While an undergraduate at Harvard in the late sixties, I lived in an student house that achieved a reputation as a hotbed of radical activity during the campus protests. One of those activists was a senator's son by the name of Al Gore. Gore had to keep a low profile during the rallies, because his father was in a tight re-election battle in conservative Tennessee and Al's activities had become an issue in the campaign. In effect his father's handlers had asked Al to muzzle his mouth so that his father wouldn't suffer PR fallout. It was my first glimpse of how the system can force people to compromise their convictions.
During the student protests, I was fascinated by popular unrest as an instrument of systemic change. I attended teach ins, rallies and mass meetings, because I found the logic of the protests both exciting and compelling. Although I was raised the son of a conservative Wall Street banker, I found the logic of the protests compelling. The rhetoric was focused on the war in Vietnam, but it also involved a questioning of the system that had lead us into the war. Back then, very few of us students understood the system or how it really works, though we more than happy to rail against it. The strategy for bringing down the system was to use a sledgehammer of public protest. That's what the 60's "revolution" was all about. Somehow, by taking over buildings and organizing rallies, those who ran the system would cave into student demands, abdicate their throne of power and a better system would prevail. With the benefit of hindsight, it's clear that the students' bravado was naive. But the passion behind the rhetoric was real, and it's real again today in the form of The Occupy Movement.
Many of those ensconced in positions of power seem more human to me than to most people. I saw them when they were testing out their beliefs and their worldview was just taking shape. When I was at Harvard Business School, I was a proctor in Harvard's freshmen dorms when Ben Bernanke, now chairman of the Fed, entered as a freshman. He had come to the same fount of learning as did John G. Roberts, who would live nearby in another Harvard house. Roberts is now Chief Justice of the Supreme Court. A few years later, Barack Obama studied at Harvard Law School and after classes used to play basketball in Hemenway gym, where I would play nearly every afternoon after classes. Mitt Romney studied at the same time at Harvard Business School, although he graduated a few years after me because he was getting a joint degree at the law school.
Living in such close proximity to those who today represent the system I know that the system is neither monolithic nor static. It fills me with hope that those of us now on the outside looking in, can change that system. Later in my career I worked on Wall Street with Chase Manhattan Bank until I soured on Wall Street and left to become a reporter with Fortune Magazine where I got another inside perspective on how the system works.
Before we can change the system its inner workings must be fully understood. What is the system? Who really controls the system? How can the system be changed?
This is the subject of my recent book, Wall Street Versus Main Street: Understanding Why The System Is Broken. I had my first real awareness the dynamics of "Wall Street" and its profound power holds over our lives in the 1980s when I was working in the real estate group of Chase Manhattan Bank on Wall Street. The economy was in trouble and the energy crisis had hit with vengeance. Interest rates had soared to 20%, as the economy tanked and defaults soared. Banks all across the country had dramatically cut back lending. Gas lines formed across the country. With an insider's view of the extent of the problems, I could see where we were headed, and I no longer wanted to be a part of the problem.
It was a turbulent time to be working on Wall Street. I found myself sitting in boardrooms lined with anxious bankers acting like predators, picking clean the carcasses of once high flying real estate companies. New York City was on the verge of defaulting on its municipal bonds. To bolster the morale of us bankers, David Rockefeller had a series of open meetings, where he would discuss the ongoing negotiations of Chase with New York City and Congress over the prospect of a Federal bailout. Chase and Citibank owned a huge share of New York's City's bonds and stood to lose billions if the City defaulted, potentially destabilizing the entire financial system. There was tension everywhere you turned.
Yet, I was surprised at David Rockefeller's composure during those meetings. He was a calm amidst the storm of widespread panic in the financial markets. It was only years later that I came to realize how he could be so calm -- he knew that the system was functioning exactly as it was designed. Chase, which had taken imprudent risks in its real estate and municipal loans, would ultimately be bailed out by the government. Sound familiar?
David Rockefeller knew this would happen. At the time I thought this crisis was an isolated instance of the government acting, in a state of crisis, to rescue the system from collapse. Since then I have come to see that these periodic spasms of the financial markets are entirely predictable. It is also predictable that in a state of crisis, the government will act to rescue the banks that caused the problems by taking on too much risk. The Congressional bailout bill was part of a larger pattern which would be repeated. It had rescued Penn Central and Lockheed in 1970. Later they would rescue Chrysler, Commonwealth Bank of Detroit, First Pennsylvania Bank, Continental Illinois and others. Then of course there was the savings and loan crisis in the late eighties and Long Term Capital Management in 1998, the bailout of Mexico and of course, the bailout bill of 2008, each instance rescuing a financial system that had come perilously close to collapse and required federal intervention.
This is how the system works. It's all part of the design of the system. It's reliable. It's hugely profitable for those on the inside, working on Wall Street. It's unfair to those on the outside, living on Main Street. But those of us living on the metaphorical Main Street have a lot more power over the system, then we realize. We have a choice where we spend, deposit and invest our money. Yes,, "The System" is deeply embedded in institutional and inertial structure and propelled by levels of self-interest that are deeply ingrained in our culture. Changing the system will require not only support from within the system, but also coordinated and determined effort from outside -- and that process of changing minds has already begun on the streets with the the beginning of the Occupy Movement.
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