The following is an excellent excerpt from the book “WALL STREET: America’s Dream Palace” by Steve Fraser from Chapter Three titled “The Hero” on page 124 and I quote: “Mythmaking about Wall Street’s heroic presence began in the Gilded Age and has been with us ever since. It has always rested first of all on a belief that an elect subspecies of men are endowed with a certain genius for triumphing over risk. This has been emphatically the case more recently. One need only recall the Reagan era and the years since then. Think of names like “Chainsaw”Al Dunlap, the asset stripper from Sunbeam, “Neutron” Jack Welch of General Electric, and the corps of samurai-like practitioners of the art of “lean and mean” management, crusaders on behalf of “shareholder value.” For a decade and more their ferociousness and implacability were applauded on magazine covers, in best-selling biographies and autobiographers, in gossip columns, and on a slew of new cable television shows catering to the popular fascination with Wall Street as a combat zone. Or recall books like The Predators’ Ball (1989), which recounts the high-risk financial acrobatics of Michael Milken and his coterie of junk bond speculators. In fact, the very sobriquet “Predators’ Ball” was not, as one might assume, the brainstorm of some publisher’s marketing department. It was conceived by Milken and his colleagues to capture the brazen spirit of the annual Beverly Hills orgy celebrating their ruthless makeover and dismantling of the country’s most formidable corporations. And of course who can forget Gordon Gekko, the cinematic apotheosis of people like Milken and Ivan Boesky? Gekko’s infamous but charismatic pronouncement in the film Wall Street that “greed is good” both scandalized and seduced. How reminiscent of the way Vanderbilt, Drew, and Fisk had flouted Victorian pieties a century earlier, earning themselves censure but also the awe reserved only for the most daring.
Beginning with the merger and acquisition mania of the mid-1980s, the media were overrun with depictions of Wall Street “gunslingers,” “white knights,” “killer bees,” “hired guns,” “shotgun” corporate matings, and “barbarians at the gates,” warrior appellations borrowed helter-skelter from antiquity, the middle Ages, and American’s mythologized West. New magazines like Manhattan Inc., Venture, and Success, as well as established venues like the New Yorker, became awestruck documentarians of the era’s power-suited corsairs, with their manly horseplay and their O.K. Corral financial staredowns and shoot-’em-ups. Portraits of the biggest deal makers on the Street such as the lawyers at the leading merger and acquisition firm (Skadden, Arps, Slate, Meaghen, and Flam) marveled at their all-around fitness and their regimen of physical workouts, which prepared them for “all-nighters.” These were financial athletes at the peak of their game, in it not for the money but for the je ne sais quoi that always seems present at the heart of all true sportsmen, men like the “Liquidator,” Asher Edelman, who confided to an interviewer his “Nietzschean desire for control.” Bond traders made out like professional hit men and boasted of “ripping the faces off” their clients, while the more cerebral samurai of the financial wars carried around copies of The Art of War by Sun Tzu, the Chinese Clausewitz. One young trader caught up in the throes of a superheated deal was overheard exclaiming: “I love it. It’s just like combat. It’s the real thing.” a magazine anointed Michael Milken “Michael the Magnificent.”
Remarkably, for the first time in nearly a century scholars began revising the shadier history of the founding generation of Robber Barons. New studies of Jay Gould, J.P. Morgan, and Edward Harriman reconceived them as master builders. This historical revisionism did more than simply revive the Gilded Age hagiographies and the fawning magazine literature of the turn of the century. In these revisionist biographies the well-publicized faults of the old tycooney were duly noted; in fact, they were reconceived as the natural, necessary, inevitable, and even heroic traits of a bumptious country feeling its oats, preparing to burst onto the world stage as a new colossus.
Soon enough, all these goings-on became commonly referred to as America’s second Gilded Age. It was a characterization that would last well beyond the Reagan era, into the dot-com mania of the next decade. Echoes of the present in the past—and conversely the past making itself heard in the present—suggest deep-running similarities between the two Gilded Ages. Like Drew, Fisk, and Gould, many of the Wall Street heroes of the 1980s, including Carl Icahn, Bruce Wasserstein, Saul Steinberg, Ivan Boesky, and Michael Milken, hailed from unimposing social backgrounds, middle- and lower-middle-class outer boroughs and suburbs, and state colleges or no colleges rather than the Ivy League. Their rise out of social obscurity struck a chord, making them living confirmations of that primal national faith that for those with the gumption anything was possible in America. Awe, mixed with envy for those who have ascended from nowhere into the emptyrean heights, is an indigenous American cultural instinct. First noted by Alexis de Tocqueville in his portrait of antebellum America, it has remained potent ever since. This emotional chemistry provides the combustible raw material of endless melodramas depicting the rise and equally delicious fall of great Wall Street tycoons and their empires; thus Reagan-era best-sellers included Greed and Glory on Wall Street: The Fall of the House of Lehman, Barbarians at the Gate, and The Serpent on the Rock.
Like their forebears of the first Gilded Age, the Street’s newest breed of financial bad-asses burst on the scene as rebels against the ancien regime, only more so. Michael Milken’s “social revolution” aimed at overturning the Street’s historic hierarchy. The firm he worked for, Drexel Burnham Lambert, had been distinctly minor league; now it, and a handful of their new arrivals like Kohlberg, Kravis, Roberts & Company, were cock of the walk. “Relationship banking,” that genteel world enclosed within mahogany walls hung with Old Masters were “relationships” were premised as much on family and social ties as on mere moneymaking, gave way to, was run over by, “transactional banking.” Here every new deal was open to negotiation, each a new test for some Wall Street financial house to prove its commercial bona fides all over again. Milken believed in and milked his reputation as a warrior against the “corporacracy.” Nasty microclass struggles for control took place between languorous Ivy League patricians turned out in rimless glasses and the omnipresent breast-pocket hanky and shirt-sleeved, uncouth cigar-chomping geeks from the trading floor staring out at the world through thick-framed black glasses. This too gave a sense of freedom, of fresh blood being pumped through the aerated arteries of an aging financial organism. The rebels’ bloody assaults on the corporate and financial bastions of the old order earned them points for fearlessness. And their nerdy outfits gave them extra credit for their social irreverence, a kind of bourgeois version of epater le bourgeois, like the tobacco juice drooling out of Unc’l Dan’l Drew’s mouth.
Michael Milken’s Aladdin-like junk bond buy-outs, mega-mergers, and acquisitions formed the vanguard of this upheaval, making him the Lenin of the social revolution. Reared in California, supremely arrogant, and notably modest in what he drove, wore, and lived in, he was perhaps oddly suited to the role of the iconoclastic gate-crasher. He exerted a mesmerizing influence, a charisma that had limousines lining up on rodeo Drive at four in the morning to do deals, their owners convinced, as one of his admirers gushed, that “Michael is the most important individual who has lived in this century.” Why not? In just a half dozen years, 215 industrial and financial companies issued $20 billion in junk bond debt (roughly 13 percent of the total corporate bond market). Household names of the American economy—TWA, Gulf Oil, Walt Disney—were suddenly in play. Three thousand mergers worth $200 billion took place in 1985 alone.
It was an odd anti-elitist revolution, organized from on high and exuding a messianic aura. As a “social revolution:” it was designed to save America from itself, from its fat-cat complacency. Stripped of poorly performing assets, malingering workers and their feather-bedding unions, doddering and absentee managers, and intrusive government bureaucrats, American business would rise again. Only men who had themselves risen from social obscurity could appreciate and meet the challenge. Companies languishing in commercial oblivion, financially distressed but with untapped potential, could be resurrected, but it would take the audaciousness of a new financial knighthood.
In these same ways, however, Wall Street heroes of the second Gilded Age were quite unlike the model epitomized by J.P. Morgan. When the captains of industry and finance lorded it over the country at the turn of the twentieth century, no one would have dreamed of calling them rebels against either an overweening government bureaucracy or an entrenched set of interests. There was no government bureaucracy to speak of to rebel against, and these men were themselves “the interests,” Wall Street chief among them. People like Morgan, Andrew Mellon, and Henry Clay Frick worried about being overthrown, not about over-throwing someone else. A Gilded Age peopled by irreverent, leonine youngsters out to shake up the old order has a distinctly different feel from one run by lugubrious, bearded patriarchs whose very physical heft cried out their sense of entitlement and reverence for good order.
Just as Morgan’s emergence as a new kind of Wall Street hero signaled a profound shift in the underlying structure of the political economy at the turn of the century, so too did the rise of Wall Street’s rebels during the Reagan years highlight another fateful turning point. However, it was a more dubious one. Wall Street “heroism” during the closing decades of the nineteenth century, no matter how much it transgressed law and morality, was bound up in the vast transcontinental industrial explosion of the country. Wall Street heroes had their hand in all the nation’s great undertakings—coast-to-coast railroads, gigantic steel, oil, and raw materials industries, pioneering technologies in electricity and chemicals, the dazzling cornucopia of new material delights. Moreover, these stupendous feats of production and innovation drove the economy.
A hundred years later, however, Wall Street stood at the center of a decaying productive apparatus. The billions of dollars trading hands during the Reagan (or Milken) era measured what one commentator aptly called the “financialization” of the economy. It concealed an underlying stagnation: the 1980s were marked by a relative lack of investment in new plants and machinery, bare-bones budgets for research and development, and the contraction of folding up of precisely those core industries that were the hallmarks of the first Gilded Age. Instead the economy relied on the heady vapors given off by the financial services sector. Wall Street became a revolving door for the exchange and re-exchange of nominal assets; corporations buying other corporations; public companies taking on freight loads of debt to go private; privately held firms auditioning for their debuts on the public equities market; a kind of “paper entrepreneurialism.” Between 1979 and 1990 the proportion of total private investment in plant and equipment that went into the financial, insurance, and real estate sector (FIRE) doubled. And between 1984 and 1990, one-quarter of all private investment ended up there.
Our most recent cult of the titan, the maestro of risk, emerged amid a mood and even the reality of national decline. It followed the defeat in Vietnam, the scuttling of the postwar financial system inscribed at Bretton Woods, the rise of OPEC, “stagflation,” the wholesale deindustrialization of the country’s midsection, an inferiority complex regarding the Japanese economy, the humiliation of the Iran hostage crisis, and more. How unlike the environment of late-nineteenth-century America, when the country was clearly on the rise, an awakening giant flexing its muscles.
Does the heroic stature of Wall Street diminish under such circumstances? Does it matter that once the lions of the Street were identified with great material accomplishments but that more recently, especially during the fabled 1980s, their names have been linked to the economy’s dematerialization? Perhaps this can account for what might be characterized as the declension of the masculine mystique long identified with the titan of finance, indeed, even its faintly comic or comic-book inversion. During the Reagan era the country was introduced to the “big swinging dick” phenomenon made famous by Liar’s Poker. This was the easily satirized world of Gordon Gekko or Larry “the liquidator” (from the play and film Other People’s Money), an adolescent male fantasy world of “rip their eyes out” raw bravado and violence. The Wall Street “hero” of Tom Wolfe’s Bonfire of the Vanities is a “master of the universe” not because he is one—on the contrary, he is a quivering mass of insecurities, duplicities, and fears—but because he has borrowed the name of one of his six-year-old daughter’s favorite over-muscled superhero toys. All this preening and chest-thumping might have struck their titanic forebears as unnecessary or even demeaning. One senses here an instinct for revenge and overcompensation gestating during the years of national frustration and decline.
Early on the Wall Street hero was given life by his association with the country’s mighty material explosiveness; later, by living off its financial fall-out. In either case, however, the Street has always seemed to thrive thanks to somebody else’s efforts. From the time of Jefferson through to the present, Wall Street has appeared to many people under the guise of the parasite. And for our ancestors especially the parasite was more than a species of economic deadwood. First and foremost the Wall Street parasite was a sinner.”
(WHAT STEVE FRASER IS TALKING ABOUT HERE IS IDENTICAL TO A STORY TOLD BY DAVID STOCKMAN, WHO WAS PRESIDENT REAGAN’S BUDGET DIRECTOR AND THE TITLE OF THE STORY, WHICH I ALSO PUT ON MY BLOG SITE IS “WOLFSTREET.COM: DAVID STOCKMAN; HEDGE FUNDS AND THE RULE OF RIPS AND WRECKS” FROM THE WOLFSTREET.COM WEBSITE DATED JULY 29, 2013. IT SAID WHEN ALAN GREENSPAN WAS RUNNING THE FED, THE CONGRESS TOTALLY DISMANTLED ALL REGULATIONS, SEPARATING THE COMMERCIAL BANKS FROM THE INVESTMENT BANKS AND THE STOCK MARKET ON RECOMMENDATION OF MR. GREENSPAN. THE BIG BANKS LOBBIED CONGRESS, SAYING THEY DIDN’T NEED ANY REGULATIONS AND EVEN FINANCED THEIR ELECTION CAMPAIGNS. THE BANKS SAID REGULATIONS WERE INTERFERING WITH FREE ENTERPRISE, WHICH DAVID STOCKMAN CALLED “CRONY CAPITALISM.” HE SAID HE COULD LIVE WITH HONEST CAPITALISM BUT SINCE IT GOT SO CORRUPT THAT OUR SYSTEM WILL FAIL BECAUSE OF THEIR GREED, SUCH AS THE FILM “WALL STREET” AND THE GORDON GEKKO CHARACTER SAYING “GREED IS GOOD.”
LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members