Status and pride

Maybe they'll just go Gault.

Part of the problem, the Goldman vet explains, is that there’s a vast divide between where the public is and where the bankers are. The public registers how fundamentally the system has changed; the bankers are far from getting to that point. “When I talked to my friends in November and December at firms like Goldman, they would tell me, ‘If the government doesn’t bail us out, we’re going down.’ They really thought they were going to zero, and without exception, they all forget that now,” he says. “They forget that their company’s stock was going to zero. It’s a state of delusion; they don’t remember those days. The flip side of that is, every guy except the Goldman guy remembers that Goldman was bailed out.”

I asked him what will happen if Congress succeeds in regulating compensation. “These guys will not work on Wall Street,” he says flatly. “People go to Wall Street out of greed. When I was interviewing for jobs, frequently some form of the question came up: How much do you want to make money? If my answer was something like—and it wasn’t—but if my answer was, ‘I’m here for intellectual betterment,’ their response might have been, ‘University is a great place for you.’ They want people who think ‘I’m greedy, I want to be a billionaire.’ That was viewed as a really good thing.”

The greed won’t disappear, of course. “The smart people are going to make money in good times and bad times,” one investment adviser tells me. “They’ll figure out how to game the system,” says the former Bear Stearns managing director. “You may get a new set of players. This may be a movement back to partnerships and boutique firms. This could be their moment.”

There’s a vast woundedness now on Wall Street, which is hard to contemplate after the period of triumphalism so recently ended. In this conversation about money, there’s a lot to work through. Just months ago, the masses kept what anger they had to themselves, and the bankers were close-lipped about what they thought they were owed by society. There wasn’t much of a dialogue about the haves and have-nots and who was entitled to what. For the privileged, it was a lot more comfortable when things remained unspoken. Almost more than the loss of money, they are concerned with the loss of status and pride.

Almost, but not quite. Money was their way of keeping score, but it was also their way of buying status and it definitely became part of the structure of their lives. That's why I laugh when I hear that the wealthiest 1% will stop making charitable contributions of the deduction is reduced or eliminated. I'm not saying that they don't want to help people with their charitable giving (though I'm not sure how being on the board of MOMA helps anyone other than other wealthy people who like to go to fundraisers at MOMA), but ultimately that charitable giving gives them access and status. That need won't go away.

Davos Man and "The System"

Daniel Gross writes from Davos that, just like Wall Street, at Davos, success is privatized, failure socialized.

The preferred strategy at Davos is to simply ignore failure. By and large, screw-ups don't make the agenda. It's just not that sort of place. If you screw up, you don't get invited, and you don't show up. This explains why I couldn't see a single economist or official associated with the Bush administration on the roster, and why there are very few American bankers at Davos this year. As John Thain's career at Merrill came to a close, he suffered the ultimate indignity: Bank of America told him it wouldn't be a good idea for him to come to Davos. The only thing worse than being attacked is being ignored. You don't matter anymore. You're not even worth mentioning. As World Economic Forum founder Klaus Schwab put it: Davos is not a place for "has-beens."

But I hear the skiing is excellent.

Timing is everything

I've heard of rats, but now the cronies are fleeing the sinking ship?

Hubbard, of Indiana, was a low-profile economic adviser to the president whose strength came from his closeness to Bush. The two both attended Harvard University. Hubbard also has close ties with Treasury Secretary Henry Paulson. Hubbard accompanied Paulson on some of his trips to China to lend White House support to efforts to get China to reform its economy and narrow the huge trade imbalance between the two nations.

Among other issues, Hubbard has been deeply involved in the debate over the State Children's Health Insurance Program and Bush's proposal for a major shift in tax policy to, for the first time, treat health insurance costs as taxable income.

The National Economic Council was created in the Clinton administration to coordinate economic policy. The first NEC director was Robert Rubin, who went on to become Clinton's Treasury secretary.

Hubbard took the post at the beginning of Bush's second term, when the administration had high hopes for achieving success on a number of major issues such as addressing Social Security's funding problems and overhauling the tax code. However, as Bush became mired in problems involving the Iraq war, his domestic initiatives failed to make headway in Congress.

Hubbard first met Bush when they were both attending Harvard's business school in the 1970s, getting MBA degrees. Hubbard later became president of E&A Industries, an Indianapolis investment firm.