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Posts Tagged ‘Wall Street. The New York Times’

Drunk on ‘Sexcess’: What A Lavish 1999 Magazine Launch Party Has To Do With A 2009 Recession.

Ten years ago Talk Magazine was the you know what of the town.

Ten years ago Talk Magazine was the 'you know what' of the town.

Bill Simmons, popular national columnist from ESPN, has taken a liking to Twitter. As such he posts early and often @sportsguy33. One of his recent tweets was about the startling difference between the much ballyhooed launch of Talk Magazine in 1999 and the stark reality that confronts the industry now. The story is a great read, chronicling the absolutely over the top nature of a party in front of the Statue of Liberty, complete with floor pillows and celebrities bumping into each other in a shrouded outdoor atmosphere. A quote from the story:

“Ten years ago, journalists, long the salarymen of the publishing economy, began gorging on big contracts and options from digital start-ups like shrimp at a free buffet. With coveted writers commanding $5 for every typed word into magazines that were stuffed to the brim with advertising, there was a fizziness, some would say recklessness, in the air. The industry was drunk on its own prerogatives, working a party that seemed as if it would never end.”

Does that sound familiar? While I was reading it, suddenly my mind was shifting away from the mistakes of magazines and I felt like this wasn’t about the writers and publishers at all. The paragraph above could just as easily be describing the culture on Wall Street. Is it passe to bash these companies? I don’t think so. Especially because they continue to operate in a reality other than the one most of us inhabit. In 2008, 4793 Wall Streeters made over $1 million in bonuses. They received taxpayer money and doled it out liberally. But surely those practices have mercifully ended, correct? These companies, ones that received TARP payouts, they’re not back to their old ways are they? Well actually they are, as Goldman Sachs prepares to hand out $11.4 billion this year to its employees. I don’t know enough about this topic to say for certain that companies like Goldman should be exercising restraint for the good of their company. What I can say is that I’m pretty sure  it looks terrible for them to be tossing money from the rafters while the rest of the country suffers through the worst recession and job market in a generation. But what I can’t say authoritatively, I will let others do.

The New York Times: “Goldman, analysts warned, is embracing financial risks that many of its competitors are unable or unwilling to take. While Goldman managed those risks this time, its strategy could backfire if the markets turn against it.”

Moneyweek: “Trading in fixed income, currency and commodities generated half Goldman’s record revenues. That can’t last. Competitors will return and clients will lose enthusiasm for trading as the rally runs out of steam. And as investors lose their appetite for government debt, Goldman will also struggle to continue earning fees by finding buyers for this.”

New York Daily News: “The scary thing is we’re about to see the cycle repeat itself – and it will lead to near insolvency at another firm too big to fail,” said John Coffee, a Columbia law professor. “High-risk, high return trading – where managers share in the upside, but not in the downside – has already returned to Goldman Sachs, and other banks will say they have to do the same thing so they can compete with Goldman.”

Well! That sounds fantastic. Let me see if I get this straight. It’s hard to get your mind around complex issues when you’re not gifted with the intelligence and foresight of financial tycoons, executives, and CEO’s, so bear with me. With Wall Street drunk on a mix of success and excess, let’s call it ‘sexcess’, our financial system was on the brink of failure. It was saved by the government. The government still owns some of these companies, like one-third of Citigroup, for example. So last year amidst the meltdown, these corporations continued to shell out big bonuses. Now this year, despite everything that happened, a little success, in one quarter mind you, has led companies to throw caution to the wind once again. “Screw it! We’re back,” seems to be the sentiment. And on top of this fortunate news, analysts believe that other companies will feel that they need to embrace the risky practices that led to near catastrophy and threatened our fair republic.

The amount that Americans should be outraged is incalculable. Maybe, David A. Viniar, Chief Financial Officer for Goldman Sachs can take us away with a comforting quote. Something to make us all sleep a little better tonight.

Viniar on bonuses, from NYT: “We pay for performance.”

I bet the publisher of Talk Magazine was thinking the same thing in the shadow of the Statue of Liberty, on a night not so long ago.


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