A Gekko for The Great Recession

04 Jun A Gekko for The Great Recession

Photo by Aditya Vyas on Unsplash

In Wall Street: Money Never Sleeps, Josh Brolin plays Bretton James, a sort of nouveau version of Gordon Gekko for The Great Recession. Although the players and the times may change, it seems the financial chicanery remains the same.

Jake Moore is trying in earnest to promote a clean energy company and his girlfriend, Winnie Gekko, runs a lefty publication and wants to avoid everything about her father, Gordon. The Great Recession is in its early stages yet Jake is handed a commission check dated 6/22/2008 for $1,450,000. Jake’s manager, Louis Zabel, is a bit like Bud Fox’s manager, Lou Mannheim, from the first film. Older. Wiser. Saltier. More in tune to the shenanigans than the youngbloods. Jake has a good relationship with Louis and clearly respects him. One of Jake’s buddies warns him that Louis is saddled with toxic debt and talks about a Gordon Gekko media interview where he predicts the looming financial storm with home loan defaults merely tip of the iceberg. Jake either doesn’t believe it or doesn’t want to believe it.

The next day, Zabel’s stock gets hammered and the brokers are on the phone with all sorts of hot air and promises to investors. At a meeting where Zabel wants a bailout, Bretton lectures him on moral hazard and how Wall Street needs to make a statement. Bretton offers Zabel $2 per share and his choice is essentially to give the company away for pennies on the dollar or allow it to go bankrupt. The next morning, Zabel goes through his typical routine as he probably has done for decades and then commits suicide. Jake is devastated when he hears the news. Meanwhile, Bretton’s firm, Churchill Schwartz, turns a tidy profit from the failure of Zabel’s company. Zabel had refused to help Churchill Schwartz during the Dot Com Boom/Bust and now Bretton has had his payback watching Zabel fail during The Great Recession.

And on and on it goes. Look at what we just saw: “The federal government seized First Republic Bank and sold it to JPMorgan Chase on Monday, ending the lender’s six-week-long free fall and reassuring depositors that their money is safe.” (https://www.nytimes.com/2023/05/01/business/first-republic-stock-deposits-sale.html) Jerome Powell met with Ben Bernanke who seems to me like the last damn person we’d want offering up financial advice.

After Zabel’s suicide, Jake attends a lecture given by Gordon Gekko. As I’ve written before, Gekko’s summation of the ’08-’09 crisis remains one of the best I’ve ever heard:

Someone reminded me the other evening that I once said, greed is good.

Now it seems it’s legal!

But folks, you know it’s greed that makes my bartender buy three houses he cannot afford with no money down. And it is greed that makes your parents refinance their 200,000 dollar house for 250K, and then they take that extra 50K and they go down to the shopping mall and they buy a plasma TV, cell phones, computers and an SUV. And hey, why not a second home while we are at it. Because, gee whiz, I mean we all know the prices of houses in America always go up. Right?

And it’s greed that makes the government of this country cut the interest rates to 1% after 9/11 so we can all go shopping again.

They got all these fancy names for trillions of dollars of credit, CMOs, CDOs, SIVs, ABSes. You know I honestly think there’s maybe only 75 people in the world who know what they are.

But I’ll tell you what they are, they are WMDs. Weapons of mass destruction.

When I was away, it seemed that greed, got greedier. With a little bit of envy mixed in. Hedge fund managers just walking home with 50 to 100 million bucks a year.

So Mr. Banker, he looks around and he says, “My life looks pretty boring!” So he starts leveraging his interest up to 40%, 50% to 100%. With your money, not his. Yours. Because he could. You are supposed to be borrowing, not them!

And the beauty of the deal: no one is responsible. Because everyone is drinking the same Kool-Aid.

Last year, ladies and gentlemen, 40% of all corporate profits came from financial services. Not production, not anything remotely to do with the needs of the American public.

The truth is we are all part of it now. Banks, consumers, we’re moving the money around in circles. We take a buck, we shoot it full of steroids and we call it leverage. I call it steroid banking.

Now I have been considered a pretty smart guy when it comes to finance, and maybe I was in prison too long, but sometimes it is the only place to stay sane, and look out from the bars and say, hey is everybody out there nuts?

It is clear as a bell to those who pay attention. The mother of all evil is speculation. Leverage debt. The bottom line: it’s borrowing to the hilt. And I hate to tell you this, but it is a bankrupt business model.

It won’t work. It is systemic, malignant and it’s global. Like cancer. It’s a disease. And we got to fight back. How we going to do that? How we are going to leverage that disease back in our favor?

–https://speakingfrog.com/?p=589#:~:text=Gordon%20Gekko%3ASomeone%20reminded%20me,afford%20with%20no%20money%20down.

Gekko offers his sympathies to Jake for Zabel’s death. As they’re talking, Gekko feeds Jake the intel that Bretton was probably the source of rumors against Zabel’s company and that Bretton “gutted him at The Fed.” Jake takes revenge against Bretton by spreading rumors of his own and kills one of Bretton’s stocks to the tune of $120 million. Bretton requests a meeting with Jake, which happens at a fancy party he’s throwing at his Park Avenue pad. To his amazement, Jake receives a job offer from Bretton complete with a nod to Jake’s interest in clean energy.

Jake goes to work for Bretton with the intention of getting a slow, powerful payback against him. Get in on the inside and ruin the machine. As the stock market collapses, Bretton and Jake go on a motorcycle race on expensive Ducatis. 😒 Bretton breaks the news that surprises Jake but not the audience: Bretton will not be investing in clean energy after all. Gekko tells Jake that Bretton was shorting stocks, knew their speculation would crash the market, and then took bailout money from The Fed for 100 cents on the dollar. I’m reminded of what Gekko himself told Bud in the first film: “I don’t throw darts at a board. I bet on sure things.”

Jake leaks the story to the press through Winnie’s website. Bretton’s reputation is destroyed (like Gekko’s in the first film) and the remaining partners turn to . . . wait for it . . . wait for it . . . none other than Gordon Gekko for help. Gekko convinced Winnie to give him her $100 million trust fund, which he used to start his own brokerage in London. Gekko has, in his typical fashion, turned that $100 million into $1.1 billion after assuring Jake that he would invest the money in clean energy. Like Bretton, he manipulates Jake for his own purposes and absconds with the cash. In the end, Gekko tries to make amends by depositing a check for $100 million to a clean energy company that Jake and Winnie support. Bretton comes under fire for his financial shenanigans and Oliver Stone provides the audience with something of a happy ending.

In real life, we don’t get the tidy Hollywood endings though. As with the first film, Stone gives us a peek behind the curtain of how these shady financial deals are brokered. Bretton James is like the Gordon Gekko of The Great Recession. Where Gekko represented the 1980s era of slicked back hair, fancy suits, and a flaunting of the “greed is good” mentality, James is the same kind of slimeball who isn’t quite as flashy about it. Gekko relied on insider trading and corporate raiding where James relied on toxic debt, market manipulation, and government bailouts.

All of that sounds quite familiar and quite current, does it not?