This evening I went to John Talbott’s event at the Barnes and Noble at 555 5th Ave for his new book The 86 Biggest Lies on Wall Street. I haven’t had time to do much more than just skim a few parts, but the talk he gave left me with a generally good impression. I don’t have the finance background to say anything particularly intelligent (or particularly stupid) about his assessment of the current financial crisis. But, the fact that he doesn’t give any simple, cliche “blame the whoever” explanation strikes me as a good sign.
The event was filmed by CSPAN and will air sometime in the future. I didn’t think to find out when.
It’s unfortunate that with this type of book you don’t need to know much to point out errors, but need to know a whole lot to explain why something is correct. So, my critique is going to have to be limited to some negative comments:
First, a couple of the “lies” aren’t things that anyone, aside from a few cranks and nutters, have claimed. The statements would be untrue, sure, but for them to be lies, someone actually has to be claiming it.
7. Free-market capitalism works best with no regulation and no interference from government.
I doubt anyone really thinks we should dispatch with the FDA, disallow law suits for malfunctioning circular saws, or let anyone with the cash buy a tank. Not even Reagan thought we needed literally no regulation. Sure, some people want much less regulation, and the rhetoric is sometimes oversimplified to this degree, but no one really thinks we need zero regulation. We all want our doctors to have some sort of licensing procedure; we all want exotic security offerings to be subject to anti-fraud regulations.
10. Capitalism works equally well in all industries.
Show me someone who thinks free-market capitalism works well for highways, nuclear energy, the military, or law enforcement, and I’ll show you someone who’s yanking your chain.
79. Hedge funds should remain unregulated, because only sophisticated, knowledgeable investors can invest.
Talbott mentions several times that hedge funds are unregulated. Not quite the case, and the proof is right there in the name he gives the lie. If only sophisticated, knowledgeable investors can buy into hedge funds, that’s a regulation. What Talbott means is that they are not registered and are not reporting to the SEC. Reasonable minds can argue over whether there should be more or different regulations for hedge funds, but it’s simply inaccurate to say they are unregulated.
86. Excessive regulation is not needed in the financial markets because anyone who is harmed can seek redress in the courts.
Two problems with this one. First, “excessive” regulation is never needed. If you think it is needed, you obviously don’t know what “excessive” means. The amount of regulation we need is, by definition, not excessive, it’s appropriate. No one thinks appropriate regulation is unnecessary. Second, I’ve yet to even hear of anyone who thinks the courts always provide adequate remedies.
I also had some issues with two comments Talbott made during his talk.
The first is that you won’t see anti-corporate messages out in mainstream media, because the media are owned by big corporations. Well, Barnes and Noble has almost 800 stores in the country, employs 40,000 people and has an annual income over 5 billion dollars. It’s a pretty big corporation and certainly could choose to not let Talbott talk, but I just don’t think most big corporations are going to edit media content to that degree. Viacom isn’t going to pull the plug on Jon Stewart even if he openly criticizes Viacom.
I think the explanation for why is pretty simple: Jon Stewart brings in more money than would be lost by even the most radical of messages he could deliver. Same thing with Barnes and Noble not just stocking Talbott’s book, but inviting him to talk in their stores. So long as a message is popular enough to be profitable, companies will put it out there, even if the message is critical of the company.
Talbott also lays much of the blame for our current problems at the feet of high-powered Washington lobbyists. I had the opportunity to ask him if it was unfair to place so much blame on lobbyists, when at the end of the day none of them get a vote. I was not impressed with his answer: that lobbyists (and their massive corporate bankrolls) have too strong a hold on politicians for them to resist, and too much an influence in elections for us to vote out the bums who won’t stand up to them.
Well, if a lobbyist offered a senator millions of dollars to rob an innocent old lady would we say there’s no way the senator could possibly resist? Hell no, we’d vote the bum out of office.* We’ve done so for far smaller transgressions. To quote the Godfather, “I believe in America.” The day horse heads show up in congressional beds is the day we can say it’s alright for them to cave. Until then we should have higher standards for our leaders. I’m not saying the lobbyists aren’t also to blame, but that much of the blame must also be placed on the people actually passing (or not passing) regulations, and on the voters who don’t do something about it.
*Unless that bum is a Kennedy.
P.S.: The biggest lie on Wall Street is the shrimp cocktail at Ulysses. $10 for 4 medium shrimp? Bollocks!
