|The Predator Class
by Dick Meyer
The stock market boom of the 1990s, the proliferation of 401(k) plans and
the mass use of mutual funds so greatly increased the number of Americans
who own equities that a new demographic term was born: the investor class.
The emerging accounts of thievery in the world of mutual funds confirm,
for me at least, something I have suspected since the go-go 1980s -- the
existence of an economic predator class.
I believe there is now a professional, well-trained elite, supported by
large institutions, that is adept and willing to use corrupt practices to
accumulate wealth. Despite assurances from game-theorists and
anthropologists that the criminal cadre in the species remains a constant
percentage over time, I believe today's mainstream, sanitized, and
institutionally sanctioned financial crime rackets are being run by a new
breed of crook. There have always been scandals and crooks in the history
of American money, but our predator class is a distinct creation of the
late 20th century.
I believe there is no way the counter-class made up of regulators,
watchdogs and do-gooders and hack columnists can match wits with the
predator class. Today's piles of money are so huge, great fortunes can be
amassed by swiping the tiniest of slices in the wiliest of ways long
before picked pockets are discovered.
I also believe that my darling baby-boom generation and our successors in
gens x and y, reared in raised consciousness, righteousness and me-first,
are probably to blame.
The docket of this still running corporate crime spree has grown far too
long to be dismissed as either a passing fluke, a few bad eggs or as
regularly scheduled financial event. It is a more permanent condition of
commercial culture. And it is barely scorned.
It is partly, of course, simple Wall Street and boardroom greed, a cousin
to the greed and gargantuan rewards in entertainment and sports. It is
partly the degradation of professional standards, of the concept of the
fiduciary, akin to the same market-driven devolution in divergent fields
such as medical care, Hollywood, publishing and, yes, journalism.
My guess is that financial historians will start the clock in this epoch
with the big merger scandals of the 1980's -- Ivan Boesky, Michael Milken
and scads of lesser cads. Next came the long running, now forgotten, S&L
scandals. Then a lull (maybe), punctuated by the pretty picture of the
tech boom. That delusional portrait was been redrawn when we learned of
the rigged IPO's, insider trading, completely corrupt "analysis" practices
at the Wall Street giants and old-fashioned flimflam.
Coveting the vast instant riches of the techno-boomers and baby
billionaires was way more than many titans of less glamorous industries
could bear and in virtually all companies executive salaries soared beyond
all proportions of the post-war era. And in many of those executive
suites, greed morphed into felony -- Tyco, Enron, Rite-Aid, Adelphia,
Global Crossing, WorldCom, ImClone, Lucent, KMart, MicroStrategy, Qwest
Communications. And then scandals at the supposed auditors, like Arthur
Andersen, insulted the injury.
As the market turned down, the corporate crime spree didn't wane as some
theorists said it should. Hot stocks, IPO's, M&A were no longer where the
Willy Suttons with MBAs, Turnbull & Asser shirts and Patek Philipe watches
saw the money. They saw it in those huge piles of money accumulated by
working people for savings and retirement -- corporate pension funds,
public pension funds, 401(k)'s and mutual funds. Who would notice a few
mil or bil siphoned off in arcane late-trading deals? They'll never know
what hit them.
So, pension funds were raided, an entirely legal scandal. And now we're
learning about the mutual fund grifting rampage that may affect Main
Street as much as prior fiascos: Putnam, Alger Management, Bank of
America, Morgan Stanley, Strong Capital Management, PBHG Funds, Bank One
Corp., Alliance Capital, Janus Capital Group are some of the implicated
So now we'll be told that the market, smarter than any deliberately
organized system, will correct this. After all, who would invest in a
known corrupt game? No one, so the market will fix it. Plus, the
regulators are on the case.
This time, I don't buy it. The predator class will not be exterminated by
cease and desist orders, Senate hearings, independent boards of directors
and the invisible hand. It's a culture. And essentially, it's our culture.
Dick Meyer, the Editorial Director of CBSNews.com, has covered politics
and government in Washington for 20 years and has won the Investigative
Reporters and Editors, Alfred I. Dupont, and Society of Professional
Journalists awards for investigative journalism.