2008 Schmuck of the Year

Time Magazine has run the Man of the Year for over half a century which has now evolved into Person of the Year. Not surprisingly, the 2008 Person of the Year was Barack Obama with runners-up Henry Paulsen, Nicholas Sarkozy, Sarah Palin, and Zhang Yimou, creator of the 2008 Olympics in China. Barack follows 2007’s Vladimir Putin and 2006’s YOU. Yes, You were the 2006 Person of the Year. Maybe you didn’t feel like you deserved the honor but Time thought you did. So accept it and move on to 2008.

            It must be exciting and inspiring to choose among those who had the most influence in 2008. But I would argue it’s a lot more fun and infuriating to choose from the dozens of worthy candidates for Shmuck of the Year 2008. Almost every week we got a few more extraordinary candidates. In November, would anyone have thought that Bernard Madoff or Governor Rod R. Blagojevich would be finalists in this prestigious competition?

            A few weeks ago, few of us even knew who these schmucks were. Now, you have to be a real schlemiel or dead not to know that Madoff and Blagojevich are two of the most corrupt hoodlums in America.

            They have lots of company. Think of all of the worthy candidates who can make cases for Schmuck of the Year.

            Exhibit 1: You might consider the Senators that voted against giving the Detroit automakers a $14 billion lifeline to survive a few months heroes if you hate unions, love foreign automakers, and believe that we’ve had enough of government bailouts. But I tend to be more on the side that these sanctimonious bobbleheads placed themselves in the running for Schmuck of the Year with their actions.  

            I’m prejudiced because I come from Detroit and I have watched the entire Great Lakes area being strangleheld by fear and lack of credit for people to buy houses or cars, American or foreign. Imagine the ire when you read Detroit Free Press columnist, Mitch Albom, in his excellent essay, “Hey, you senators: Thanks for nothing.” (Detroit Free Press, Dec. 14, 2008) “Do you want to see the last gurgle of economic air spit from our lips? If so, senators, know this: You’ll go down with us….History will show that when America was on its knees, a handful of lawmakers tried to cut off its feet. And blame the workers….In a world where banks hemorrhaged trillions in a high-priced gamble called credit derivative swaps that YOU failed to regulate, how on earth do WE need to be punished? In a bailout era where you shoveled billions, with no demands, to banks and financial firms, why do WE need to be schooled on how to run a business?

            “Who is more dysfunctional in business than YOU? Who blows more money? Who wastes more trillions on favors, payback and pork?”

            Who can argue with Mitch’s impassioned plea for sanity? We heard about AIG getting $150 billion of government money and continuing to give thousands of employees millions of dollars of bonuses. “There ought to be a law—against the hypocrisy our government has demonstrated. The speed with which wheelbarrows of money were dumped on Wall Street versus the slow noose hung on the auto companies’ necks is reprehensible. Some of those same banks we bailed out are now saying they won’t extend credit to auto dealers. Wasn’t that why we gave them the money? To loosen credit?

            “Where’s your tight grip on those funds, senators? Where’s your micromanaging of the wages in banking? Or do you just enjoy having your hands around blue-collared throats?”

            You can imagine Heath Ledger’s Joker laughing to Mitch and saying with glee, “Why So Serious?” If Heath weren’t dead and the Joker wasn’t an imaginary super-villain, he might have argued that Senators Shelby of Alabama and Corker of Tennessee were only doing the all-American thing of protecting their Japanese, German, and Korean transplants that collected billions of dollars of their states’ tax breaks. Mitch fired back to the senators, “You’re so fond of the foreign model, why don’t you do what Japanese ministers do when they screw up the country’s finances? They cut their salaries. Or they resign in shame.”

            So who bailed out the senators who wouldn’t bail out the automakers? Vice President Dick Cheney, a previous recipient for Schmuck of the Year (you pick the year), admitted that lawmakers “had ample opportunity to deal with this issue and they failed. The president had no choice but to step in.” Yes, the president “caved in” according to free-market conservatives, many of whom believed that the $750 financial bailout was responsible and necessary. I believe that George W. Bush, the lame duck president, was right up to the end of 2008, one of the top candidates for Schmuck of the Year but his last-minute aid to the Detroit automakers let him slip away quietly into the ex-president afterlife without any more shame than he already has to carry.

            Mitch and I don’t have to rely on the administration or Congress to supply us schmucks. Detroit has one of the best in its ex-mayor Kwame Kilpatrick, who is resting for a few months in a Detroit penitentiary and is barred from public office for five years. Kwame seems so last year. All he did was have an affair with his chief of staff, cheat on his wife, his city, lie about it, cost the city $9 million so that no one would know of his lying and cheating, fought tooth and nail to stay on as mayor, and finally plead guilty to two felony counts of obstructing justice and one count of felonious assault, agreeing to serve four months in jay, pay up to $1 million in restitution, serve five years of probation, and agree not to run for office for five years.

            Kwame must be an inspiration to Illinois Governor Blagojevich. Like Kwame, Rod looks to be following Kwame’s lead to try to hang onto his job for months as the media and attorneys form a posse outside his office. Unlike New York Governor Spitzer who might have been a serious challenger for Schmuck of the Year but who honorably resigned after being caught with a high-end prostitute after making his name for his years of fighting organized crime, financial crime, and prostitution, the Illinois governor will not go quietly into the good night.   Blago used the Governor’s office like a public prostitute, trying to sell everything he could to the highest bidder. It wouldn’t have been surprising to see Donald Trump as the next Illinois senator, if RB had his way. What made Blagojevich so intriguing was the colorful jargon he used to disparage everyone, including the next president.

             Tony Soprano seems like such a polite gentleman in comparison to Blagoman. But as a corrupt crook, he is small potatoes compared to Bernie Madoff. The former Nasdaq chairman and SEC advisor was respected as a well-connected, a “nice” Jewish man, and brilliant investor who made his hundreds of wealthy clients consistently excellent returns between 10 and 13% a year, in bull or bear markets. He was the most consistent investing maven on Wall Street and it turns out, a complete fraud. He swindled charities and celebrities, Christians and Jews. He stole everything from charities run by Spielberg, Wiesel, Jewish Federations, universities, pension funds. Organizations and people who thought they still had retirement accounts found out they had been swindled out of everything. And it looks like Bernard also swindled the United States government out of over $17 billion in taxes, enough to give GM, Ford, and Chrysler their urgent bridge loans.

So when you look in the dictionaries in the years to come, the word, “Schmuck,” may have Madoff’s photo within the frame.

            How could Bernie Madoff have gotten away with this “Ponzi scheme” for so long? It turns out that Harry Markopolos was on the trail since 1999, when he began to investigate Madoff’s operation and noticed even then the fraud that was going on. He worked with mathematicians and complained to the SEC’s Boston office in 1999 and submitted a report in 2005 that it was “highly likely” that “Madoff Securities is the world’s largest Ponzi scheme.” In the report, he said he was also worried about the “the personal safety of myself and my family.” But like so many other warnings unheeded by the useless SEC and the federal government, nothing was done.

How many billions of dollars has Christopher Cox, the appointee of George W. Bush, cost investors in the seven years he has “led” this regulatory agency? Not surprisingly, the regulators didn’t regulate. And trillions of dollars have been lost.

The Schmuck list is long and wide and certainly could be led by SEC chairman, Christopher Cox. As Jim Cramer said, Cox is an “idealogical fool,” enough to be a regular on Jim’s Wall of Shame and get the Plaxico award from him as well. Cox was in charge of policing the men who traded stocks and bonds, who jacked up oil futures to $147 a barrel and then brought them back down to under $40 a barrel. His loyalty to the Bush free-market credo led to so many billions being lost by investors. Who can name all the interesting trading vehicles that were allowed and that led to the ruin of so many? One schmuck was Richard Fuld, CEO of Lehman Brothers, one of the biggest companies to go under.  Lehman was also the company that used the most credit derivatives in which its tentacles branched out around the world. In 2001, Lehman Brothers (Europe) published an 86 page document called “Credit Derivatives Explained,” which is the document that explained all of the complex mathematical formulas behind Collateralized Debt Obligations, Arbitrage CDOs, Synthetic CLOs, just to name a few.  The many reasons for the financial collapse are revealed within its pages.

              Schmucks like Alan Greenspan, Ben Bernanke, Hank Paulsen, and Cox allowed banks and insurance companies to be like financial high-stakes poker players. And Wall Street mavens like Stanley O’Neal replaced by John Thain of Merrill Lynch, Ed Liddy of AIG, Lloyd Blankfein of Goldman Sachs, and Fuld all made over 50 million dollars each and were allowed to keep their winnings. Add Franklin Raines of Fannie Mae, Angelo Mozilo from Countrywide Financial, Jimmy Cayne of Bear Stearns, Dick Syron of Freddie Mac. Add Chuck Prince of Citibank and Bob Rubin, former Treasury Secretary and advisor to Barack Obama who has been on the Citigroup board for years, making over $100 million. How much money can a schmuck keep if we keep letting them keep it? As long as they aren’t from Detroit car companies, I guess the answer is: unlimited.  

               We just keep forgetting all the shmucks who ruined the financial futures of so many unknowing Americans. The list is virtually endless but certainly one of the crown jewels of schmuckdom was the former Chairman and CEO of Washington Mutual, Kerry Killinger. Chairman and CEO Kerry Killinger had pledged in 2003, “We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s/Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.

               ”Killinger’s goal was to build WaMu into the “Wal-Mart of Banking,” which would cater to lower- and middle-class consumers that other banks deemed too risky. Complex mortgages and credit cards had terms that made it easy for the least creditworthy borrowers to get financing, a strategy the bank extended in big cities, including Chicago, New York and Los Angeles. WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets. WaMu setup a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients. Variable-rate loans, and Option Adjustable Rate Mortgages in particular, were especially attractive because they carried higher fees than other loans, and allowed WaMu to book profits on interest payments that borrowers deferred. As WaMu was selling many of its loans to investors, it did not worry about default.

   It can now be said that Killinger helped kill housing and the financial industry both, helping to contribute to the killing of America’s economy.

  Of course, the setting was already set in the last eight years that led to our culture of schmucks. This leadership was certainly supplied by the 43^rd President of the United States. “Today, Bush’s legacy to his successor is two unresolved wars, a global image that is deeply tarnished, and the greatest economic crisis in modern times,” writes the editorial staff of the conservative magazine and website, Newsmax (“Bush’s Legacy: Conservatives Were Betrayed,” http://www.newsmax.com.) The editorial is as critical as any from the New York Times when it writes, “Bush, in fact, has decimated the Republican brand. Bush oversaw the greatest increase in discretionary social spending in history as the federal government usurped new powers in its war on terror. He placed the United States on a global interventionist path for the elusive goal of ‘democracy.’

  The Newsmax staff write that his administration “pushed the Federal Reserve for easy money as his administration turned a blind eye to far out banking practices, such as zero percent equity mortgages and Wall Street financial practices that were motivated by greed, not good business sense.”

 Without George W. Bush, the Republicans would not have been thrown out of office in 2006 and 2008 and Barack Obama would not have been elected. In this way, the Schmuck of the Decade led to Time’s 2008 Man of the Year. Now, let’s hope that Obama doesn’t end his term with the honor of winning Schmuck of the Year in 2012.

 So who is the official Schmuck of the Year? Bush, Cox, Killinger, Fuld, Madoff or someone else? No, for the majority of they candidates, they ended up with huge amounts of wealth and were able to walk off, free of a jail cell, able to laugh all the way to their own bailed out banks.

            So the winner of the 2008 Schmuck of the Year is clearly US. YOU won the Time Magazine’s 2006 Person of the Year. This year it’s US, everyone who lives in the U.S.

        US in the U.S. have been the fools to vote for the president, governors, and Congress. We’ve been the fools to invest with Madoff, to buy needless stuff borrowed on countless credit cards and on our homes. We’ve been fools to borrow more than we could afford, to be sold by high-pressure sales organizations, to believe that fairness still works. We’ve believed that the government will save us by borrowing even more trillions to bail out banks, car companies, states, and insurance companies. Who knows how many others will have their hands out in the next four years?

         Mazel Tov. Congratulations to all of US for winning this non-prestigious award of shame. It should make us all want to give up our award next year and try to be smarter, more cynical, and willing to fight corruption and incompetence. If we don’t elevate ourselves to something better, we might just win next year’s World Stupidity Award (www.stupidityawards.com), which recognizes “global achievement in stupidity and ignorance.”