Who Rules America: An Investment Manager's View on the Top 1%

This article was written by an investment manager who works with very wealthy clients. I knew him from decades ago, but he recently e-mailed me with some concerns he had about what was happening with the economy. What he had to say was informative enough that I asked if he might fashion what he had told me into a document for the Who Rules America Web site. He agreed to do so, but only on the condition that the document be anonymous, because he does not want to jeopardize his relationships with his clients or other investment professionals.

I think it's important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top. Wall Street created the investment products that produced gross economic imbalances and the 2008 credit crisis. It wasn't the hard-working 99.5%. Average people could only destroy themselves financially, not the economic system. There's plenty of blame to go around, but the collapse was primarily due to the failure of complex mortgage derivatives, CDS credit swaps, cheap Fed money, lax regulation, compromised ratings agencies, government involvement in the mortgage market, the end of the Glass-Steagall Act in 1999, and insufficient bank capital. Only Wall Street could put the economy at risk and it had an excellent reason to do so: profit. It made huge profits in the build-up to the credit crisis and huge profits when it sold itself as "too big to fail" and received massive government and Federal Reserve bailouts. Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it.

There you have it.

http://sociology.ucsc.edu/whorulesamerica/power/investment_manager.html