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What Caused the Financial Collapse of America?

03/18/2010 05:12 am ET | Updated May 25, 2011

Gucci shoes
BMWs
Driver-attended Lexus sedans
Park Avenue apartments
Westchester country clubs
Greenwich mansions
Jackson Hole vacations
NetJet accounts
Black towncars
Island summer homes
Manhattan steak houses

OK, those aren't the real reasons, but they are the outward trappings. The "real" ten reasons are probably the seven deadly sins, de-regulation, globalization, and the decline of public education.

However, those ten symbols (to which all the major characters in this gripping narrative had unfettered access), although never part of the lifestyle of the average American, are part of every Wall Street banker's repertoire. Even as they failed to mark their worthless assets to market (translation: tell the truth about the crap they had securitized) and continued to demonstrate unfamiliarity with the numbers in the businesses they were supposed to be running, these CEOs were living in unbridled luxury thinking they were taking part in "real life."

By now you probably can guess that I'm reading Andrew Ross Sorkin's Too Big to Fail, and it is making me sick. From what I can tell, none of these investment banking firms or mega-banks had so much as a controller to tell them when to stop spending. Throwing around multi-billion dollar numbers in deals that repeatedly bet the farm (or the firm), they operated in an atmosphere of outright denial about what money actually means. Even the ones from poor backgrounds forgot that their portfolios of toxic assets contained the remnants of other peoples' lives.

And none of those people, with the exception of Dick Fuld of Lehmann Brothers, a hot-tempered egotist, have lost their jobs. They're still in position: John Mack of Morgan Stanley, Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase, Vikram Pandit of Citibank, and Ken Lewis of B of A. Not to mention Tim Geithner, then-head of the New York Fed, now Treasury Secretary. These guys vandalized our financial system and were never apprehended. As far as they were concerned, they did nothing wrong. They moved pieces on a board, and played to win, that's all. When it doesn't work out, they say "holy shit," and scramble for the bailout exits.

Almost two years later, their assets are still toxic. Lehmann crumbled, but my own experience trying to get a mortgage modification has convinced me their real estate division still refuses to mark its assets to market; they still want to value my home, now worth $511,000, at the $769,000 it was worth in 2005. If they didn't, they'd modify my mortgage. But that would mean they would take the write down. Instead, I take it. And I don't mean just me -- I mean every middle class American who owns a home, lost a job, or can't get a loan. We are all taking it.

I also take the new "inactivity fee" for not using my Citibank credit card, and the new "transfer fee" for moving money from my business line of credit to my checking account to pay a bill. And I take the "finance charge" on my Visa, and the ATM fee, and the overdraft fee. We have to take those, so the bankers can keep their compensation.

The fees are going up even as I write this, as the banks fight to get their profits locked in before the new regulations start in February.

Simon Johnson, one of the writers of "The Baseline Scenario" has voted with his feet. He has closed his accounts at the big banks. He can't trust them. He knows they won't help him. They will do anything to preserve their hegemony. They don't even trust each other. In Sorkin's book, even in the most dire circumstances, the ethos is always "don't help the competition." Only when they think the competition's death might bring them down as well do they offer to work together. Wall Street is all about WIIFM: what's in it for me.

In the mean time, the rest of us have learned a different lesson. In our world, where people can no longer afford to eat out or take a vacation, we've learned that we must work together, sharing what little resources we have left so that we can survive in this brave new world the bankers have brought us.

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