I picked up a copy of The 86 Biggest Lies on Wall Street by John R. Talbott at JFK Airport recently. A book promising juicy Wall Street gossip – irresistible!
However, it failed to deliver. I've been left wondering if this book should be renamed to The 87th Lie. Some of the author's arguments make sense only in the slightest degree. However, I would have liked to see some more facts and data. This book should actually have been published as a blog because no one should have to pay $22.95 + tax only to receive an opinion piece. Where are all the statistics and data expected of a previous Goldman Sachs investment banker?
One of his more radical and illogical arguments is that all the banks are insolvent. I do not agree with this argument. Whether TARP was actually necessary is a whole other argument, but TARP took place whether we like it or not. Given that TARP was going to be implemented, any bank who did not apply for TARP would have been placed at a competitive disadvantage if their competitors received substantial capital inflows whilst they did not. So, some banks were actually forced to apply for TARP funding as it was basis for survival in the sense that if they did not apply, they would be left in a weaker position than their peers. I would go so far as to say that some banks actually did not require the funding and still applied. Therefore, the whole TARP incident made all banks look weaker than they actually were.
Another scary thought that the author presents is that capitalism does not work in every industry. He is clearly in favour of government intervention, but then he goes on to argue that the government is actually corrupt and can never run anything well. Sorry to say, but if the government is corrupt and ineffective, why give it more power?
Talbott seems to be in favour of forcing all the banks into bankruptcy and forcing all people who bought property into foreclosure. He believes that the socialism that we see in Europe is actually what capitalism in the US should evolve into. I wholeheartedly disagree.
There was the whole Sino-Japanese War going on prior to the onset of Communism in China, which left China in a very bad economic state. One of my great grandfathers was working in the US at that time and another was an entrepreneur in Panama, which enabled them to become property owners in Guangdong and Hong Kong. During the early Communist regime in China, which was about the early 1950s, my family experienced downright barbaric treatment from their neighbours in China due to the property they owned. You and I aren’t that close, so without getting into my whole family history, suffice to say that my grandparents had several brushes with life / death situations during that time – all under the pretence of wealth redistribution. So, I’ve never been a supporter of communism / socialism / wealth redistribution in general. I favour the independence of Tibet, Taiwan, and Hong Kong as well, but that’s another story – one that I’ll probably never tell in front of another Chinese person (again).
Whilst income disparity is politically incorrect, wealth redistribution is never fair. Rather than resorting to wealth redistribution, we really ought to address the real issue here, which is the lack of advancement opportunities in our economy. How sad has our economy gotten? I was taking the subway and this young man who was quite talented felt he had no other opportunity other than to turn towards being a street performer. This is clearly a man who was seemingly left behind.
As the diva who was able to move to three different hotels in one city just because the lighting wasn’t quite right, I definitely felt the guilt at that moment. Money equates to freedom and in many cases can buy happiness, albeit only fleeting happiness.
I firmly believe that for those who have financial security, sooner or later, the guilt of seeing wealth disparity manifest itself throughout society will compel us to act out of the greater good and therefore do more to give back to society. Warren Buffett, Bill Gates, George Soros, and Oprah are some recent examples. However, I do not believe the government has any right to enforce wealth redistribution.
Back to the book… The worst argument presented in Talbott’s book is that our government should limit the size of companies. He proposes that any time a company gets above a certain size in market cap, we should break the company up into two or three smaller companies. That would increase competition to such an extent that it would be totally counterproductive. Moreover, it’s clearly anti-entrepreneurial. Who in their right mind would want to start a business if there’s legislation that prohibits and punishes growth?
I suppose the bit I found most amusing about this book, which I had somehow managed to miss out on was the news that the credit ratings agencies were using their First Amendment rights as a defense strategy on the whole CDO ratings fiasco. I blink for one second and I miss out entirely on this bit of first-rate gossip?
Generally, this was an interesting read and it was probably written with some good intentions, but I’d say that Talbott’s arguments are not very convincing. The solutions he offers up to end the Great Recession are also on the whole unrealistic bar one. He indicates that to jumpstart the economy, a pro-inflation policy would be suitable. I agree to a certain extent with this stance. At the same time, there cannot be runaway inflation.
I do not regret reading this book. I might not necessarily agree with most of Talbott’s viewpoints. However, his book will likely start many discussions across the nation and possibly across the world.
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