Insiders Gamble With America’s Future
To many Americans it seems inconceivable that someone like Martin A. Siegel, the 38-year-old former point man for mergers and acquisitions at both Drexel Burnham Lambert Inc. and Kidder, Peabody & Co., would take $700,000 in bribes for insider information from 1232494958millionaire.
But you have to see this world up close to understand it. Wealth is the fundamental measurement of how smart, talented and successful you are. Even those earning spectacular salaries are subservient in the theater of power to those with more--and their fast-track egos are made to feel it every day. Amassing greater fortunes is the sure-fire road to greater power, but there can never be enough--not in this, the fastest of all fast lanes, where helicoptering to work and $2-million apartments are accepted as necessities. Temptation thus proves overwhelming.
And in the 1980s, in which the free market and the wealth it engenders have become the golden calves we worship, there are no significant countervailing moral values at work--no larger beliefs or obligations to prevent committing what until recently was one of the world’s easiest and least prosecuted crimes. So now insider abuses have become integral to the system, not aberrations from it.
The high-flying Wall Street merger specialist trading in insider information certainly isn’t thinking about the effects of his actions on his country’s future. Instead, his mind echoes the sunny propaganda that we’ve heard in recent years about risk-taking, entrepreneurship and the strategic role of information in the “Information Age.”
If pangs of conscience arise, the trader answers them with the rationalization that “no one’s getting hurt”--a false premise that seems vindicated when the Dow soars to new heights after every round of indictments. Indeed, although some investors have filed suits against Boesky and other kingpins of the insider traffic, it isn’t always easy to document cases of specific investors who have been ruined as a direct result of these market manipulations.
Yet the real victims of the damage from insider trading are not individual investors but America’s financial system, economy, productivity, living standards and moral fabric.
How can U.S. industry regain its much-talked-about “competitive” edge whenso many of our top financial minds are devoting their energies to arranging insider tips for briefcases filled with cash? Certainly Japan has its own gangsters and versions of trading abuses, but its peak-performing financial stars are still almost uniformly working for the good of corporation and country.
The chance to make overnight millions has been a significant component of the engines driving the Great American Takeover Game. Indeed, many of the biggest takeovers have now been linked in one way or another to devious exploits of the insider traders--and that’s with the Securities and Exchange Commission and U.S. attorney’s office focusing only on the most clear-cut cases.
The $175 billion spent last year alone on takeovers was mainly a parasitical pyramid scheme, inflating the paper value of corporate America without expanding its underlying productive assets.
America will pay dearly. The debt left in the wake of the takeover era will strangle future growth in large sectors of the economy. The decision to ignore needed investments in new technology and training in order to finance these takeovers will continue to “hollow out” industry, leaving us more vulnerable than ever to competition from other economies that are not so shortsighted.
“The merger and acquisition part of the business has become the tail wagging the Wall Street dog,” observed Samuel L. Hayes III, an investment-banking professor at Harvard Business School. Wall Street itself has become the tail wagging the dog of American industry. Those who use and abuse insider information have become the golden tails wagging the rest of their mergers-and-acquisitions departments around.
Reaganomic enthusiasm for greed and glory in the marketplace has fueled this sort of behavior during the past six years. Therefore it’s no surprise that Ronald Reagan, the President who regularly professes concern with a return to basic American virtues, has had nothing to say about Wall Street’s scandals.
The President finds time to speak out for the cause of returning prayer to schools, but apparently sees no need to restore moral order among the adults who gamble with the nation’s future. They, after all, are among his most loyal constituents.
Until the climate in the country changes--until our so-called “best and brightest” think a little more about the future and the country and a little less about themselves and getting rich quick--Wall Street abuses are not likely to disappear.
Indictments, arrests and convictions will make insider traders more careful; only a renewed sense of national purpose can engender the kind of moral fiber necessary for them to think beyond their self-serving impulses to the common good.
