Modest Proposal


F eb. 28, 2008


Dear President Ahmadinejad and President Chavez:

To introduce myself, I currently serve on the board of a multibillion-dollar hedge fund. You might recognize the name of the fund, but I am not writing to you today in an official capacity. I am writing to you with a business proposal.

I have worked a total of 29 years on Wall Street, most of that time in executive positions. My résumé is attached.

Strange as it may seem for a person like me to say, I believe, like you, that America’s greed has done much to cause poverty and instability in the world. I am ashamed to be an American. Therefore, I am writing to you today with a business proposal. Please allow me to give you some background first.

Today, the dollar closed at another low vs. the Euro. This makes four days of new lows in the last week. Moving in the opposite direction, gold and oil both closed at their respective all-time highs. Many other dollar-denominated physical assets, like industrial metals and agricultural commodities, are also trading at historic highs. Why? Because they’re priced in dollars, and as the dollar falls it will take more dollars to buy the same pound of copper or bushel of corn. Meanwhile, you can’t give bonds away. Auction-rate bond failures approach 70 percent. Yields have doubled since January.

In my 29-year career, I’ve never seen anything like these markets. Nothing comes close. Not Black Monday, the Asian monetary crisis, the Russian bond defaults, the failure of Long Term Capital Management, the dotcom crash or even the terrible events of 9-11.

Today, America’s credit markets are starting to seize up. But the worst is yet to come. Up to the present, we’ve seen only one bubble burst, the residential real estate CMO market. But there are three more bubbles out there, each one bigger than the one before it, and each one ready to burst.

First, we have the bubble in the commercial real estate CMO market. Lots of subprime junk here. Tons of it. Like the residential real estate subprimes, the commercial subprimes were not rated as such. Just like residential subprimes, a lot of hedge funds are highly leveraged into this extremely credit-sensitive garbage.

Next we have the bubble in the private equity or CDO market. Garbage here, too. Think back at all the hundreds of billions of dollars in private equity deals that were done before this summer’s subprime mess. Get the picture?

Finally, we have the bubble in the credit-default swaps and related derivatives market. This is a $45.5 trillion monster. It scares me shitless.

In a front-page article on Sunday, Feb. 17, The New York Times reported on this obscure market. Worse than obscure, this market is also largely unregulated. Congress, the SEC and the NASD have all looked the other way as this market has grown. This lack of oversight is beyond shameful and irresponsible; it’s criminal and immoral. This lack of oversight in credit-default swaps screams out for a collapse.

Which brings me to my business proposal.

Enemies of the United States of America, take note. You want to fuck up the U.S.? Hire me. I’m not kidding. Hire me. This is a bona fide offer. With a few billion dollars, a trading platform and some expertise, we can bring down the house of cards known as the credit-default swap market. Heck, we can bring down the U.S.

Forget about suitcase nukes. Forget about anthrax. Forget about flying jetliners into skyscrapers. Forget about all forms of conventional terrorism. Hire me. I’ll assemble a team of traders, some IT guys and a few guys with prime brokerage experience, and together, with a bankroll from you, we’ll bring Wall Street down.

We’ll use the IT guys to build our own trading platform. I like a proprietary platform. Nice thing to own. The Russian Trading System is a good model. Next, we’ll also use the IT guys to build our own ATS (alternative trading system ) or ECN (electronic communications network). An ATS is a wormhole into the dark matter of the financial universe. You have to have at least one. More than one is better.

Then, our prime brokerage guys can do their thing. What they do is a form of wizardry. Prime brokers are wizards. They create new forms of money—swaps, derivatives and structured products—from nothing. They create portfolios from nothing. They are the merchants of mirrors. They buy, sell and trade illusions and chimeras.

Finally, I need a pile of chips to play this poker game, just a few billion dollars. What’s a few billion, if we can bring down a house of cards worth $45.5 trillion? And, oh, I forgot to mention something. We might make a few hundred billion for ourselves along the way, too.

Too much of a long shot, you say? Too fantastic? No, it’s not. It’s already happening.

So come on, Mahmoud Ahmadinejad and Hugo Chavez. Hire me. Today may be a bad day for the United States, but it’s a good day for you. The dollar is coming to the end of its reign. And with the end of the dollar, together we can attack the credit markets and bring down everything else.

We can bring it all down. America’s preposterous wealth. America’s vulgar extravagances. America’s vanity. America’s hunger for power. America’s desperate need to be the second Roman Empire. We can do this.