Too Big to Govern?

Following the 2008 crisis, there was a guttural outcry from the public, demanding that the so-called “banksters” be brought to justice. Much to their chagrin, repercussions for those making the decisions that brought the economy to its knees have been few and far between. At the time, the general excuse was that, while many of these figures had made decisions that could be characterized as unethical, they were not criminal decisions in nature.

Cold comfort for those who lost everything.

But today, we have to come to terms with the fact that even when a law is broken, the banksters are still above the law. The New York Times put it simply:

State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.

The response to the (justified) outrage which met this announcement was that it’s a “record” settlement. That “record” is being met by “partially deferred” bonuses for the executives of the bank. Looks like Mrs. Executive will be getting one less mink coat this Christmas. Bummer.

Welcome to the world where “too big to fail” has become “too big to govern.” If someone NOT at a bank had been found guilty of funding terrorists and drug traffickers, their indictment would be heralded as a massive victory in the expensive and frequently ineffective war on drugs. Matt Taibbi put it this way:

They’re now saying that if you’re not an important cog in the global financial system, you can’t get away with anything, not even simple possession. You will be jailed and whatever cash they find on you they’ll seize on the spot, and convert into new cruisers or toys for your local SWAT team, which will be deployed to kick in the doors of houses where more such inessential economic cogs as you live. If you don’t have a systemically important job, in other words, the government’s position is that your assets may be used to finance your own political disenfranchisement.

On the other hand, if you are an important person, and you work for a big international bank, you won’t be prosecuted even if you launder nine billion dollars. Even if you actively collude with the people at the very top of the international narcotics trade, your punishment will be far smaller than that of the person at the very bottom of the world drug pyramid. You will be treated with more deference and sympathy than a junkie passing out on a subway car in Manhattan (using two seats of a subway car is a common prosecutable offense in this city). An international drug trafficker is a criminal and usually a murderer; the drug addict walking the street is one of his victims. But thanks to Breuer, we’re now in the business, officially, of jailing the victims and enabling the criminals.

Maybe this would be easier to swallow if it wasn’t coming on the heels of shady behavior in the MFGlobal crisis, the LIBOR scandal and more. Maybe the news wouldn’t taste quite as bitter if President Obama wasn’t considering the appointment of number one bank insider Jamie Dimon as Treasury Secretary.  But the track record on justice for those involved in financial services is just disheartening. Sell exotic mortgages to unqualified people? Engage in illegal robo signing of mortgage documents? Manipulate the main rate (LIBOR) many bank products rely on to set their own lending rates? Bundle junk mortgages at the request of a hedge fund who is shorting them and turn around and sell them to your other customers? Launder Mexican drug cartel money to the tune of $9 billion? No big deal – just have a checkbook ready, and you’ll be free as a bird. And we wonder where the vitriol in movements like Occupy Wall Street comes from…

The point is, this is a blatant and nauseating show of preferential treatment to the benefit of banksters once again. And there’s no way to sugar coat it.

Margin Call- Worth the Risk Capital

From the minute we heard about the new movie Margin Call, we knew we’d be reviewing it (lots of movie buffs in the Attain offices), but with the New Yorker calling Margin Call “easily the best Wall Street movie ever made,” we were curious about how those involved in the film felt about what they’d created. We had the distinct privilege if discussing the film with one of their producers- Neal Dodson. Dodson, along with Corey Moosa and Zachary Quinto, run Before the Door Pictures (deriving its name from a Carnegie Mellon drama exercise), the production company behind Margin Call.

Shout out to the fabulous Sean Cummings (brother to Attain Investment Research Manager John Cummings and credited in the film) for making that happen, by the way.

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Behind Enemy Lines?

It’s hard to work in finance and ignore the Occupy movements. In Chicago, the participants march past our offices on a regular basis. The whispers and rumors of some of the supposed policy proposals could have wide-sweeping consequences for the financial sector as a whole if realized. Much of the press and government have expressed confusion over what, exactly, they’re trying to do. Even in our own offices, opinion on the occupations is divided.

Ambiguous, wide reaching and controversial, what started as Occupy Wall Street has become a worldwide movement, with reporting 118 confirmed occupations globally- many of which are U.S-based. Critics have argued that the movement is a form of class warfare comprised of hippies, anarchists and socialists, but with the numbers of supporters online and at the occupations themselves increasing daily, there comes a point where it doesn’t do us any good to pretend this isn’t happening. There comes a point where we need to understand what’s happening, and why.

The general reaction of the finance world (with notable exceptions like Soros and Bernanke) has been to dismiss the protests as a temporary annoyance, but if you read our blog, you know we rarely take anyone’s word for anything. In true Attain fashion, we decided to research the Occupy movement ourselves. After extensive reading, interviews and several trips down to the Occupy Chicago events themselves, here’s what we found.


Occupy Wall Street began on September 17th, 2011 as a group of 20 or so participants who chose to “occupy” Wall Street proper in New York City. The Nation explains the roots of the movement as follows:

Adbusters made the initial call in mid-July, and also produced a very sexy poster with a ballerina posed atop the Charging Bull statue and riot police in the background. US Day of Rage, the mainly internet-based creation of IT strategist Alexa O’Brien, got involved too and did a lot of the early legwork and tweeting. Anonymous—in its various and multiform visages—joined in late August. On the ground in New York, though, most of the planning was done by people involved in the NYC General Assembly, a collection of activists, artists and students first convened by folks who had been involved in New Yorkers Against Budget Cuts. That coalition of students and union workers had just finished a three-week occupation near City Hall called Bloombergville protesting the mayor’s plans for budget cuts and layoffs. They had learned from the experience and were itching to do it again, this time with the hope of having a bigger impact. But no one person or group is running the Wall Street occupation entirely.

Since the Wall Street Occupation began, similar events have popped up across the U.S. in major cities like Boston, L.A., Chicago, Seattle, and more. Smaller towns have not been excluded, though. reports planning and preparation in cities like Walnut Springs, California and Gardner, Kansas.

The concept of the movement is based on an “occupation” based methodology that was inspired by the Arab Spring movements of early 2011, relying heavily on social media to raise awareness and coordinate efforts. Unlike a protest, which often stops at the end of a day and resumes the following day, the occupations involve participants literally occupying a public space until they achieve their goals. During occupation, participants use signs, chants, music and other forms of public display to convey their concerns and encourage discussion of the issues they advocate. On Twitter, hashtags such as #occupywallstreet, #ows, #occupyboston, #occupychicago and #occupytogether demarcate the real-time global discussion.

The structure of these occupations is largely egalitarian in nature. Typically, they feature a decision-making body that is referred to as a “General Assembly,” where participants can propose and vote on official beliefs, internal policies and new forms of demonstration. The movement prides itself on being “leaderless”- no one individual has any more say than another in the direction of the occupations.

While the idea is to “occupy”- as in stay in one place- the amount of supporters that actually occupy is overwhelmed by the amount of people who simply support via digital outreach or occasional participation in the occupations themselves. In places like New York (with Zuccotti Park) and Boston (with Dewey Square), the occupations take up permanent residence in an area approved by city officials. Here, you wouldn’t believe how organized they are- tents set up as kitchens, medical facilities, and even barber shops dot the landscape.  In places like Chicago, where the selected location in front of the Federal Reserve building has been deemed inappropriate for any form of permanent occupation, the movement is mobile. Occupy Chicago participants will sleep and store supplies in local churches and synagogues, but there’s always a group outside of the Federal Reserve building- always someone occupying.

While the structure is idealistic and maybe inspiring to some, its ability to function is fairly limited. For instance, Occupy Chicago’s General Assembly, in particular, is almost clumsy.  Because they meet at Congress and Michigan- a busy and loud intersection for those unfamiliar with the Chicago landscape- they speak using a method called “the people’s mic,” where the person presented speaks in short phrases, and the crowd repeats each phrase before hearing the next one. While it’s meant to ensure that everyone accurately hears what’s being said with the traffic noise, it draws out the message substantially, and when those speakers are limited to 2-4 minutes, that can be an issue.

The General Assembly also requires a 9/10 majority for a proposal to pass, making  it a wonder that they pass anything at all. The rule was put in place to be as democratic as possible, but as one participant pointed out, it makes it easier for “provocateurs” to plant themselves at the General Assemblies and vote everything down, forcing the Assembly into gridlock. While such a thought may seem slightly paranoid to someone outside the group, Chicago’s recent experience with agitators attempting to put the group in a bad light has everyone on edge.

The General Assembly is not the only structural component of these occupations that leaves something to be desired. Most people raise an eyebrow at the “leaderless” nature of the occupations on sheer principle, but members of the occupation have expressed exasperation with this facet. Though Occupy Chicago does have a variety of committees, even the tried and true believers probably won’t be able to tell you who is on what committee when questioned. This makes it difficult for efforts to be effectively coordinate. More importantly, even when the committees are functioning properly, they can’t act without the approval of the General Assembly and that troublesome 9/10 majority.

These things may need to change soon if the occupations are going to continue to grow, but will likely face fierce opposition.  Participants are generally suspicious of anyone attempting to step up to the leadership challenge; they are deathly afraid of having a power-hungry egotist take the wheel, as, in their minds, it would make them no better than the entities they protest. However, at some point, fear has to give way to necessity.  As one woman told me, “There’s a difference between leadership and governance. I don’t want governance, but we need a leader right now- more than ever.”


Who exactly is participating in these occupations? To hear the media tell it, you’d expect swarms of hippies with dreads and the distinct aroma of marijuana floating through the air. I won’t lie- if you visit Occupy Chicago, there are a fair amount of flower child-esque folks walking around, but they are only a piece of the pie (and, to be fair, the only things I saw being smoked were cigarettes). These free spirit types stand shoulder to shoulder with public school teachers, nurses, truck drivers, small business owners and straight-laced students. The ages ranged from high school student to Great-Grandmother status, and the ethnicities represented was as bold a rainbow as one could imagine.

Perhaps the thing that catches people off guard most when speaking with those in the occupation is the level of education on the issues. We’ve seen the video clips of people fumbling and bumbling as they try to explain why they’re protesting, but the interactions I had in Chicago stood in stark contrast to that kind of unsubstantiated babble. Even if the participants can’t claim a degree to their name, they’re educated on the topics in contention- citing references to a wide berth of academic studies, books and statistics to support every claim they make in conversation, and not just the ones you hear referenced by mainstream media. It may be fair to say that one could probably find a study of sorts that would back up any opinion in the world, but the point is that these people aren’t just spouting off talking points. They’re researching before they take a stance.

We’re quantitative people, so I initially set out to do an anonymous survey of the participants in Chicago to get some numbers to work with on the demographics point. That idea quickly flopped. Many of the people protesting are wary of the press after some unscrupulous video editing and misquoting, but when they asked me who I was with, and I indicated that I was writing a piece for an investment brokerage… well, caution  was quickly replaced with outright distrust. After surveying some of what has been published, I’m not sure I can blame them.

So I abandoned the survey and I started talking with people walking by. While few had seemed comfortable with the idea of providing vital statistics to what they viewed as financial press, not a single one hesitated to explain what they saw the movement as and why it mattered to them. Most of the people I spoke with were students or working in some capacity, though they had no problem admitting to the fact that many of their participants were unemployed. That was usually followed up by them stating that the split between the working and the unemployed within their ranks was pretty even.

Perhaps the most revealing conversation took place with one of the supporters running tech for the movement. As he explained it, participation in the survey would have been the least of my problems if I really was looking for a representative data set. The bulk of their base doesn’t come out to physically protest; they have obligations like work and family that make a physical presence difficult. Instead, the community is increasingly digital, connecting through the website , email, and various social networks. Even in a world where everyone on the ground had answered my questions, our data would have been fairly useless.

That being said, everyone I spoke with was over the moon with the diversity present. Yes, the varying beliefs could make it more difficult to reach a consensus (especially in the General Assembly), but they believe that those varying viewpoints forced the participants to more closely evaluate their own ideals, ultimately leading to better solutions. On top of that, as one man said, “When you get this many people together, there are going to be differences. But when you get people with this many differences- this many extreme differences- to put them aside for the sake of a common goal, you’ve got to admit- that’s pretty impressive. That goal must mean something.”

While the diversity here is impressive, the question continually repeated in the public sphere is whether the occupation crowd can really represent 99% of America. Maybe, numerically, that’s a stretch, but the problem is that most people who investigate the 99% claim stop at wealth distribution demographics when there are other, non-statistical interpretations of the claim. For example, one supporter explained that it’s about not having the ability so frequently exercised by the 1% to directly influence policy-making via campaign and lobbyist donations. Another explanation conveyed to me was that the 99% claim referred to who they gave a voice to, not the actual demographics of the protests, since the opinions typically blasted by the media are funneled through the interests of the parent company.

Regardless of what interpretation you go with and whether you believe it has merit, does it really matter at the end of the day? These are hundreds of thousands of people lining up along the streets of cities big and small to make their case, with even more speaking up in the digital sphere. Defining that case, however, is a challenge in and of itself.

So- what’s the point?

The million dollar question is, “What do they want?” Unfortunately, there is no concrete answer to this. Each occupation represents themselves, and may have their own stated goals and grievances. The most commonly referenced document is the New York Declaration of Occupation, and many of the subsequent occupations have issued some form of affirmation of the declaration through their general assemblies. The message was further confused when members of the media took a list of proposed demands from one protester at Occupy Wall Street (that were never adopted by the General Assembly) and passed them around as official demands. If you take a look at them, you can understand why those who thought it was official were turned off to the occupations.

The proposed demands may have caused more headache than anything, but the Declaration is hard not to sympathize with- even if only in part. Still, while the Declaration does a good job of articulating many of the frustrations predominantly held among participants, it still doesn’t do a very good job of answering  the “why.” Josh Brown at The Reformed Broker gave definition a shot in a recent post indicting Bank of America’s payment of $11 million to ousted executives this year. While admitting the vague nature of the “demands” coming out of the occupations, he pointed to that kind of pay as exemplary of the source of frustration, saying:

You pay fired executives more in severance than the average American worker will earn in a lifetime.  For most people on the outside looking in, this seems like it’s from outer space, another world entirely.  These numbers just do not exist to regular human beings, they cannot be fathomed.  The ordinary American is not a class warrior or a woe-is-me whiner coveting the rewards of others – the ordinary American simply believes that extraordinary rewards should go to those who do extraordinary things, not to paper-pushing failures at parasite banks.

So let me give you a hint that will save you countless hours and millions of dollars spent on consultants and the public relations morons you keep on staff:  This is why they hate you.  This very type of thing, while just a single example, epitomizes the piggish mentality that has set you apart from everyone else.  This is why they’re marching against you and calling for boycotts and writing their politicians.  And this is why your whole model and way of life is on its way to being dead.  Forever.

While this highlights the frustration quite nicely, it still does little to pinpoint the reason for the occupation or the goals of the efforts. In fact, no one seemed to do a particularly concise job of articulating the point of the occupations- not the press, politicians, or participants themselves, at times.

Don’t get the occupations started on the media unless you’re ready to listen to a tirade. While the so-called “citizen journalists” of the blogosphere have been active in covering the movement, the mainstream media was slow to latch on. When 400 people were arrested while protesting on the Brooklyn Bridge, not one of the major media outlets (FOX, CNN, MSNBC) provided real-time coverage. In fact, if you had flipped through the channels during the thick of it that night, all you would have found was coverage of the passing of Steve Jobs. While I’ll be the first to admit that he was a very important and influential man, one sympathize a little when occupation participants express frustration with the complete blackout of coverage of the arrests.

The blackout has faded somewhat since then, but many pundits continue to express that they don’t “get” what the point is, and many that claim they do “get” the point are repeatedly lambasted by the occupation participants for spreading misinformation. While the leaderless nature of the occupations doesn’t help the press do their jobs, the job they’re doing is not sitting well with the occupations’ supporters.

The occupations have also become a sort of political kamikaze. Everyone wants the politicians to comment, but no one is thoroughly pleased with what they get. Herman Cain was heavily criticized after telling the participants, “If you don’t have a job and you’re not rich, blame yourself.” Mitt Romney caught heat after stating, “I think it’s dangerous, this class warfare.” President Obama, after sending out a tweet acknowledging Steve Jobs’ death before even recognizing the existence of the occupations, was slammed across the board.

You would think that going to the source of the message would clarify things, but no such luck. Ask 10 different participants why the occupations are occurring, and you’ll likely get 10 different answers. Some say they want to prosecute the people behind the ’08 meltdown. Others say they want to tax the rich. Complaints about unscrupulous regulators from every corner of finance abound. There are those who want to disband the Federal Reserve, revert to the Gold standard, forgive student debt, or end the wars. These explanations range from the reasonable to the radical, but their variety and, at times, contradictory nature create a lot of confusion regarding the purpose of the occupations.

So I sifted through the concerns.  I  talked with close to 300 people about it- supporters and critics, press and public, on Twitter and in person. If you exclude some of the fringe opinions (including the man who told me that he believes the U.S. should be dissolved and reformed as utopian communist states the size of small towns to better prepare for welcoming the inevitable alien invasion), a common theme begins to emerge.

The End Game

Many of the grievances reflect preferential policy making (like the repeal of Glass-Steagall in 1999 to appease opponents of the Community Reinvestment Act  or the easing of mark-to-market requirements when bank stocks plummeted in 2008), perceived impropriety in relations between policy makers and wealthy CEOs (like the lack of ramification over use of TARP funds to pay for massive executive bonuses or the JP Morgan Chase donation of $4.6 million to the NYPD just as the police started cracking down hard on the Wall Street protesters) and legal inequities (like GE paying $0 taxes in 2011 because of loopholes). At the root of these issues, from what I could gleam, was the influence of corporate financial power over how policies are developed and executed in the U.S.

When phrased this way, nearly every participant and supporter we spoke with agreed that this was a fair characterization of the movement’s purpose. The question then became, what changes do they want to see to fix things?

Here’s where things get even more fuzzy. Even in a world where this idea of corporate influence over policies being a problem is accepted as the overarching purpose of the movement, the policy prescriptions to the problem are a matter of fierce contention. Occupy Chicago has been one of the few to constructively create a list of policy recommendations for consideration, which can be found here. But even this list is vague at points, and participants conveyed that not everyone agrees with everything on there.

While not everyone could effectively articulate their raison d’etre, many were quick to dispel some misconceptions being circulated  regarding the occupations, and to clarify some of the smaller issues.

  • They aren’t REALLY anti-Wall Street. Many have assumed that the chants of “people over profit” indicate a distinctly anti-finance attitude among the protesters. It certainly doesn’t help that, in Chicago in particular, the occupation is taking place right outside the Chicago Board of Trade building. Some people we know working over there have been yelled at as they go to and from work. But those I spoke with were quick to apologize for the behavior of their peers. One stated, “We know that a good amount of the people working in finance are just people trying to pay their bills and take care of their family. They aren’t committing fraud. They aren’t asking for a bailout. They aren’t the target here.” So why did they choose Wall Street initially- especially since the bulk of Wall Street isn’t actually on Wall Street anymore? “It was symbolic of cutting off the money flow at the source- even if the primary responsibility rests with elected officials and regulators.”
  • Don’t call them anti-capitalism. While the press and many politicians have been quick to dismiss the crowds as angry socialists, that characterization isn’t really true to life. While there are certainly socialists among their ranks, the bulk of the protesters were actually very pro-business in their comments. As one small business donated food for the participants, another small business owner holding a sign that said “We are the 99%” told the donation crew to take down his number  and call him if they ever needed anything- it would be on the house. As one woman put it, “Make as much money as you want. Just don’t use it to influence the policies that impact all of us.”
  • The target may be politics as usual, but they aren’t political. Everyone seems to want to assign the occupations to a particular party, and the easy affiliation is the Democratic Party, especially in the wake of the Democratic Congressional Campaign committee circulating a petition in support of the movements. Actual participants and supporters fight hard against this idea; in their minds, both parties are guilty of succumbing to the corporate checkbook’s power, and neither deserves their support as a people. They are so dedicated to avoiding partisan politics that, even as unions proclaim their support for the occupations, Occupy Chicago last night continued to stand by its non-partisan dedication by refusing to endorse those unions in reciprocity because of their participation in partisan politics. As one sign proclaimed in Chicago, “Occupy Chicago is apolitical because both parties are at fault.”
  • They love their country- fiercely. The fastest way to anger one of the occupation participants is to question their patriotism. Even if you don’t agree with what they propose, as one outspoken young man was quick to point out, they are exercising their Constitutional rights to free speech and peaceable assembly in support of their beliefs, which is about as American as it gets, if you’re looking at the history books. Moreover, at the end of the day, their goal is the betterment of the country, which, as this guy yelled at the top of his lungs, it what patriotism is all about- even if you disagree with how he wants to do it.

  • No, they don’t hate rich people. It’s exceedingly easy to boil this down to income disparity, especially when the occupations describe themselves as representing the bottom 99% in terms of wealth. With that in mind, it’s not all that surprising that the 8th floor of the Chicago Board of Trade building wrote a message to the occupation below on their windows that read, “We are the 1%.” Again, it boils down to miscommunication. They may attempt to represent the 99%, but that does not mean that someone in the top 1% of earners is excluded from participating. As one participant observed, “Wealth does not necessarily preclude the ability to recognize inequity or injustice.” Their major beef with the wealthy comes to a boil if the well-off are using their wealth to procure preferential treatment in the system.

As I listened to these clarifications, it was hard not to notice the blue uniforms that wander the perimeter of these occupations- and at times, attempt to reign them in. With protesters come police presence, and with police presence at the occupations, the results have been mixed. In many cities, the relationship with the police force is cordial. In Chicago, even with a few isolated incidents, the police are, by and large, fairly respectful of the participants. Some officers have even expressed support for the movements.

In others, it’s been a battle. New York was the first example, where participants posted videos of police officers- desperate to control the crowds- resorting to swinging at random into crowds of people. Boston has been the most recent point of controversy, after photos surfaced of police officers grabbing the throat of a female war veteran they were removing from a public park. These allegations are seriously alarming, but part of the problem with evaluating them is that the bulk of the evidence supporting the charges don’t provide enough context to make a deliberation of fault, or were taken with shaking phones in hand, providing a less than clear depiction of what happened. That’s the defense, at least. What is clear, though, is that tensions are high and getting higher.

As occupations continue to expand, concerns over further violence abound, but there’s another side to this coin- cost. The most recent estimates put spending on NYPD overtime at $1.9 million to date, and those kinds of expenses raise questions of how much longer city governments will tolerate the presence of the occupations. Then you get into the idea of Constitutional rights, which guarantee the right to assemble peacefully. Things are careening towards a breaking point, and what happens then is anyone’s guess.

Bottom Line

The occupations may seem silly to some, but the ideas behind it are serious business. They face major structural and legal struggles ahead. Still, their determination is unwavering. Their demands may seem nebulous, but as the Secretariat reminded everyone during the General Assembly in Chicago last night, this is still a young movement. The person sitting next to me nodded her head in agreement. “We’re young as a movement, but we never stop talking about the issues, and when that many people are exchanging ideas and working toward solutions, the end result will be worth the growing pains.”

A member of the Press Liaison Committee in Chicago brought up another good point. The success of this movement should not be measured by the amount of policy changes accomplished, but by the way it transforms the American- and even global- narrative. If the movement succeeds in diminishing apathy towards policy in the public sphere, that’s a win that cannot be quantified.

No matter how you slice it, the stakes are high.  We are facing uncertain times, and the idea that something’s gotta give resonates strongly with the public- regardless of what party you’re registered with, how much money you make, or where you went to school. It’s especially hard to be in this industry for long without coming face-to-face with some of the very issues being highlighted. Just today, hedge fund billionaire Raj Rajartnam, after being found guilty of 5 counts of conspiracy and 9 counts of securities fraud, found himself losing only one percent of that wealth in fines. He was sentenced to 11 years in jail, but health complications may ultimately mitigate even that sentence. Here was a man with rock-hard evidence against him, and this was the result? Is it really any wonder that people are upset?

The occupations seem to embody a collective revelation that the public has been asleep at the wheel while others dictated their direction, and it’s time to wake up. Whether the occupations will ultimately be successful- or should be- is not a call we’re about to make. As you often hear us say, only time will tell…