Well, Recessions Do Teach the Basics

By Sydney H. Schanberg

First published in Newsday, April 26, 1991

There’s nothing like a recession for teaching home truths — and for making some people behave oddly.

Donald Trump’s empire is sliding speedily into the maw of his creditor banks, and Donald says, with a smile on his Kewpie lips, that he’s never done better and everything’s going his way. That’s the nice thing about Donald — his realism.

The other nice thing is the comfort his downfall brings the rest of the suffering nation. He was the high roller, the world’s leading con man, and he got stung and stung big by the junk-bond scam. We little schnooks, we exist to be taken, so when the high priest of hustle gets skinned by the carnival barkers, we get to feel superior — or at least feel a little better about our schnookiness. 

For my part, it makes me experience a smidgen of empathy for Donald. I can almost see him as a human person, vulnerable and capable of being hurt. The only thing that gets in the way of this empathy attack is the manner in which Donald dresses.

No, I’m not talking about those stupendously ordinary red and yellow ties. It’s his jackets. He never takes them off. Think about it — have you ever seen him with even his arms exposed? He goes to Palm Beach, and the temperature is 90, and he keeps his jacket on. He goes to construction sites where men are stripped to their t-shirts and he nervously buttons his jacket tight — and puts something on, a hardhat.

I don’t want to psychoanalyze him, but clearly he’s trying to cover something up. Maybe that headline should have read: “Best Sex I Ever Had With a Fully Dressed Man.”

To get back to the recession, I’m convinced it had one primary cause — those junk bonds that Donald among so many others bought like shortcakes.

Every morning when you pick up your pager, you know there’ll be a story about another huge bank or insurance company going out of business because they loaded up on junk bonds.

As we know, Michael Milken was the chief sorcerer, a man with a bent bent. His story was that he had discovered the ultimate populist panacea. By creating this new category of high-risk, high-return instruments, he was going to crack open the closed fraternity of snooty bond brokers and make the bond market available to little people. In short, he wasn’t breaking laws, he was creating a new world economic order for all of us schnooks.

Sure. And now there are legions of schnooks around the country whose retirement annuities have gone into the sewer with the financial institutions that carried them and then invested the funds in the garbage bonds. Why didn’t somebody believe the label? Wall Street did, after all, describe them as “junk” bonds.

It’s hard to conceive that a handful of tricksters from a handful of financial houses — Drexel Burnham, Salomon Brothers, Merrill Lynch — brought on this whole slide. And of course, they didn’t — because for their scheme to succeed (and for the economy to collapse later), they needed thousands of accomplices around the country. Greed drove the engine, and greed — like the smell of sulfur — is never in short supply. Added to which is the fact that no one ever accused bankers as a community of being intelligent. 

So here we are now, watching businesses by the dozens go under and watching George Bush’s lips for any hint at all of when the cloud will lift — as if he really has any more of a clue than the rest of us schnooks.

At the center of the universe — New York City — where the top financial geniuses practice their alchemy, things are getting to the point where the homeless are being pushed into a lower category of government concern by the growing regiments of the unemployed.

Whole office buildings stand empty or nearly so, another demonstration of the genius-cum-greed syndrome. Brilliant developers rushed to throw their scrapers into the sky so as to capitalize on expiring government tax abatements, and now their creditors also soar in the sky, emitting vulture shrieks as they circle the new towers listening for death rattles.

I know it sounds naive to ask who suffers most in times like these, but the answer is so obvious and so necessary. Milken’s in jail for a few years, but nearly all the other schemers are free and clear, just waiting for their next chance to hypnotize us and skin us. The people on the jobless lines are the ones who’ve taken the biggest hit.

At a seminar I attended a few years ago, a leading New York developer described real estate as the highest-risk business in the country. He was then asked what the personal impact would be on him if, say, his latest project went bust. He seemed confused by the questions. “Well, my investors would lose their money,” he said. But what about you, the questioner persisted, what effect would this have on your everyday life? “Like I said,” he repeated, perplexed, “this Japanese group would lose their investment.”

It had never occurred to him that risk for ordinary people meant possible loss of a job or a decline in standard of living. His risk was for others to take. His limousines would always stay intact.

Yup, there’s nothing like a recession for dispensing some gut lessons in life.

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