Read Fixers for Free Online

money they make and the cost of what they thinkthey’re entitled to: more luxurious houses in better neighborhoods, flashier cars, Ivy League educations for the kids, bigger flat screens, vacations in the south of France. How much consumer debt do you think is out there?”
    I shook my head. I couldn’t begin to.
    “Try fourteen trillion dollars. A lot of it owed by people living pretty close to the bone.”
    “Ouch!”
    “If there’s a recession, millions of people are going to come up short. There’ll be foreclosures and repossessions, and that’s how revolutions get started.”
    “Or movements to penalize foolish lenders.”
    He nodded. “Quite right. There’ll be pressure on Washington to force creditors to take haircuts.”
    “Makes sense to me.” I instinctively root for the little guy. Mankoff doesn’t. I knew who he was
really
worrying about: creditors’ creditors. I thought about adding something to the effect that with Congress and regulators in the Street’s pocket, there couldn’t be much to worry about—but decided to keep my trap shut.
    “Worst case,” Mankoff said, “we could see a repeat of the savings-and-loan mess of the eighties, only carried out to about the tenth power.” He reminded me that when the savings-and-loan industry blew up in the late eighties, just about the time that Mankoff and I were putting the blocks to the Bank of West Congo, the American Taxpayer, who would be obliged to put up $125 bil-lion to ultimately fix the mess, called for the blood of the people responsible and Washington granted his wish. Names were named; the manacles were brought out; federal and state prosecutions succeeded in sending a bunch of big-name S&L executives to jail. You probably remember photos of one Charles Keating, friend of presidents and a man of influence, doing the perp walk. A thousand S&L executives, some say, ended up doing time.
    This time could be worse, Mankoff says. A lot of the top executives on the Street have knowingly or unknowingly signed off on various forms of transactions that walk, talk, and smell like fraud, he told me. He’s concerned that he hasn’t been as vigilant as he might have been with respect to what Rosenweis’s regiment of traders may have gotten up to. Worst case, if the Feds get serious and go strictly by the book, they could bring criminal charges against many of the million-dollar earners on the Street.
    I thought about asking him about a series of trades that STST’s been doing with a major hedge fund, bespoke transactions that sound distinctly dodgy to my untutored sense of straight and crooked, but I’m not sure I’m supposed to know about them, so I keep silent. I’ll tell you about them in due course.
    Anyway, what worries Mankoff is that Washington, which, thanks to the utter corruption of Congress and the regulatory agencies that will have been Wall Street’s equal in precipitating the coming crisis, will try to cover its ass by attacking the Street with new legislation and regulation. Wouldn’t be the first time a guilty party turned on his coconspirators to save his own skin. There will be calls for punitive retribution, and people may go to jail, but what he really fears are reformist policies and programs that widely heeded “progressive” pundits like the Nobel economists Krugman and Stiglitz will have a hand in shaping. The thirst for reform will be sharpened by the massive financial inequality that is now an acknowledged fact of the U.S. economy. There will be calls for legislative reaction that will take Wall Street back to the New Deal regulatory structure that the Street has spent millions to dismantle over the past fifteen years.
    “You mean like bringing back Glass-Steagall?” I asked. I swear he paled at my mere mention of the New Deal’s cornerstone bank reform—which separated deposit banking from investmentbanking and trading, and has protected the country from highrollers and usurers in marble halls since