Daily Archives: May 6, 2009

’cause that’s where the money is

Willie Sutton at Eastern State Penitentiary

Willie Sutton at Eastern State Penitentiary

My dearest brother sent me a link to yesterday’s New York Times story detailing how hedge fund investors are circling the country’s small banks like raptors after particularly tasty chipmunks.

Published: May 5, 2009

CAINSVILLE, Mo. — No one seems to want to own a business in this dusty, windswept corner of rural America, population 370, with its crumbling sidewalks and boarded-up storefronts.

First National, with its boarded-up second story and $17 million in assets, is worth about a third of what its owner, a New York investor, paid for an Upper East Side town house in 2006. It is an unlikely launching pad for a new American banking empire. Except, that is, for J. Christopher Flowers, a media-shy New York billionaire who last year bought the First National Bank of Cainesville, one of the United States’ smallest national banks.

With that charter in hand, Mr. Flowers plans to take over a handful of large struggling banks, casualties of the economic crisis. In some cases, he hopes, the federal government will help.
Mr. Flowers, a private equity manager, has no particular love for rural Missouri; in fact, he has never set foot in Cainsville. Rather, he wants to use the national bank charter he picked up in this farm town to go on a nationwide buying spree.

My brother’s comment was telling:

Hello sucker— how the vulture capitalists will pick your pocket with the help of their lobby and the same connivers in the congress!!
M.C. Escher in Lego by Andrew Lipson and Daniel Shiu

M.C. Escher in Lego by Andrew Lipson and Daniel Shiu

And it’s hard to argue that he’s not right. Parties that hold “toxic assets” are going to unload them to other parties who also hold “toxic assets,” who in turn will unload their “toxic assets” to other parties who also hold “toxic assets” in a scheme to make would-be M.C. Escher’s the world over jealous. And all with underwriting from the government and the Fed.

But, as hard as it is to believe, there is method in the madness. And that method derives from the timeless logic and priceless American wisdom of Willie Sutton.
Sutton, as we’ll all remember, was among the public enemies number 1 of his day (almost as fatal as being “Al Qaeda’s No. 2” today I suppose) who, when asked why he robbed banks, famously replied, “because that’s where the money is.”
Which brings us back to the question, why are “vulture capitalists” (and their firms) being allowed to “pick our pockets [again]?” The obvious answer to which is “’cause that’s where the money is.” Having recently put my wallet through the washer, I can say beyond a shadow of a doubt that passing “distressed assets” from dirty hand to dirty hand is an act any money launderer can be proud of. But, given the way the world works, this miracle of accounting legerdemain (or should that be “ledger-demain“?) will probably have the desired effect, over the long run, of rinsing away the sins of the B- tranche, and restoring the appearance, if not the actual fact, of health to the financial sector.
The Whos Roger Daltry

The Who's Roger Daltry

And since this is a game that requires an enormous amount of money to play, why waste our time being aggrieved that the same Masters of the Universe who drove the bus off the cliff own the tow truck that’s come to drag us out? It’s American as Willie Sutton. Or in the words of the immortal poet, Roger Daltry: “Meet the new boss [baby]; same as the old boss.