, allowed that deregulation had gone “too far.”

But those were intellectuals, bound by a different code than politicians and pundits. Elsewhere, things scarcely changed at all. Yes, that new president and his partisans in Congress managed to pass an enormous health-care bill, but only after making sure that the big institutional players were on board and that the new law followed a business-friendly prototype. Then, a halfhearted stab at re-regulating Wall Street, and the audacity tank was just about dry.

As the right howled “socialism,” President Obama took pains to demonstrate his loyalty to the exhausted free-market faith. On trade issues and matters of economic staffing, he loudly signalled continuity with the discredited past. On the all-important issue of regulatory misbehavior—a natural for good-government types—he has done virtually nothing.

The real audacity has all been on the other side. Many Republicans chose to respond to the crisis not by renouncing the consensus faith of the last 30 years but by doubling down on it, calling for more deregulation, more war on government.

That they have partially succeeded with such a strategy in these years of financial crisis, mine disasters, and oil spills is testimony to their political brilliance—and to Democratic dysfunction. As is the burgeoning populist movement that now stands beside the GOP, transforming anger over unemployment into anger over the auto bailout and the good pensions enjoyed by public workers.

Where I most expected changes, though, was in the world of professional punditry, which had largely failed to raise questions about the disaster as it loomed. Today it’s two years on, and nobody has changed the water in the fish tank, as a friend of mine likes to say. Thomas Friedman of the New York Times still burbles about theories of creativity that were management clichés 10 years ago. The Washington Post prosecutes its undeclared war on Social Security by having former TARP czar Neel Kashkari explain why banks had to be bailed out but “entitlements must be cut.” The need to balance the federal budget is almost universally thought to be urgent. And bipartisanship still intoxicates the pundit mind with its awesome majesty.

On Wall Street, the road to hell is still lined with bonuses. And Washington feels the same as ever. The prosperous, well-educated people still tote their yoga mats around town, line up outside the special cupcake shops, and listen to NPR talk show hosts welcome the next generation of boring centrists into the glorious circle of the right-thinking. The lobbyists still gather at the tasteful restaurants du jour, doing their work on behalf of the forgotten men of the uppermost one percent.

As for me, it’s two cans of beer and the escape chute to terra firma. Goodbye and good luck.

Lunchtime Read: Meet Mitt Romney, The Businessman

Stumbled upon this awesome profile of Mitt Romney at the Boston Globe. They basically take apart his life. Whatever you you think of his politics now (for instance, a charlatan willing to abandon all the moderate positions he held to win a hard right GOP’s 2012 nomination), his career is business is unbelievable.

Mitt Romney gets buckets.

On a winter’s evening in 1985, Mitt Romney sat in a drab 10-by-10-foot conference room in Boston’s Copley Place, flapping his tie to mimic a rapidly beating heart. His colleagues knew that when Romney flapped his tie, it meant he was under pressure. Lately, the young businessman had been feeling it like never before.

The pressure had been building ever since he’d been tapped by his mentor to create and run an investment firm called Bain Capital. But two years after Romney took the job, and more than a year after he officially launched the firm, Bain Capital had yet to make many investments. And the few it had made were foundering.

Sitting in the conference room, Romney was so worried about the start-up’s future that, according to one colleague, he raised the possibility of just returning the millions they had raised from investors and going back to their old jobs.

Dressed in a crisp blue shirt, with a white collar and gold collar-pin, Romney appeared to be the model of a successful young financier, with one exception. His shirt, according to colleague Geoffrey Rehnert, was drenched dark with sweat under his arms.

”Mitt was struggling,” Rehnert says. ”And he wasn’t used to struggling.”

In time, Romney would lead the shaky start-up from a staff of seven people managing $37 million to 115 people managing $4 billion in assets. During Romney’s 15-year tenure, Bain Capital would post an astonishing record, on average doubling its return on realized investments every year. Thomas H. Lee, founder of cross-town rival Thomas H. Lee Partners, calls the company’s performance under Romney ”one of the great stories of American capital.”

Romney would eventually use his business success as a platform for his political campaigns, stressing his leadership skills and data-driven management acumen. His critics would use his work in this little-understood world of private equity to paint him as a coldhearted profiteer, cutting jobs to line his own pockets.

But there would never be any argument about how perfectly Mitt Romney fit the image of the smooth and supremely confident executive, with never a hair out of place. Privately, his colleagues knew differently.

On his way to the top, Rehnert says, Romney sweat his way through the underarms of so many shirts that his colleagues came up with a term for it: ”pitting.”

Click the link above to this section of the profile. It runs from his Harvard JD/MBA in 1971 to his departure to run the Salt Lake Olympic Committee in 1999.