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‘The Devil’s Financial Dictionary’ Cuts Through The Euphemism, Doublespeak, And Lies Of Wall Street

‘The Devil’s Financial Dictionary’ Cuts Through The Euphemism, Doublespeak, And Lies Of Wall Street

One of the defining characteristics of the financial crisis of 2008-2009 was that Wall Street’s gains were privatized while its risks were socialized: The CEOs and other top executives at banks and brokerages pocketed billions of dollars’ worth of bonuses for themselves, while taxpayers subsidized the losses after the same financial firms collapsed and had to be bailed out by the government. More recently, Wall Street would have you believe that you are better off being “advised” by stockbrokers who will put their own interests ahead of yours, that fund managers who have failed to protect their investors against losses in the past will do so in the future and that conflicts of interest can harm you only if you don’t know about them.

The great American satirist Ambrose Bierce wrote his Devil’s Dictionary (first published in 1906) to mock the pretension and hypocrisy of the Gilded Age. I started writing what became The Devil’s Financial Dictionary merely to amuse myself, but soon realized that it could be a vehicle to mock the pretension and hypocrisy of our own, latter-day Gilded Age. The financial industry abounds in euphemism, doublespeak, myth and mendacity. With this book, I seek to offer a glossary of what lies beneath.

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APOLOGY, n. In the real world, an admission of culpability and remorse for an action that harmed someone else, typically followed by an attempt to right the wrong and a commitment not to repeat it; on Wall Street, a declaration that other people did something wrong and that any resulting harm was caused by circumstances beyond the bank’s control. A Wall Street apology always purports to take responsibility, but usually omits contrition, shame, a desire to make good on what went bad, or the willingness to make sure the same behavior never happens again.

In testimony at congressional hearings today, Manuel B. Schacht, chief executive of Bellow, Blair, Howell, Huff & Bragg, the investment bank, apologized for the $794 billion in losses his firm incurred on securities backed by the value of beachfront property in the Central African Republic. “I accept full responsibility for what happened, and as a firm we deeply regret the inconvenience that investors and taxpayers have experienced,” said Mr. Schacht.

He added: “The worst of the suffering, however, will be borne by our own employees, who must forgo their future bonuses and search for work elsewhere while bearing the stigma now so unfairly attached to our firm. It is important for policymakers and the public to recognize that, while mistakes were made, these losses were triggered by events beyond our control.”

BEAR MARKET, n. A phase of falling prices when you can no longer bear to think about what a fool you were for not selling your investments—which is generally a sign that you should think instead about buying more. A period of falling prices inevitably sets the stage for a period of rising prices. See also BULL MARKET.

A bear market is commonly believed to begin when a stock-market average or index has fallen by at least 20 percent. But, in fact, there is no official definition or threshold—still another reminder that reality on Wall Street is just a state of mind.

BIASED, adj. Human.

BULL MARKET, n. A period of rising prices that leads many investors to believe that their IQ has risen at least as much as the market value of their portfolios. After the inevitable fall in prices, they will learn that both increases were temporary. See BEAR MARKET.

BUY, v. What Wall Street analysts say investors should almost always do, regardless of a stock’s price or market conditions. See also SELL.

CLEARLY, adv. Unclearly.

Analysts and pundits using the word “clearly” are either (1) pretending, without any valid evidence, that they know what is going to happen, or (2) describing what has already happened and declaring, after the fact, that they knew it would happen when at the time they had no idea (see HINDSIGHT BIAS).

CREDIT CARD, n. A thin slab of plastic that enables a person to feel pleasure today by incurring pain tomorrow.

DATA, n. The raw material from which Wall Street fabricates distortions for marketing purposes.

DAY TRADER, n. See IDIOT.

DODD-FRANK ACT,n. A financial-regulation law, enacted in 2010, that sought to prevent financial institutions from becoming “too big to fail” but succeeded mainly at being too long to read, too complex to understand, and too convoluted to implement.

POTENTIAL CONFLICT OF INTEREST, n. An actual conflict of interest.

REGULATOR, n. A bureaucrat who attempts to stop rampaging elephants by brandishing feather-dusters at them. Also, a future employee of a bank, hedge fund, brokerage, investment-management firm, or financial lobbying organization.

RUMOR, n. The Wall Street equivalent of a fact.

SELL, v. What Wall Street analysts say investors should almost never do, regardless of a stock’s price or market conditions. See also BUY.

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Excerpted from The Devil’s Financial Dictionary by Jason Zweig. Reprinted with permission from PublicAffairs. Copyright © 2015 Jason Zweig. All rights reserved. 

Hillary Clinton Emails Show A Friendly Face To Wall Street

Hillary Clinton Emails Show A Friendly Face To Wall Street

By Zachary Mider, Bloomberg News (TNS)

Hillary Clinton tried to help one private-equity boss with a visa problem and encouraged another on a project in China. She apologized to the chairman of a big corporation for failing to commit to an event right away.

“So sorry I haven’t responded before but I’ve been hip deep in the rollout of the Afghanistan strategy,” Clinton wrote to Terrence Duffy, executive chairman of futures market operator CME Group and a supporter of her 2008 presidential campaign. “I hope you, your family, and the futures markets are all well!”

The 3,000 pages of emails that the State Department released this week, dating from Clinton’s time as secretary of state, show another side of Clinton from the one that was on display last month in New York.

There, the Democrat kicked off her campaign for the presidency with a swipe against overpaid CEOs and hedge-fund managers, saying “democracy can’t just be for billionaires and corporations.” She also said the nation’s 25 highest-paid hedge-fund managers make more than all of American kindergarten teachers combined.

The emails, which mostly date from 2009, Clinton’s first year running the State Department, show more willingness to work with big business and financiers, perhaps not surprising given that, in her previous job as a senator from New York, Clinton represented Wall Street and had financial firms among her top campaign donors, according to data compiled by the nonpartisan Center for Responsive Politics.

Even Stephen Schwarzman, the billionaire leveraged-buyout CEO who was a key fundraiser for George W. Bush, got a favor. After an event at the New York Stock Exchange in 2009, where she rang the opening bell, she emailed her staff to follow up on Schwarzman’s request for help with a visa for a person whose name is redacted in the State Department release.

The Blackstone Group chairman is an outspoken defender of the preferential tax treatment that applies to some private-equity managers’ pay known as carried interest, once likening a proposal to end it to Hitler’s invasion of Poland. (He later apologized for that analogy.) Clinton is among those who have called for the carried interest treatment to be changed.

Still, Blackstone has given at least $250,000 to the Clinton Foundation and related charities over the years. And although Schwarzman gives mostly to Republicans, according to Sunlight Foundation data, he gave $500 to Bill Clinton’s presidential campaign in 1992. (On Wednesday, Clinton reported raising a record-breaking $45 million for the first quarter of her presidential campaign. Names of donors won’t be revealed until later this month.)

Another private-equity executive who appears in the emails is Admiral William Owens, who was appointed vice chairman of the Joint Chiefs of Staff by Bill Clinton. By 2009, he was a top executive in the Asian arm of AEA Investors, a private-equity firm founded by the Rockefeller, Mellon and Harriman family interests. He was working on a project to encourage dialogue between retired senior military leaders in the United States and China, and wanted Clinton to attend some meetings.

“Thanks for continuing this important project which I heartily support,” Clinton replied. It’s not clear from the emails if she took him up on his request.

Clinton had warm exchanges with Stephen Roach, a Morgan Stanley economist, and passed along a concern about a trade issue voiced by David Cote, the chief executive officer of Honeywell International.

Another pen pal was CME’s Duffy, who made $6.7 million last year, and whose endorsement in her 2008 run came despite his being a registered Republican.

“We need a president like Hillary Clinton who understands the important role that financial markets play in our global economy,” he said in a statement then.

Clinton knows more than a little about the futures markets in particular. Her series of well-timed trades in cattle futures became a topic of controversy during her husband’s first term in the White House.

Duffy kept in touch after the 2008 campaign. “You’re doing an incredible job,” he wrote in May 2009, asking for her presence at a company event. “Once again,” he said in September, inviting her to another event, “you’re doing an amazing job.”

“I am trying hard to accept this invite,” she replied, “We will let you know one way or the other by the end of the week. Is that OK?”

It was OK with Terrence Duffy.

Photo: U.S. Embassy via Flickr

Republicans Doing Their Best to Protect Wall Street From Financial Reform Law

WASHINGTON (AP) — President Barack Obama’s financial overhaul law is nearly a year old. For congressional Republicans, the fight to weaken it is just starting.

Wary of trying to repeal the entire statute and being portrayed as Wall Street’s protectors — banks rank among the country’s least popular institutions — GOP lawmakers are trying to nibble away at the behemoth measure. It’s a crusade they’re waging despite lacking the White House and Senate control they need to prevail.

Days ago, one Republican-run House committee approved bills diluting parts of the law requiring reports on corporate salaries and exempting some investment advisers from registering with the Securities and Exchange Commission. Another House panel voted to slice $200 million from Obama’s $1.4 billion budget request for the SEC, which has a major enforcement role.

Meanwhile, Senate Republicans are continuing a procedural blockade that has helped prevent Obama from putting Elizabeth Warren or anyone else in charge of the Consumer Financial Protection Bureau, which opens its doors in two weeks.

The law hurts “the formation of capital, the cost of capital and access to capital, and you can’t have capitalism without capital,” said Rep. Jeb Hensarling, R-Texas, a leader of the House Financial Services Committee. “So Republicans in the House will be examining each and every one of the 2,000-plus pages” of the law, which he called “a job creator’s nightmare.”

Confident that Obama and the Democratic-controlled Senate can prevent the House from doing major damage, Democrats view the Republican drive as a political exercise — for now.

“It’s mostly setting a marker for the election. And it helps with their campaign contributions,” said Rep. Barney Frank, D-Mass., who chaired the Financial Services Committee last year and was a chief author of the law. “But it also tells people in the financial community that if they win the next election, they’ll be able to undo it all.”

The financial industry leans Republican in its campaign contributions but not overwhelmingly. Sixty-one percent of the $9 million that commercial banks gave federal candidates for the 2010 elections went to Republicans, while 54 percent of the securities and investment industry’s $9 million went to Democrats, according to the nonpartisan Center for Responsive Politics.

Democrats are using the GOP drive for their own fundraising.

In one email sent last week under Frank’s name soliciting money for House candidates, the party wrote that Republicans want to “bring back the days of unrestrained excess, deception and de-regulation of Wall Street.” The mailing called it “payback to their big contributors in the financial services industry.”

Obama signed the banking and consumer protection measure last July 21, a keystone achievement that responded to the biggest financial crisis and most severe recession since the 1930s. It passed Congress with solid Democratic support and near-uniform GOP opposition.

Among its provisions, the law:

— Created the consumer protection agency to oversee mortgages, credit cards and other financial products.

— Established a body of regulators to scan the economy for threats to the financial system.

— Required banks to hold back money for protection against losses.

— Curbed the trading of derivatives, speculative investments partly blamed for the 2008 financial crisis.

— Gave the Federal Reserve powers to oversee huge companies whose failures could jeopardize the entire financial system.

Yet the law was just a start, since it ordered federal agencies to craft rules to enforce it. As of July 1, out of an estimated 400 regulations to be written, 38 are complete. That leaves 362 proposed, facing a future deadline or having missed due dates for completion, according to the law firm Davis Polk.

Republicans say the overhaul went too far and has saddled banks and other companies with requirements that harm their competitiveness. The House Financial Services panel alone has held more than a dozen hearings on the law, in part to underscore to administration witnesses that some provisions — like forcing banks to hold back capital as a hedge against losses — will hurt business, according to the committee’s chairman, Rep. Spencer Bachus, R-Ala.

“What we are doing is rational, it is sensible, it is entirely practical, it is compassionate,” said Rep. Nan Hayworth, R-N.Y., a tea party-backed freshman on that panel. “So we are doing the right thing, and it behooves the Senate and the administration to follow suit.”

The highest-profile fight has been over Warren, picked by Obama to set up the new consumer bureau. Many Democrats and liberal groups want her to become its first director.

Following a May clash between Warren and a House subcommittee chairman, House Oversight Committee Chairman Darrell Issa, R-Calif., plans to question the Harvard law professor and long-time consumer activist at a July 14 hearing about her role shaping the new agency.

Meanwhile, 44 GOP senators have promised to block a vote on any nominee unless the bureau is made “accountable to the American people” by replacing the director with a board of directors and giving Congress control over its budget. Forty-one senators can prevent a nomination from coming to a vote.

“You try to get leverage where you can. In the Senate, nominations are your leverage,” said Mark A. Calabria, who monitors financial regulation at the conservative-leaning Cato Institute.

On another front, Republicans want to cut the budgets of agencies that are supposed to enforce the overhaul.

Besides denying the SEC extra money next year, the House Appropriations Committee would limit the consumer protection bureau to $200 million, well below the $329 million Obama wants. The full House has voted to hold the Commodity Futures Trading Commission, which oversees derivatives, to $171 million, short of this year’s total and less than two-thirds of what Obama wanted.

Republicans cast the cuts as part of their deficit-cutting drive, but Democrats say the reductions are designed to obstruct the new law.

SEC Chairwoman Mary Schapiro said in a speech this spring that budget cuts would mean “an investor protection effort hobbled.”