Book review: ‘Age of Greed’ by Jeff Madrick

At times the book can feel fractured. A chapter on Ronald Reagan precedes a section on moguls Ted Turner, Sam Walton and Steve Ross, and then it’s back to Jimmy Carter. But at its best, Madrick’s panoptic view illuminates the big picture of American financial history in a way that a micro-study of Fannie Mae or Bear Stearns or the Federal Reserve never could.

Since history gets cloudier as time passes, the book’s most fascinating chapters are the earliest. Madrick’s capsule reviews of recent events — how Fed Chairman Alan Greenspan or GE head Jack Welch deepened America’s economic mess — are bound to feel familiar. More revelatory are his discussions of the malign roles played by people often left out of the history books. Walter Wriston of Citicorp (now Citigroup), for instance, worked to eliminate “Regulation Q” of the 1933 Banking Act, which limited the rates paid on savings accounts. Corporate lawyer Joe Flom, now little remembered except as a philanthropist, masterminded the hostile takeover. (Never again will I enter the Flom Auditorium at Washington’s Woodrow Wilson International Center for Scholars, where I work this year, with a clean conscience.)

(Knopf) - ‘Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present’ by Jeff Madrick. Knopf. 464 pp. $30

The book’s slightly lurid title recalls the Reagan years, when liberals seethed at a new culture that extolled an unfettered market and rampant acquisitiveness. (Illustrative of the zeitgeist was the way that Michael Douglas’s “greed . . . is good” line in the 1987 movie “Wall Street” — spoken by a villain and meant as an indictment of him — was parroted without irony as a watchword for the times.) Despite the title’s undertones, however, Madrick is no polemicist or ideologue. He writes in restrained, dispassionate prose, letting out only hints of the outrage rumbling below. And yet he has a clear interpretative slant. Unerringly critical of financial adventurism and deregulation, he argues that his subjects’ relentless quest for personal wealth, enabled by politicians who were either ideologically compliant (Reagan) or politically timid (Carter), produced a society rife with inequality and injustice.

The problem with the book’s title, actually, isn’t its melodramatic oversimplicity — every author should be cut a little slack in trying to sell books. What “Age of Greed” elides, it seems to me — not only in its title but also in its analysis — is the difference between those rogues whose greed led them to run afoul of the law and those whose greed the system has in fact smiled upon.

So, Madrick’s narrative rightly includes sordid characters such as Ivan Boesky, Michael Milken, Ken Lay and Sandy Weill — poster boys of financial malfeasance — whose transgressions appalled almost everyone. Even Wall Street’s defenders have sometimes claimed that high-profile miscreants such as these men simply prove the rule that by and large the system functions well.

More problematic are cases such as those of Welch or Flom — men who amassed their fortunes by threading loopholes, breaking with customs and violating unspoken codes of behavior, but never technically committing crimes. It’s fine and well to condemn these men as greedy, but greedy people will inevitably flourish in a system rooted in the profit motive. It’s naive to expect civic-mindedness, a sense of social responsibility or even a human conscience to restrain them when laws and regulations don’t.

If you believe in capitalism — as most of us do — this stubborn truth points to one humane alternative. The government needs to construct strict rules and revise them often to clamp down on egregious practices as soon as they start. It was possible, once, to stop the leveraged-buyout craze before it wrought so much havoc or, years later, to blow the whistle on collateralized debt obligations before the crash. Bankers who invent and exploit these tools are obviously avaricious by most definitions, but it’s the government’s job to look out for those being victimized, and for the economy as a whole.

The real scandal revealed by Madrick’s important book is not the well-known tales of dastards such as telecom analyst Jack Grubman or Internet stock promoter Frank Quattrone, but the more elusive — and more consequential — story of how the government came to abdicate this supreme responsibility.

David Greenberg is a professor of history and of journalism and media studies at Rutgers University. He is a fellow at the Woodrow Wilson International Center for Scholars for the 2010-11 academic year.