Sunday, October 12, 2008

A Brick At A Time

A pseudo news report making the rounds of the web claims authoritatively that “Jews” walked away with $400 Billion just before Lehman Brothers collapsed. This anti-Semitic tirade was in the same vein as those espoused by morons after the collapse of the Twin Towers following the attack by two jetliners on Sept 11, 2001. Then some websites claimed the “Jews” had already fled the building before the planes hit, because the real criminals who flew the planes, or manipulated those hapless Moslem fundamentalists into flying the plane were Jews.

Visitors to Israel report that there is a feeling of unease among American Jews, who fear a backlash. Readers of Jerusalem Magazine may recall a theory that there was indeed such as thing as a “survival gene,” which is very active in the Jewish population, because of the bloody history of the Jewish people. Jews, the theory goes, are very attuned to the slightest anti-Semitic ripple in the air. Their noses twitch, their ears stand up, eyes narrow, sniffing like deer in the forest, ready to bolt.

Unfortunately the history of the Jewish people is replete with instances where the non-Jewish population decided to make their Jewish neighbors the scapegoats for a calamity. During the Black Plague in the middle ages, millions of people were dying, but only a small number of Jews. Twisted logic dictated that the Jews were to blame for the plague.

In fact the Jews survived because of their traditions. Their rules. Their laws. Washing hands, and saying the appropriate prayer, after going to the toilet, and before eating bread, dunking in a mikvah, the ritual bath. In other words, staying clean. The bacteria carrying the plague washed away before it reached the Jewish mouth. (Anyone who has visited China appreciates how important clean hands are before eating.)

None of this is new. Neither anti-Semitism, nor making the Jews scapegoats. However, there may be some truth to the fact that the Jews were inadvertently responsible for the stock market crash on October 9, 2008. How? According to one analyst, the short-sellers starting their deeds early in the morning, when the market opened. This selling activity coincided with the expiration of the Federal Government’s time limit prohibiting short sales of nearly 800 stocks.

Usually when someone shorts a stock, (that means, sells a stock he doesn’t own in expectation that the price will drop, then buys it back at a lower price,) that person counts on someone stepping up and buying the stock as it drops. In this case the stocks went into free-fall. There were no buyers. The short-sellers could ride it all the way down, and then buy when they felt like it. Why? Because of Yom Kippur, the Jewish Day of Atonement.

On Yom Kippur most Jews, no matter how marginally religious, refrain from eating, and even working. Much as the Arab armies attacked Israel on Oct 6, 1973, when the country was deep in it’s Yom Kippur observance, the attack on the stock market caught the Jewish brokers, traders, investors, money managers, and corporate heads, unawares.

Contrary to the anti-Semitic conspiracy theory, the Jews were not involved because most were in synagogue. Perhaps some were at the office, selling short and reaping enormous profits, but most were sitting in synagogue losing fortunes, pensions, and life-savings.

Another analyst blames the Jewish financial expert Alan Greenspan, formally the head of the U.S. Federal Reserve, for the disaster. According to a recent article by Peter S. Goodman in the Oct 10, 2008 edition of the International Herald Tribune, Mr. Greenspan, a Libertarian, was a firm believer in no regulation on ‘derivatives,’ that confusing financial instrument which, according to the article, financiers like George Soros, Felix Rohatyn, and Warren Buffet, claimed not to understand, or trust. Buffet likened derivatives to a nuclear bomb waiting to explode.

Much as it would be easy to blame George W. Bush, just as it’s easy to blame the Jews, said one pundit, the fact is that Mr. Greenspan practiced his ardent non-regulation policy over the course of decades, including the time when Democrat Bill Clinton was in power, and, alas a Jewish Sec. Of the Treasury, Robert Rubin.

Greenspan, with Rubin’s support, according to the article, were so against regulation that they fought with a pro-regulation Washington bureaucrat, and managed to so defeat her initiative. She was gone from her job a year later.

Greenspan, according to the article, believed in the strength of the US financial institutions, and the integrity of their managers. Greenspan, the article claims, believed that financiers wouldn’t ruin the marketplace where they made their living. The article concludes, obviously, that he was wrong.

“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Greenspan told the Senate Banking Committee in 2003. “We believe it would be a mistake,” he said, to more deeply regulate the contracts.

Mr. Greenspan trusted the bankers to regulate themselves, the article says. While the world is now scrutinizing his record only those like-minded individuals who favor no regulation, still support his theories that he still maintains are correct.

This brings us to Yom Kippur. Those who pay attention to such things can see clearly that religious Jewish people are highly regulated. The ultra-Orthodox have a rule for just about everything, and spend their days trying to keep the rules.

One observer said that the regulations imposed first by God on Mt. Sinai, then by the Prophets during the Temple Times, and the Rabbis prior to and during the expulsion, only underlined the basic fact that man is a dangerous, selfish, greedy animal. Without regulation man runs amok.

The Ten Commandments lay out the rules simply, the Mishnah, or Oral Law, transcribed by the Rabbis, probably with liberal interpretation, explained the depth of the commandments, and the Talmud went into a sixty-seven-volume discussion of how the laws apply and to what.

According to this view, left unfettered man would roam free, pillage, rape, murder, steal, insult, abuse. The laws of every country pose regulations. As a sociologist pointed out, if all men could control their base instincts, and self-regulate, there would be no need for laws, police, judges or prisons. But that is a utopian thought.

Some people, on a higher intellectual, and moral rung of the ladder of life, may not need these regulations. Mr. Greenspan probably didn’t need laws to hold him to an enviably just moral code. But Mr. Greenspan, called the oracle during his time in Washington, was clearly not most people.

Derivatives, as understood by the layman, relieved those who had a stake in the financial markets from any responsibility. Debts were rolled over, repacked, combined into packages, sold wholesale to a middle-man, who then rolled them over, combined them into bigger packages, and acted as a middle-man to yet another wholesaler. The debts were used as security on other loans. A house of cards was then built on a foundation of bad debts. The slightest wind, in this case reportedly the drop in housing prices, caused the house to collapse.

Had the original lender been more responsible, kept some of the individual debt on their books, rather than ‘sell the paper wholesale’ to someone else, they would have been more careful whom they lent their money to, and also in managing that debt. This according to the former CEO of one of the world’s largest restaurant chains.

Mr. Greenspan believed that those middlemen and wholesalers wouldn’t do what they did, mark up the mortgages, and pass them on up the ladder to an even bigger fish. Financial institutions, he kept repeating in the article, wouldn’t be so irresponsible as to create their own demise.

Mr. Greenspan, said one observer, overlooked the elements of greed, avarice, and envy. Overlooked the competition for a larger bonus, a bigger Mercedes, a grander house, a more expensive vacation, and of course, a more luxurious private plane. He overlooked the nature of man. He overlooked the need for regulation. For rules. Simply put he was, probably, too good a Jew. The kind who was trying to fix the world a brick at a time. Except this time, they fell in on him.