“Greed is good…………………………………”

To quote the inimitable Yogi Berra: “It feels like deja-vu all over again”!

When Gordon Gekko, played by Michael Douglas, uttered the infamous phrase – “greed is good” – during the 1987 movie, “Wall Street”, shown in the above video clip, he went on to say:

“Greed, you mark my words, will not only save Teldar Paper, but also that malfunctioning corporation called the USA”

The “malfunctioning corporation”, as Gekko referred to the US, has had its economy and that of many other countries just about brought to its knees because of greed and imprudent risk taking by real-life Gekkos’.

The Gekko character was based on a composite of real life individuals including the junk-bond king, Michael Milken, and Ivan Boesky, an arbitrageur. a
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Boesky, in 1986, gave the commencement address at Berkeley’s business school at the University of California and what he said there was paraphrased by Gekko in his “greed is good” comment.

Boesky, during the commencement address said:

“I think greed is healthy. You can be greedy and still feel good about yourself.”

A few months later Boesky was indicted on charges that would land him in Southern California’s Lompoc Federal Prison. He cooperated with the prosecutors and in return for leniency, he played a major role in the conviction of Milken among others.

Since then we have seen a continuation of criminal behavior motivated by greed, repeat itself in the 20+ years since Boesky and Milken were jailed. In the 90s’ the dot-com bubble produced its cast of shady characters as has the first decade of the 21st century. This decade has seen the Enron and WorldCom scandals which lead to executives of both companies being convicted of crimes and going to jail – quite apart from stupendous losses to the employees and an investors in those companies.

The last few months have seen Bernie Madoff convicted of conducting a Ponzi scheme resulting in losses of over $60 billion, R. Allen Stanford accused of conducting another Ponzi scheme with losses of over $8 billion. In India, Ramalinga Raju, the chairman of Satyam Computer Services, confessed to overstating the income of Satyam by over a billion dollars over multiple years. He is currently in jail awaiting trial.

Andrew Cuomo, the attorney general for New York state, is investigating questionable bonus payments by Merrill Lynch, which although insolvent for all intents and purposes, still paid $4 billion dollars in performance related bonuses ahead of schedule. The notion of “performance” in the context of Merrill is an oxymoron given its huge losses and recent bail-out by the US federal goverment. Paul Volcker, a former Federal Reserve chairman, chuckled as he recounted one top Merrill officer’s justification for his own very large lump sum payment.

“The guy that got the biggest bonus said he deserved it because he played a big role in orchestrating the merger of Royal Bank of Scotland and ABN Amro,” he said. “Turns out they were both bankrupt.”

So what is it that causes successful, wealthy individuals who have more than enough money to maintain the luxurious life-style they enjoy to seek even greater riches and in the process risk their freedom and all that they have achieved? Is it sheer greed? Is it ego or just plain hubris?

Years ago, I heard Ross Perot, the mult-billionaire, give the commencement address at Boston University. He told the graduating class that there was no magic formula for achieving great wealth. But he gave them one piece of advice about keeping in perspective the accumulation of wealth: he said that after one accumulates a certain amount of wealth there is just no way to spend it even if one has all the luxuries one could want and the only thing one can do with the money is to give it away. This, of course, is what Bill and Melinda Gates and Warren Buffet are doing today as they donate the bulk of their wealth to charity.

The Madoffs’ of today and the Boeskys’ of yesterday would have done well to keep Perot’s admonition in mind.