Payback time

At the moment, I'm trying to keep track of two different financial meltdowns -- and frankly, I'm not sure if that is such a good idea. I may need to seek counseling for excessive media exposure.

On the one land we've got Sir Fred Goodwin, and on the other, we have the AIG bonus reapers. And although both stories have been bubbling along since the early fall, the pots (of gold, that is) have bubbled over this week.

For those of you not entirely familiar with Sir Fred, he is the guy who nearly bankrupted the Royal Bank of Scotland through his aggressive bank (and debt) acquisition. The UK government may soon own a 95% stake in the bank, having used billions of tax-payers' pounds to shore up the substantial losses. On his way out last fall, Goodwin made good on his name -- and somehow managed to win an infamous £693,000-a-year pension. More salt in the collective public wound? He gets to draw it, starting now, at age 50 -- for life, and despite the fact that he only worked for the bank for 10 years. Although our Prime Minister has repeatedly asked the deposed banker to give back some of his ill-gotten gains, Sir Fred has declined to do so. (Perhaps he is planning on decamping to the Cayman Islands or the Bahamas sometime soon?) Apparently, he doesn't even need a tax haven -- because the latest word is that he has withdrawn 3 million pounds from his pension pot AND RBS (i.e, the taxpayer) has paid the 40% tax on it for him. Somehow, I find that bit most galling. He gets the full 3 million, while it costs the government twice over. If he does leave Great Britain, it will probably be because of all of the people, little and large, baying for his blood. The man is going to need a fortress of self-justification to protect him. I do wonder if he feels like a glorious picnic was spread before him, only to be ruined by swarms of midges.

In American news, AIG has finally managed to unite the Democrats and Republicans -- who are falling over themselves to condemn the recent bonus pay-out of 165 million dollars. Although this amount is mere chump change compared to the overall 200 billion bail-out given to the American International Group, it has become the lightning rod for collective anger. Two main points, really: the 165 million was distributed amongst only 418 people, 52 of which had already left the company; and, it was said to be a "retention bonus" for certain employees in the financial products unit -- the very unit whose dicey derivative deals brought the company down. As Maureen Dowd put it so pithily, Isn’t that like giving bonuses to the arsonists who started a fire because they alone know what kind of accelerants they used to start it?

Although various people are still going on about the sacredness of contracts, Sigmund was taking the firm view (in our kitchen last night) that the time has come to renege. Surely bankruptcy changes the rules a bit? Thomas Friedman suggests, in a very measured The New York Times editorial, that the best way out is for the A.I.G. bankers to take one for the country and give up their bonuses. But is that likely? Are the bankers suddenly going to discover a conscience and do the right thing? Do they actually think they've earned this money, or are they so deep into "wealth without work" thinking that they have lost of all concept of "fairness" and "equality?" Auto workers and teachers -- surely modestly paid professions, at best -- are now agreeing to compromise their individual contractual rights in order to benefit the greater whole, but the rich are looking mighty reluctant to come off their gilded perches. Mrs. Madoff, I'm talking to you. The gulf between Haves and Have-nots has grown apace -- and not been helped a bit by that showy new category: Have-mores. Has our society become so skewed that we are beyond anything but the survival of the most selfish?


There was an interesting editorial in this weekend's paper: Look no further than inequality for the source of all our ills. Author Will Hutton suggests that "more unequal societies are socially dysfuntional across the board." Drawing from a recently published book called The Spirit Level, Hutton suggests that human beings are "social creatures" foremost: the "esteem of others is central to our well-being" and "we have a deep inbuilt sense of fairness." When the rich are beyond regarding the poor, the poor become less inclined to want to play along with any kind of social contract. The conspicuous consumption of the rich and the knife crime of the poor are two sides of the same coin. Or, put another way, is there any real difference between a rich man's tax dodge and a poor man's benefit fraud?


I read this editorial as I was finishing the 2008 Booker Prize winner, The White Tiger, and the fierce and filthy descriptions of the deep inequalities of Indian society seemed to illuminate the points that Hutton was making. The narrator of that story describes himself as a "social entrepeneur." Although he does build up a small business -- in the traditionally entrepeneurial sense -- Balram believes that his true accomplishment is escaping from the mental "Rooster Coop" which enslaves the majority of his countrymen and women. Balram presents his revenge on the social norms as a victory, but the novel does a brilliant job of exposing the perils of living for nothing but extreme self-interest -- no matter what the size of your bank account.

For years, it seemed like we were more or less inured to the increasingly more competitive and surreal bonus culture . . . but now it appears that the bankers, with all of their self-justifications, are looking a bit unclothed. The payouts are leading to paybacks . . . and the bonus reapers better watch theirs.

Monopoly Money

Build or Go Bust

Yesterday I stumbled upon a blog brouhaha.

A certain Anonymous criticized a blogger for writing about a party thrown by some artistic friends. In addition to concluding that the vast majority of bloggers were self-absorbed and self-indulgent, Ms Anonymous contended that writing about parties was a slap in the face to struggling Americans. Do you people know there is a recession? wrote Anon.

Well, yes Anon; I think that we are all very much aware of the general economic decline around us. How could we not be? But perhaps -- and this is just a thought -- blogs are a place to get away from the front page and the sliding stock market?

I am the fretting sort, and I can't seem to stop myself from endless speculation and worry about it all. Just as the ancients scrutinized animal entrails for clues to the future, I listen to conversations and scan my own middle-class landscape for signs of economic health or sickness.

Although we know a mostly affluent group of people, the overwhelming majority of them are involved in finance and property -- two occupations which have suffered from a dizzying reversal of fortune. Nobody is talking -- well, not much -- but yesterday I was with a woman who burst into happy, relieved tears when she found out that her son had just won a major scholarship. (Her husband has been out of work for months.)

This weekend, when my husband and I endured a family bout of Monopoly, I couldn't help but draw parallels between the strategies of this game and the real-life financial world.

I taught my children to play Monopoly using Ganny's Rules -- as instituted by my game-loving grandmother. Perhaps Ganny was a trader at heart, because she liked to emphasize the elements of risk and reward. Wheeling and dealing were encouraged, and so was incentive -- in the form of a big pot of money. We always kept a $500 bill tucked under Free Parking, and any tax/penalty money got deposited there, too. If you were lucky enough to land there, you ended up with a fat bonus that could potentially save your bacon. We all speculated wildly, plowed all of our funds into development, and suffered from the dramatic windfalls and declines which made the game a tad more exciting. My brother ALWAYS wanted Park Place and Boardwalk -- the most expensive properties. He would trade for anything in order to get his hands on them. He often went broke trying to develop them, but if he succeeded, he would inevitably drive everyone else out of the game.

Sigmund wasn't having any of that. He made us play by the rules: no extra money; no borrowing; no trades. For most of the game we played in a state of boring gridlock. Everyone owned something that someone else needed, and all property development was thus stagnant. It reminded me our banking industry, frankly. I finally caved in and traded youngest daughter what she needed . . . in a deal that had no benefit to me. Although I had built up a sizeable fortune through the conservative investments of railroads and utilities, I eventually lost it all. There's always that one expensive hotel stay too many.

Our financial world has lurched, sickeningly rapidly, from the first "strategy" to the second -- and now we are in the widening gyre. (This famous phrase of Yeats' suddenly occurred to me, but a financial writer had already gotten there first.) Everyone's instincts are to rein back on spending and tuck any surplus under the mattress -- people are being criticized for having parties, for goodness sake -- but that will just drive more businesses into bankruptcy. (My friend whose husband lost his finance job? She's in catering: mostly weddings and parties.)

Who could possibly forget, even for an hour, about this strange, shaky new world we live in? There is never more than one degree of separation between a person who is still okay -- and a whole bunch of others who aren't. My list of friends and acquaintances read like News items. A friend of a friend lost all of her money with Madoff. A friend is stuck with buy-to-let tenants who are months behind on their rent. An acquaintance had to lay off nearly all of their employees when the Royal Bank of Scotland called in their loan. (Perhaps they needed the money for Sir Fred Goodwin's £703,000-a-year pension pay-out?)

Why shouldn't we occasionally want to read or think about something else?

Woolworth's: gone, but not forgotten
Our local storefront is drawing the musicians who play for small change

Should we start growing turnips?

I can go months, nay years, without a turnip crossing my mind or my lips. Yet in the last 24 hours, turnips have cropped up not once, but three times! Surely three of anything is a pattern, and therefore of significance? And so I talk, not of "cabbages and kings," but of turnips and banking titans.

Is there anything worth talking about at the moment other than the meltdown of our financial services and banking industry? Despite the fact that I go about my daily life . . . making soup for sick children, ordering bulbs for next spring, attending an Arthur Miller play . . . all I can really think about is the shaky state of our collective finances. I am reading, from afar, about the mighty battle in the U.S. Congress to determine how much, and to what extent, the Treasury (and thus all taxpayers) are going to bail out the banks -- as they list, and sink, under bad debt. A quote from Lloyd Doggett, Democratic congressman and fellow Texan, sums up the situation fairly pithily, I think: "The problem is that the people getting asked to clean up the broken furniture didn't get invited to the party." (The Guardian, 25.9.08)

Who IS to blame for this mess, frankly? Is it really just the Wall Street fat cats? Is it the people who borrowed money they couldn't afford to pay back . . . or the people who let them? Is the Bush regime responsible for the encouragement, by means tacit and overt, to create financial growth by any means possible? Or is the banking crisis just the opportunistic virus which has invaded a body already weakened by its decadent appetites and habits? Have we all just become really greedy?

Yesterday, I was invited to play tennis with three women of slight acquaintance -- they are what I like to think of as jolly good English sorts, "veddy middle class," very WI, and all probably 15 years or so older than me. The last bit -- age -- was particularly pertinent to our discussion because these woman all came of age in an England much different from the one we live in now. England in the 40s and 50s was a much more parsimonious place, by all accounts, and even the well-heeled of that era had more frugal habits than the majority of us do now -- particularly when it came to borrowing money. Being "greedy" was not only sinful, but even worse, it was a sign of bad manners. One of the women claimed to still feel "slightly sick" when she surveyed the vast choice at today's grocery stores. Another woman related that her young son, a fledgling titan, had been interviewing Lehman Brothers refugees all week. Only 30, he was hiring men many years his senior and experience level -- and all of them with crushing monthly direct debits for mortgages and school fees. Apparently, he was feeling grateful about being relatively unencumbered. As lifelong savers, these women's major concern seemed to be how exactly to disperse their savings -- because the UK banks are only going to guarantee a certain amount. They aren't quite to the point of mattress-stuffing, but it's getting close.

In the end, we only played one set of tennis -- because we had squandered all of our time huddling around the AGA. It wasn't like any of us had any real answers, not to mention any in-depth understanding of the situation, but we were all gripped by the need to talk about it. Although it was meant to be a humorous remark, our hostess finally threw out, "Well, I guess that we are going have to go back to growing turnips."

Later that morning, I was scanning the newspaper and I came across an article trumpeting root veg: Humble turnip makes comeback. Apparently Tesco "revealed yesterday that sales (of turnips) were up by 75%" (The Guardian, 25.9.08). The article went on to suggest that inexpensive root vegetables could "bulk" out the diet and stretch the shrinking food pound.

It was during the bedtime story hour that I came across my third reference to turnips for the day.

For several months now, my youngest daughter and I have been working our away through Laura Ingalls Wilder's "Little House" series. We are just nearing the end of the third book, On the Banks of Plum Creek. I was an avid reader of these books as a child, and it is interesting to square my memories with the stories as I read them afresh. On one hand, I had an enduring sense of the family's closeness: of Pa's twinkly eyes and fiddle-playing, of Ma's gentle and genteel ways, and of the three sisters -- one good, one naughty, and one just little and inconsequential. On the other hand, I had retained a deep horror of the farming life. Every time you think you've got a decent crop, some plague or weather freakishness is sure to come along and destroy it. Perhaps the most memorable of these natural disasters occurs in this book: the incident of the plague of grasshoppers. Even though the event occurred more than 130 years ago, it cannot be read without a sense of horror and grief as fresh as today's news.

Briefly, the Ingalls family has moved to the Minnesota prairie and invested their meager net-worth in a small farm and sod house. "Pa," who is optimistic to the point of derangement, has planted a field of wheat . . . and then he makes the mistake of borrowing money against what promises to be a splendid harvest. Wilder is a master at foreshadowing and suspense: with each mention of "glass windows" and "new stove" and "we'll start harvesting next week," you know that disaster is around the corner. It arrives in the form of a "glittering cloud" of grasshoppers. -- and like the Biblical plague of locusts, they eat every edible scrap on the land. Pa, who doesn't even have a decent pair of shoes, ends up walking hundreds of miles to find work on another farm. Ma and the girls have to struggle on their own for months -- almost starving in the process, although the book skims somewhat lightly over that fact. The next year, the family manages to salvage a crop of turnips -- and Laura, the story's protagonist, writes of their gratefulness for the plentiful supply of one of the least delectable vegetables. (authorial editorializing)

The "Little House" books are all about the resourcefulness, independence and grittiness of the pioneers who staked out a claim in the American wilderness. They play to every American myth -- including the one that says anyone who works hard will be able to earn their own homestead. I can't help but compare their situation to our current one. There was no such thing as "bail out" for Pa; he literally had to dig himself out of the financial hole he found himself in. A lot of people don't think there should be a bailing-out now -- survival of the fittest and all that -- but I do wonder if we are going to have to prop each other up, or all fall. As Ma says, "There is nothing in the world so good as good neighbors" (p. 178).

And just in case, we might all start planting turnips.