King of the Club

The Book of the Week is “King of the Club” by Charles Gasparino, published in 2007.

The subject of this book “… was suffering from the downside of loyalty; he spent so much time surrounding himself with people he could trust that he forgot he also needed smart people who could get a job done in times of crisis, and he was now facing… the greatest crisis of his career.”

Sounds familiar. It was actually “Richard Grasso and the Survival of the New York Stock Exchange.” When he was fifteen years old, Grasso began trading stocks in an account held in his mother’s name, getting stock tips from his drug-store-owner-employer.

The author was rather vague about Grasso’s two years of military service which allegedly began in the mid 1960’s, spent: “…in Fort Meade, Maryland, though he did make periodic trips to Vietnam.” Apparently, Grasso’s eyesight was good enough to get him drafted by the U.S. Army, but not good enough to get him hired by the New York City Police Department, his first-choice employer after the military.

Grasso therefore began work as a back-office Wall-Street clerk at the New York Stock Exchange (NYSE) in early 1968. The author failed to mention whether Grasso was told to put his stocks in a blind trust, or whether his new employer had a “don’t ask, don’t tell” policy.

Grasso meteorically moved up through the ranks. He was innovative in executing new marketing initiatives for the exchange. He also poached companies that were listed on either the American Stock Exchange or the NASDAQ– that provided fierce competition to the NYSE. All three were stock markets of corporate entities that wanted to sell their shares far and wide. But the companies could be listed in only one place. Grasso convinced them that the NYSE was the best place to list.

By 1980, Grasso controlled NYSE listings, its trading floor and almost all its trading operations. In the mid-1980’s, the chair of NASDAQ, Bernie Madoff, claimed his market’s trading was more fair for investors because it executed trades electronically, thus multiple players were interacting continuously while setting impartial prices. The argument went that electronic trading made the market more “efficient”– as no buyers or sellers had significantly better pricing information than others on which to trade, theoretically.

In 1990, Grasso stepped up to the second-most powerful position at the NYSE. He was in charge of the exchange listees and, at the same time, in charge of regulating them. He did the legwork of bringing new business to the exchange. His boss, the chairman, did the public relations work of delivering speeches globally and persuading the federal government to keep conditions favorable for the exchange.

Several of the NYSE’s board of directors were Wall Street executives who passively continued to keep the status quo– lavishly rewarding Grasso monetarily for his undivided attention to lavishly lining their pockets year after year when times were good.

There was honor among thieves, as Grasso’s henchmen turned a blind eye to the various forms of illegal activity that allowed them to make obscene amounts of money on the trading floor. Until there wasn’t honor among thieves– as conditions changed.

From a not-for-profit-organization-legal-standpoint, most of the parties and individuals involved were engaging in various highly unethical activities, at best; conflicts of interest abounded as participants in the exchange network cooperated in a way that maximized profits for everyone until, as usual, some individuals got too greedy.

Being head of the New York Stock Exchange is not unlike leading the U.S. government. The marriage of politics and commerce is always fraught with conflicts of interest. Some are avoidable. It’s a shame that politics in particular tends to attract dishonest attention whores with hubris syndrome whose ethics are in the basement. Of course, they usually use the “everybody does it” excuse and change the subject if they can.

But there ought to be equal justice under the law for any of the accused– after an investigation of where the evidence leads— with NO jumping to conclusions, assumptions or biases prior to a thorough review of all evidence, if any. Along these lines, one would do well to ignore the superlative-laden, repetitive, sensationalist drivel emanating from the teleprompter box, um, er– idiot box.

Anyway, starting in the late 1990’s, unbridled greed led to a bunch of scandals. There was Long Term Capital Management, Enron, WorldCom, the dot-com crash, various major SEC violations committed by big-name brokerages; not to mention 9/11’s impact on the financial markets. All on Grasso’s watch. Yet, his pay kept soaring, anyway. It wasn’t pay-for-performance anymore.

Finally, Grasso got the same treatment, figuratively speaking, as other major historical figures. One week he was flying high and the next, kicked to the curb. Grasso was suffering from a bad case of hubris syndrome. In early September 2003, herd mentality / groupthink seized the board; jealousy (possibly subconscious) of his pay package reached critical mass.

Read the book to learn of the usual occurrences in such a situation (investigation, litigation, political machination and myth propagation) that led to the changing of more things, and more of same.

A Good American Family – BONUS POST

The Bonus Book of the Week is “A Good American Family, The Red Scare and My Father” by David Maraniss, published in 2019.

Born in 1918 in Boston, the author’s father grew up in Brooklyn. He was outed as a Communist by a female member of the FBI. She joined the Communist Party USA in order to spy on it, then for nine years, was paid big bucks to tattle on its members.

In March 1952, the elder Maraniss was subpoenaed to appear at a House Un-American Activities Committee hearing in Detroit. At that time, he was summarily fired from his job as a re-write man at the Detroit Times; ironically, a rabidly anti-Communist newspaper owned by Hearst.

A high-level federal judge in New York State, Learned Hand, provided the legal grounds on which the investigations into Communists rested in the 1950’s. Suppression of free speech was justified by the extent and probability of its leading to evil. “The worse the evil and the greater the probability, the more free speech could be curtailed.”

The ironies and consequences resulting from the above reasoning led to a dark period in American history. The take-away from the Red Scare was that the accusers led by Joe McCarthy, trampled on due process when confronting their prey– those who were allegedly associated with or were allegedly Communists.

One curious little experiment indicated just how effective fear-mongering propaganda can be. One irony is that fear-mongering propaganda is itself considered to be protected free speech!

In early July 1951, a reporter from the Capital Times newspaper in Madison, Wisconsin asked 112 random people in Henry Vilas Park to sign a petition, the text of which contained, “… the preamble to the Declaration of Independence… six of the ten amendments to the Bill of Rights, along with the Fifteenth Amendment granting black men the right to vote.” Only one person willingly signed. Almost one fifth of the people called the reporter a Communist.

Read the book to learn additional details of the tenor of the times in connection with the author’s father’s persuasion and generation, and the fates of his other immediate and extended family members and his accusers.

How the Post Office Created America / Superpower

The First Book of the Week is “How the Post Office Created America” by Winifred Gallagher, published in 2016. This was a detailed account of the history of the delivery of written communications in what is now the United States.

In the 1630’s, a Boston-area tavern doubled as the first post office. Local politicians and rich businessmen collected their Transatlantic written correspondence there; the latter paid for the privilege. The service was “… primarily designed to advance an imperialistic power’s interests, serve a narrow elite, and produce some revenue for the [British] Crown.”

It was in the interest of Great Britain to improve the roads to distribute the mail in the thirteen colonies (which later became the United States), as she was competing with France to rule the colonies.

Postal carriers had to deal with unforgiving land, mountains, rivers and hostile Native Americans in making their appointed rounds. A month might elapse, what with uncertain weather, before mail went from Boston, MA to Richmond, VA. The literate read letters aloud to update their fellow community members of goings-on in places far away.

Ben Franklin was a prominent figure in the mid- to late 1700’s due to his numerous, various contributions to humanity. Between and among the colonies– Canada and Britain– in the mid-1750’s, he served as one of two Postmasters General.

The colonists were demographically and geographically fragmented even after they became Americans. There were Puritans in Massachusetts, Dutch traders in New York, elitist slave owners in the South, and pioneers in the Midwest. But they all agreed that there should be a nationwide free exchange of ideas.

Read the book to learn how mail delivery quickened with more advanced forms of transportation and mail-sorting, what the “Pony Express” really was, and the controversies over: a) postage rates for different regions; b) which entity should authorize mail delivery– the federal or state governments, or private companies; c) whether the Post Office should stray from its core business of delivering only written communications, including newspapers and magazines (rather than electronic, or packages), and more.

In the United States, delivery of written communications evolved into a public-private partnership, as has the distribution of electric power. The two have become interconnected because communications have increasingly required electric power. Government regulates the two because they are the trappings of an industrialized society and massive disruption of them might cause significant economic and social (not to mention political) harm to the nation.

Some Americans are pushing to significantly reduce pollution by sourcing electric power from wind and sun. That activity, which is growing in popularity, was described in the Second Book of the Week– “Superpower, One Man’s Quest to Transform American Energy” by Russell Gold, published in 2019. This was the career biography of Michael Skelly, renewable-energy entrepreneur.

As is well known, what to do about environmental pollution has been a political football for the last few decades. In the late 1970’s, when Minnesota farmers used weaponry and sabotage to protest the building of power towers on their land, a Minnesota state trooper commented, “Whenever there is progress, there is change and change does not benefit everyone. Change is hard for some people to accept.”

In the Obama administration years, the U.S. Energy Department funded a study conducted by the National Renewable Energy Laboratory outside Denver.

Researchers used a supercomputer to analyze hypothetical scenarios in 2026 in which wind and solar power would account for thirty percent of the power generation of the Eastern Interconnection (infrastructure that would transmit energy across states and provinces between eastern New Mexico and Quebec, Canada); electric power would go back and forth, depending on need. The results were promising. Once infrastructure was in place, costs wouldn’t be significantly higher than fossil fuels or nuclear energy.

For, wind and sun are free of charge. Fossil fuels’ prices fluctuate. True, wind and sun aren’t available 24/7, but a giant network spanning thousands of miles would allow energy to be transferred across time zones wherever needed, when wind and sun aren’t available.

Skelly was a doer. He didn’t waste time in “Twitter feuds or policy battles.” In the early 1990’s, after acquiring life experience in the Peace Corps and Harvard business school, he supervised the construction of an unprecedented tourist attraction in Costa Rica: an open-air gondola / tram from which travelers could view flora and fauna from the rain-forest-canopy.

Then Skelly got into wind farms. Building them involves an extremely expensive, years-long series of steps to get cooperation from numerous stakeholders such as investors and local: residents, governments and utilities, not to mention the federal government. The company building the turbines sees nary a penny of revenue until it sells the energy. It must get a slew of regulatory approvals, and fend off angry opposition and lawsuits.

Interesting factoid: by 2007, Texas had surpassed California in renewable energy generation.

Bankruptcy is always hanging over the head of the project initiator. In 2005, Skelly and his fellow executives were able to sell to Goldman Sachs a 90% interest in their company. Getting the investment bank involved enabled them to purchase a few billion dollars’ worth of turbines from Europe. Goldman got a major tax break for building the wind energy project.

Skelly was a conscientious individual. Federal law required a different, later venture of his– Clean Line– to have one public meeting with the locals. Clean Line had fourteen meetings. Skelly spent eight years involved with another project, Plains and Eastern. “It would be a $9.5 billion private investment, generating thousands of manufacturing and construction jobs and using enough steel for four aircraft carriers.”

Read the book to learn all the details of Skelly’s trials and tribulations in supervising renewable-energy projects.

The Chief – BONUS POST

The Bonus Book of the Week is “The Chief, The Life and Turbulent Times of Chief Justice John Roberts” by Joan Biskupic, published in 2019. This slightly redundant biography described prominent U.S. Supreme-Court cases in detail, explaining them for laypeople. Most of the cases revolved around issues with which the United States continues to grapple, especially various kinds of discrimination.

Born in January 1955 in western New York State, Roberts and his family moved to Indiana near the Illinois border when he was about eight years old. He turned into a staunch conservative Republican.

The burning question that must be answered in any given case, that would determine whether favoritism or compensation should be given to the victims of discrimination, is whether, as a group, the victims– having been oppressed for so long– have caught up to the rest of society, with regard to the case’s area of life covered; education, housing, employment, political elections, financial dealings and other day-to-day situations.

In the applicable areas of life, whether and how much discrimination still exists is of course, extremely subjective (given the anecdotal evidence and propaganda wars from both sides). Each case needs to be decided on an individual basis because the times are continually changing. If the victims have yet to catch up, it is because one thing leads to another. If for decades, they’ve been rejected from, say, colleges based on their skin color, they’re at a disadvantage when it comes to employment opportunities, which leads to financial disadvantages and a slew of other lifestyle limitations. It’s not just a matter of compensating victims for past wrongs against them– the wrongs (if there were wrongs) held them back from being treated equally with others for decades longer.

It is impossible to require truly color-blind acceptance policies, however. And of course, there’s always that lingering uncertainty whether the college applicants were accepted more for– when compared with their peers– their potential success in furthering their education, than for their skin color.

Roberts claimed the Supreme Court was nonpartisan in handing down decisions. But– the Court has been divided 4-4 or 5-4 practically all the time in famous cases, because each of its presiding justices has consistently subscribed to a particular political persuasion in his or her opinions.

Further, appointments of Supreme Court Justices (or lack thereof) have been fiercely political in recent decades. “From the start of Obama’s presidency [Mitch] McConnell had put up hurdles to Obama’s lower Court nominations, ensuring, for instance, that not a single appointment was confirmed to the D.C. Circuit in Obama’s first term.”

Read the book to learn of the many ways Roberts made known his political beliefs through his Court pronouncements.