One of the criticisms leveled at Oliver Stone's otherwise decent "Wall Street" sequel, "Money Never Sleeps," is that while the original wasn't afraid to take a strong point of view on the financial industry's excesses, the 2010 version more or less punted.
Stone set the film against the backdrop of the 2008 crisis, and gave us negotiations between a fictionalized Henry Paulson and the head of a Goldman Sachs-style "too big to fail" firm.
But the same director who had Kevin Costner ranting for ten minutes about grassy knolls in "JFK" omitted some of the more troubling aspects of the real-life negotiations - starting with the fact that Paulson was also Goldman's ex-CEO.
1987's "Wall Street" put on trial Gordon Gekko's contention that "greed is good." The sequel followed that up by posing the question, somewhat lamely, "is greed good?"
Then again, while Gekko, a role that won Douglas an Oscar for Best Actor in 1988, might have technically been the villian of the original film, America's fascination with him has always been based as much in admiration as it has in anger. It's hard to argue that Gekko's "greed is good" philosophy, even as it flies in the face of traditional ethics, doesn't accurately describe the moral compass of a modern capitalist society - the same sort of thinking used to justify policies from "trickle down economics" to globalization.
Despite its anti-establishment trappings, the modern right's zero sum reverence for the free market obviously owes a bit to the 80s, "Masters of the Universe" school of thinking. Mark Lilla picked up on the connection in his piece The Tea Party Jacobins, where he characterized 2010 conservatives as a mixture of 60s anarchist radical and 80s corporate greed. But creative analysis isn't even required here - because there's actually a very concrete, real-world link between the Tea Party and Stone's fictional capitalist icon.
If there was a defining moment for the new right it was February 19, 2009. That was the day CNBC's Rick Santelli used his disgust towards Obama's mortgage plan as the launching point for a long, incoherent spiel against "losers," and government responsibility for the economy in general. Accompanied by traders play acting the role of grassroots protestors, the rant culminated with the revelation that Santelli and his associates would be having a "Tea Party" in Chicago, catapulting the phrase into the public consciousness for the first time.
In response to the White House's characterization of him as a derivatives trader, Santelli insisted he was no more than a humble, "fixed income" reporter at CNBC. The truth is that while Santelli was indeed a CNBC talking head in 2009, for most of the previous two decades, he had indeed worked on Wall Street, most notably as VP of Interest Rate Futures at a firm called Drexel Burnham Lambert. A fellow Drexel VP, Michael Milken, made the firm famous by popularizing a class of high-risk investment, the "junk bond," that fell outside the traditional ratings system. And Milken, along with another of Santelli's colleagues, Ivan Boesky, was Oliver Stone's inspiration for Gordon Gekko.
On May 18, 1986, Boesky visited Milken's alma mater, the University of California at Berkeley's business school, to deliver a commencement address where he reaffirmed his faith in capitalism. "I think greed is healthy," Boesky told the class of graduating students. "You can be greedy and still feel good about yourself."
Thanks mostly to Milken's junk bonds, Drexel Burnham Lambert, the descendent of a family bank founded in 1838, became one of the single biggest successes of 80s finance. The junk bond, which became a convenient way for firms to engage in leveraged buyouts, ushered in an age of hostile takeovers, with investors newly empowered to take on corporate management.
In 1986, Drexel netted $545.5 million - at the time, the biggest profit ever claimed by a Wall Street firm. But Milken's earnings alone actually edged past that total at $550 million.
And then, the same year, Dennis Levine, a managing director and investment banker for the company, was charged with insider trading. Levine pleaded guilty, implicating Boesky. Following Boesky's capitulation, a number of unethical practices by Milken came to light, resulting in his being indicted with 98 counts of fraud and racketeering. Like Gordon Gekko in "Wall Street," Milken was sent to prison, handed a ten year sentence and $600 million in fines.
Despite the firm's bankruptcy and eventual collapse in the years following Milken's conviction, Drexel Burnham Lambert's legacy remains, with some blaming their popularization of risky securities not just for the S & L Crisis, but for laying the ground for what would happen decades later.
For instance, aside from Santelli, another prominent Drexel alumni is Joseph J. Cassano, who ran the London division of AIG. Cassano, dubbed "Patient Zero of the global economic meltdown" by Matt Taibbi, is viewed as being more responsible than any other single figure for AIG's overinvestment in risky securities. It's not hard to trace a path from Cassano's reckless governance at AIG to Drexel's practices years earlier.
And like the older Gekko in "Wall Street 2," Milken returned as a self-described philanthropist, now one of the biggest investors in for-profit education and medical research. He runs the Milken Global Institute, where his old friend Rick Santelli is a frequent guest speaker. Milken's self-appointed role as the savour of medicine has been questioned by some, including a lengthy piece accusing him of deliberating sabotaging the prostate cancer drug Dendreon because it threatened his own cancer drug investments.
Milken has donated at least some money to Freedomworks and other conservative organizations, to the point where teachers' unions recently boycotted a Milken-sponsored teachers award event. Most grassroots libertarian types might have trouble recognizing a billionaire like Milken as one of their own. But the revolution started by Milken and other Drexel traders in the 80s almost as an accidental byproduct of his popularization of the "junk bond" feels strangely relevant in light of the current debates over the role of government.
In 1987, before Milken was convicted, Jay Epstein wrote a lengthy piece on him that described the fundamental shift that was talking place in American capitalism.
At the center of the conflict is an almost philosophic disputation about the purpose of the large corporation in the scheme of American capitalism. In one camp, the defenders of the present system of corporate stewardship argue that the corporation must be regarded not just as a private profit-making but as a public institution. As such, they must serve not only their legal owners--the share-holders-- but broader interests, including their workers, suppliers, the local community and the nation. They hold that management, which represents these community interests as well as shareholders, is best suited to run these institutions.
In the other camp, the raiders and their allies, argue that corporations best serve others by serving their legal owners-- the shareholders. In this view, they benefit other constituencies--such as labor, suppliers and communities-- not by being charitable institutions but by making the most efficient use of their resources-- which may mean selling or closing down unproductive divisions. They hold that only managers who are accountable to owners have the incentive to make such hard choices. Such accountability comes down to owners having the ability to fire them-- which may may mean taking over the corporation.
And of course this dynamic was the same one Stone captured in "Wall Street:"
America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company!
All together, these men sitting up here [Teldar management] own less than 3 percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than 1 percent.
You own the company. That's right -- you, the stockholder.
And you are all being royally screwed over by these, these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.
Although this 80s-era debate concerned itself with corporate governance, it mirrors the argument now being applied by the Tea Party towards public institutions. They are the philosophical descendants of an earlier wave of Wall Street radicals, epitomized by the fictional Gordon Gekko and the real-life Michael Milkens and Rick Santellis of the world.