O Rotten Gotham
by Tom Sullivan
The court ruling in Manhattan Monday against Nomura and the Royal Bank of Scotland over mortgage losses may be the tip of an iceberg we never see the bottom of. The firms knew they were "packaging and selling bad loans to unwitting victims, but did it anyway, because the money was good," writes Matt Levin for Bloomberg. Wall Street long argued that "the banks did not generally break the law." Finally, a court has found otherwise.
Levin writes:
There's some good anecdotal history of how hard everyone was working to churn out mortgage securitizations. I liked this bit about the real estate appraisers who testified at trial (page 167):
They performed hundreds of appraisals apiece each year during the housing boom, but assured the Court that they never took shortcuts and in fact spent many hours on each and every appraisal. Clagett reported that he performed more than 700 appraisals each year in the period of 2005 to 2008, and took about five to six hours on each of them. Platt performed about 300 to 400 appraisals each year in 2005 and 2006, taking a minimum of four to five hours to perform each one despite the fact that he was also working fulltime as a fireman. For the period of 2004 through 2008, Morris conducted approximately 600 appraisals per year, which is about 12 per week. To justify those numbers, Morris claimed to have worked long hours seven days a week.Apparently appraisers needed to appraise 70-80 hours a week, every week, for four years, to feed the mortgage securitization beast.
Speaking yesterday of culture, and of culture, and of culture, yet again no one will go to jail for the massive Nomura/RBS bank fraud. That too is cultural, filtering from Wall Street down to fireman/appraisers in Maryland. As they say, the fish rots from the head.
It seems people still reference Tom Wolfe's essay, "O Rotten Gotham—Sliding Down into the Behavioral Sink," published as the last chapter of "The Pump House Gang" in 1968. Touring the city with anthropologist Edward T. Hall of the Illinois Institute of Technology, Wolfe examined how New York affects people, referencing the work of ethologist John B. Calhoun. From Wikipedia:
The ethologist John B. Calhoun coined the term "behavioral sink" to describe the collapse in behavior which resulted from overcrowding. Over a number of years, Calhoun conducted over-population experiments on rats which culminated in 1962 with the publication of an article in the Scientific American of a study of behavior under conditions of overcrowding. In it, Calhoun coined the term "behavioral sink". Calhoun's work became used, rightly or wrongly, as an animal model of societal collapse, and his study has become a touchstone of urban sociology and psychology in general.
A friend from South Carolina got a masters at NYU in the 1980s, commuting in each day from Brooklyn. She said, "I learned to navigate the city. Where to go. Where not to go. But when I got on the subway every morning, packed in with a thousand people, I knew I was different. I knew I didn't have to live this way." Or as Wolfe put it:
In everyday life in New York-- just the usual, getting to work, working in massively congested areas like 42nd Street between Fifth Avenue and Lexington, especially now that the Pan-Am Building is set there, working in cubicles such as those in the editorial offices at Time-Life, Inc., which Dr. Hall cites as typical of New York's poor handling of space, working in cubicles with low ceilings and, often, no access to a window, while construction crews all over Manhattan drive everybody up the Masonite wall with air-pressure generators with noises up to the boil-a-brain decibel levels, then rushing to get home, piling into subways and trains, fighting for time and space, the usual day in New York-- the whole now-normal thing keeps shooting jolts of adrenaline into the body, breaking down the body's defenses and winding up with the work-a-daddy human animal stroked out at the breakfast table with his head apoplexed like a cauliflower out of his $6.95 semispread Pima-cotton shirt and nosed over into a plate of No-Kloresto egg substitute, signing off with the black thrombosis, cancer, kidney, liver, or stomach failure, and the adrenals ooze to a halt, the size of eggplants in July.
I mean, really. The poor dears on the Street can't help acting like criminals, all nervous and agitated (and medicated), shuttered up for long hours staring at computer screens, slaving away for their bonuses. We should just thank them for what they add to the Potemkin economy and ask them not to do it again, again.