Bankers and Politicians in Potomac Land

I'm reading a fascinating book, Homo Politicus: the strange and barbaric tribes of the Beltway, by Dana Milbank. He approaches an anlysis of the denizens of Washington DC from an anthropoligal viewpoint, considering the politicians, staffers, lobbyists and even reporters who together make up what he calls PotomacLand. Many of them, and much of what he tells, are familiar: lobbyist Abramoff, Tom DeLay, the Clintons, Bush; yet to see it all in one book gives in an immediacy that gets lost over time.

It is a laugh-out-loud funny telling of the foibles, folly, and habits of those who work in our nation's capital. Some of the stories are hilarious, even as I shake my head thinking that such jerks are at the pinnacle of national political power. Some other stories remind me of the outrage I felt at the acts perpetrated by some despicable people. And some are plain funny. Milbank skewers the Washingtonians with that most piercing weapon, the truth. It is little wonder to see Senator Boxer's quote in the back of the book: "Taking trash journalism to new heights." Perhaps the Senator, the gentlelady from California, meant new depths, but politicians do speak their own language.

And if one were to wonder if Milbank is telling it accurately, there is ample proof that he is spot-on.

Quotes that follow are from an article in today's WSJ, "CEO apologizes, but not for Lender" (written by James R. Hagerty and Damian Paletta).

Yesterday at the House of Representatives Committee on Oversight and Government Reform a handful of CEOs testified. Mainly it was a chance to let politicians take potshots at the poster boys of corporate excess, part of the sports curriculum in PotomacLand. "Former Citigroup Inc. Chief Executive Charles Prince and former Merrill Lynch Chief Executive Stan O'Neal also testified at the hearing, but lawmakers aimed most of their attention at Mr. Mozilo." Mozilo is Angelo Mozilo, CEO of Countrywide, the nation's largest mortgage originator, which, as with Chuck's and Stan's former companies, is in the toilet. These three bozos made $30 million (Chuck on leaving Citi), $150 million plus (Stan, on leaving Merrill), and Angi, the only one of the three still employed, "received nearly $250 million of compensation for 1998 through 2007 and collected an additional $406 million from sales of Countrywide stock."

And Angi threatened to resign because the company wasn't reimbursing his wife for some taxes the poor girl had had to pay (she must have been beside herself with fear of going broke). To this he offered the Commitee an apology. "Mr. Mozilo didn't apologize for his company's performance or the problems that threaten to put hundreds of thousands of families out of their homes. He blamed those events on unexpected turmoil in the credit markets and falling home prices.

"Instead, Mr. Mozilo said he now regrets the phrasing of a November 2006 email to a pay consultant -- uncovered by the committee's staff -- in which he suggested he might leave the company unless the board resolved certain issues, including his demand for reimbursement of taxes owed when his wife rode on the corporate jet.

"It was "a trivial issue in retrospect," Mr. Mozilo acknowledged to the committee, headed by Rep. Henry Waxman, a California Democrat. "I apologize for that [email]. I regret the words I used. I tend to be an emotional person."

Poor Angi. He got emotional and fired off an email with a threat to resign the stinky company that wouldn't reimburse his poor darling the monies she laid out for tax payments. He now realizes he should have controlled his emotions, and maybe waited before sending the email. It's good to see he feels better now.

Take a close look at Angelo. Does he appear a little alien? (As in Martian, not from overseas, that is.) Look at his pinkie, how it stands away from the other fingers. Mr. Spock would have two and two, so Angi isn't a Klingon, but is he weird, or what? Nice shirt, though. I guess the Mozilos have enough money so that Mr. Mozilo can dress nicely when he has to testify before Congress. And nice cufflinks. I guess Angi's doing okay.

And then there's the coup de grâce.

"Congress rarely holds hearings on Fridays, and roughly a dozen lawmakers showed up. The Republicans in attendance defended the witnesses, arguing that they were compensated based on their market value and can't be blamed for the country's housing-market problems now.

"Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual -- like an island tribe sacrificing a virgin to a grumbling volcano," said Rep. Tom Davis (R., Va.). "But in the end, it won't answer the questions that need to be answered.""

I added the emphasis, but Representative Davis provided the words. What he didn't say was which questions need to be answered, and who is going to ask them. Yes, blaming Chuck and Stan and Angi isn't going to stop hundreds of thousands from losing their homes, but it sure seems a pretty good beginning. Clearly Chuck's bank and Stan's investment bank had very lax controls and nearly-absent risk management. They took on many billions of dollars of investments (those now infamous Collaterized Debt Obligations) that offered excellent return, and forgot corporate risk management 101: risk versus reward tend to be opposite, so the more reward possible, the greater the risk assumed.

Citi and Merrill are going around hat in hand looking for capital so they don't go broke. Maybe skewering Chuck and Stan isn't the same as sacrificing a virgin to a volcano (what a doozie of a simile, I must say), but it is placing the blame where it belongs. They are hardly the only ones that need to get blame, but they sure are guilty.

As for Angi's Countrywide, it got sold to Bank of America for 4 billion bucks. That might sound to be a lot of money, but it ain't. In the proper context, 4 billion for that company is a song. If BofA didn't buy it, perhaps no one else would've, and then Angi and his company would be in the same toilet that Chuck's and Stan's companies are -- and Countrywide ain't far behind, though Angi never did resign.

Oy.