This essay by Eric D. Wanger was originally published in a newsletter for the financial clients of the multifamily office he ran in Chicago. At the time he wrote, three months into 2009, America had seen more than 2.3 million jobs lost for the year.

April 3, 2009

Lehman, UBS, Bear Stearns, Refco.
Madoff, Bayou, Stanford, Pequot.
Countrywide, American Home Mortgage; AIG, Merrill, Citi, BofA, UBS.
Anybody up for a good rant?

Dust off your Little Red Books, it’s that time again.

Let’s rant! We just went through a huge financial bust. Busts always make Wall Street look like an evil clubhouse for crooks, lazies, crazies and dupes. This one was no exception: Bankers, once again, are greedy parasites, and their lawyers, we are reminded, are crooked scumbags. (Any good rant should include a diatribe against greedy bankers and crooked lawyers.)

This most recent bubble was as exceptional as its bust. An extraordinary amount of wealth was created and then destroyed. I’ve not been disappointed with the quantity or quality of rants in the press. Every editorial page and blog is bursting at the seams with moralistic homilies. Crooked bankers and sold-out fiduciaries grace every page.

America is not over and the free market is not dead. Did we collectively screw up? Yes. Did we get drunk on debt and leverage? Yes. Did we honestly think that there were really enough millionaires to buy all those million-dollar condos? Maybe. But this has happened before and it will happen again.

The history of finance is filled with booms and busts and the crooks and robber barons that symbolize them. There is a whole literature on this topic. My personal favorites include the sections of A Random Walk Down Wall Street, by Burton G. Malkiel, that deal with famous securities scams as well as an obscure little book from the 1980s called: Other People’s Money: The Rise and Fall of OPM Leasing Services, by Stephen Fenichell.

The Greatest Rant Ever

Some might expect that my vote for the greatest rant ever would come from the literature of the Great Depression. It took the American public decades to regain its trust in Wall Street after the bubbles and busts surrounding 1929 (and the screw-ups that extended the misery). Yet the greatest rant in history may be one produced in the nineteenth century by Mr. Karl Marx and Mr. Frederick Engels. The Communist Manifesto of 1848 was a really kick-butt rant against capitalism and its greedy bankers and crooked lawyers. Sample some of it in English:

The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors”, and has left no other nexus between people than naked self-interest, than callous “cash payment”. It has drowned out the most heavenly ecstasies of religious fervor, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom—Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.

Now that’s a rant!


Postscript: A Plea to the Obama Administration

There is no law that can eradicate greed or make fraud more of a crime. There is no law that will restore our trust in the financial system. Please remember the disaster that is Sarbanes-Oxley. Our system became great by choosing to regulate disclosure, not by trying to legislate common sense.

We need to increase the level of disclosure and transparency demanded of certain markets and instruments. Likewise, we need to re-integrate certain areas of our financial system that successfully evaded scrutiny in the past.

Fraud is already a crime. And stupidity, unfortunately, can never be one.

Eric has nearly 30 years of experience as a creative and entrepreneurial professional in roles ranging from general management, team leadership and project management to technical rolls in IT, software development financial services and law. He has run business units, managed teams and delivered projects for established global enterprises and as the founder of a number of startups. Over his nearly 30 years at work, his job titles have included Board Member (public, private and non-profit), President, Founder, Chief Operating Officer, Director of Research, Chief Investment Officer, Fund Manager, Software Developer, Securities Analyst, Web Designer, Systems Integrator, Investment Advisor, Fundraiser, Consultant and Attorney. As a software consultant, cloud based, mobile app software as a consultant to one of the world’s leading electronic medical records companies (Cerner). As Chief Investment Officer and Director of Research for a startup financial services firm (Wanger OmniWealth, LLC), he developed a proprietary, risk-based holistic reporting platform for wealthy families and a set of allocation models based on it. He has developed automated trading systems for equity and equity ETF's. Between 2002 and 2013, Eric served as a portfolio manager of the Long Term Opportunity fund (small/micro-cap equities), the Alternative Fixed Income Fund (blend of exchange traded and privately negotiated debt) and as the strategist and founder (with Ralph Wanger) for the Income and Growth Fund (multi-asset class dividend strategy). Eric was a senior investment analyst at Barrington Research Associates (Chicago) covering technology and business services. Prior to that, Eric was a software, communications, and technology analyst for the Edgewater Funds, a private equity/venture capital firm with over $1 billion under management. Before joining Edgewater funds in 2000, Eric worked in Silicon Valley providing consulting, training, and software development to early-¬stage firms. Between 1991 and 1996, Eric was a principal consultant at EDW, Ltd, a firm he founded to provide software development, training in rapid software development techniques (NeXT), and systems interoperability consulting services for large multi-vendor and distributed computer networks. EDW's clients included such companies as Fannie Mae, MCI, Swiss Bank Corp (UBS), Chrysler, Merrill Lynch, Apple Computer, Stanford University, and The Acorn Funds. Eric received his J.D. from Stanford Law School and is a member of the California Bar. He was co-founder and managing editor of the Stanford Technology Law Review. Eric was awarded a National Merit Scholarship in 1981. He holds a B.S. in Mathematics from the University of Illinois at Urbana-¬Champaign and received a Chartered Financial Analyst designation in 2005. Eric lives in Chicago with his three children and a fat English Labrador retriever named Casper. He enjoys classical and jazz piano, hiking and aviation. He is an instrument rated pilot. Eric serves as a trustee for the Acorn Foundation and is active at Chicago’s Museum of Science and Industry.

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