Dear Occupy Wall Street: Are You Sure You're in the Right Place?

I get it – people are angry. Very, very angry. I’m angry too. And Wall Street sure makes a great scapegoat, hence the Occupy Wall Street protest. Wall Street is a symbol of the “greed and corruption” that took over America and caused this whole mess.

But let’s take a minute to examine the facts and see if we can’t find some better scapegoats:

  • In 1997 Andrew Cuomo, the Secretary of Housing and Urban Development under Bill Clinton, allowed Fannie Mae to reduce the standards by which they would secure loans. This helped create the entire subprime category. Was this a bad thing? Of course not – it allowed more people to leave the ghetto, move to the suburbs, and achieve the American Dream of owning a home. Who knew that “Dream” would turn into a nightmare in a mere decade. Cuomo is not Nostradamus. We can blame him of course, but he had good intentions despite the negative results.
  • We can blame the Federal Reserve of course. They lowered interest rates after the dot-com bust so much that there was no way for anybody to achieve safe, steady returns using conservative investments like bonds. Everyone — you, me, retirees — wanted higher returns for their 401(k) and pension plan. So we went to the banks and said, What can we do? And the banks said, Well, you’re the ones asking for higher yields, so here it is. And they bundled together all the newly made subprime mortgages into mortgage-backed securities (MBS) so that the average guy could finally get some yield since the Federal Reserve was blocking all other alternatives. So if you want to occupy the Federal Reserve, go to Washington, D.C. Of course, they had good intentions too. They wanted people to stop buying bonds and start buying stocks. And it worked! Until it didn’t.
  • And what about the banks who bundled together these mortgage-backed securities? I don’t know, you and I asked for those securities through our 401(k) plans. So they were just responding to demand, right?
    Fine, so what about the hedge funds. Suddenly they saw these mortgage-backed securities yielding 10% and immediately bought them up. They were greedy! But weren’t they just trying to find safe returns for their investors? Either way, the hedge funds aren’t on Wall Street. Go occupy Greenwich, or Park Avenue — but not Wall Street.
    But then investment banks like Lehman saw what the hedge funds were doing, and they started doing it too: scooping up as much yield as they could, risk be damned! Greed! Again though, this was a handful of CEOs, many of whom have been fired from their jobs. I’m not trying to apologize for them. But let’s make sure our anger is pointed in the right direction.
  • Which now brings me to the biggest culprits yet: the accountants! Right in the middle of all of this mess, the Financial Accounting Standards Board (FASB) changed GAAP accounting rules so that you could no longer mark a mortgage-backed security according to your own statistical analysis. You had to start marking it down as soon as there were the slightest defaults and the paper started trading at lower values (this is called mark-to-market). Which meant that hedge funds trading in these illiquid securities could make just a few trades involving a hundred thousand dollars or so, and suddenly trillions of dollars would be wiped out of the value of the banks. Hedge funds gleefully took advantage of this accounting rule change, and tons of bank equity was wiped out. Once FASB changed the rule back (April, 2009) the banks (and all stocks) went straight up.

But how about this: You’re to blame too. That’s right, you. Why? Because you’re not investing in America! You’re irrationally scared. Why have there been 25 months in a row of redemptions from mutual funds? Why are P/E ratios relative to yields at their lowest levels ever? The stock market right now is irrationally low. Bond yields are at 1% (give or take) and the S&P 500 is yielding 2.3%. That wide a spread has never happened before. So please, get your money out from under the mattress, and stop un-investing in America.

And finally, people are saying the problem in the euro zone is a “repeat” of Lehman. On CNBC this week, I had to explain that Greece is a country, and that Lehman Brothers was a bank. You can’t liquidate a country, not very easily at least. The euro zone has problems but let’s put them in perspective:

  1. In 1981-2 a huge portion of South America defaulted. Our 8 largest banks were 263% exposed to South America. What happened? A big bailout. Then the biggest stock market boom in history that lasted almost 20 years.
  2. Today, our 8 largest banks are about 8% exposed to the PIIGS (Portugal, Italy, Ireland, Greece, Spain). They can all default and pay zero cents on the dollar. Our total exposure (in the 5 largest banks) is $54 billion. That’s not chump change, but that’s not Lehman and AIG either.

So, I’m confused, whose fault is it? And where do I go “occupy” if I want to vent my anger? The choices: FASB, Governor Cuomo’s office, the Federal Reserve, hedge funds, and mortgage lenders (who were thrilled with the new Fannie Mae lending standards so they loaned out as much as possible).

What about Germany? What about Greece? What about the White House? President Obama has so confused the healthcare system, and created such confusion around mandatory payments from corporations that everyone is now afraid to hire. Two trillion dollars in stimulus and we’ve lost millions of jobs. How can that be? Guess what: there’s also $2 trillion in cash sitting in reserves at the banks. It never hit the money supply!

There are millions of private businesses out there that aren’t hiring because banks aren’t lending. Why aren’t they lending? Because they’re afraid of political uncertainty. If a bank is going to be politically targeted it needs all the money it can get. Plus, the Federal Reserve is paying banks to hold money. Why? Because we asked for it! We wanted the banks to stop being so greedy so we decided to encourage them to hold onto more money and not lose it all. The Fed does that by paying them.

Deep breath. There’s no scapegoat here. We’re all in this together, and we’re all (somewhat) at fault. So rather than planning an occupation, let’s focus on solutions:

  1. The Federal Reserve should stay out of it: stop paying the banks to hold our money instead of lending it out. Heck, let’s even charge the banks, and unleash that $2 trillion that never escaped Quantitative Easing.
  2. Let’s bring back the uptick rule, and make it harder to short the market. What does this do? It makes stocks go up so companies can raise more money to hire people.
  3. None of the stimulus from Obama or the Fed has helped the franchise business. There are about one million franchises in the U.S. employing over 10 million people. How about we give those franchises a tax break so they can hire more people. Or set up a lending program to lend directly to them so they can start more franchises and hire more people. This would definitely help unemployment.

Meanwhile, please stop being so angry. Stop “occupying” places. Let’s be friendly and focus on solutions. Let’s be creative and focus on how we can use that energy for invention, innovation, and ultimately jobs.

Patrick Daly

In 1999 clinton signed the repeal of glass stegal,did this play a role?


Go idea. Blame poor people. Best of all they don't have the internet, so they don't know it's their fault.


We're not all at fault. Some of us are just wage slaves too poor to put any money into the market at all. If by all you mean, everyone middle class and up, sure, but I'd be hard pressed to find a way to blame society's problems on the working poor.


Very eloquent. Could you please write a similar plea to the Tea Party? (See if you can penetrate their fact-proof bubble)


James is long and has been very wrong.



Wow - the writer does not understand "homo economicus" at all.


There is no point in yelling at this side of the argument. The problem is on the other side. Whatever the totality of the causes of the financial crisis, the solution is not less regulation, "trusting the markets" and then claiming the way to handle future problems is to let firms fail. Firms too big to fail won't be allowed to fail because the costs will be too great, so that argument is either stupid or a cynical strategy designed to excuse lack of regulation.

The arguments being made now, being pushed by the WSJ and constantly argued by Paul Ryan, for example, are that regulation distorts market processes and that regulation creates "crony capitalism" by favoring outcomes. This overturns the traditional idea of "cronyism" but so what? That's the argument. This is a religious belief in markets for some and it's also what I call Murdochism: what's good for me is good for me and therefore it is what is good. We can see Murdochism in the hilarious dichotomy of their news operation and their entertainment operation: one pushes a gay acceptance, family subversive agenda while the other sells the exact opposite. Why? Because both approaches are good for the Murdoch interests.

It's easy to poke at people in the street. But didn't we just see regimes of countries overturned because people gathered in streets? Didn't the kids I remember well push the end of the Vietnam War? Sometimes what happens on the streets becomes something. Like the Tea Party.

I also note your odd statement: banks "were just responding to demand, right?" That in a nutshell is a big part of the problem in economics: which is, demand makes supply or supply makes demand. It seems that when the story is right, it's time to blame demand - those lazy borrowers who took too much money from those wonderful banking folks. When the story shifts, it's time to point at suppliers: we're not suffering from a shortage of demand but of supply and the suppliers are unwilling to produce because they lack confidence. You can't keep your stories straight. Which is why economics is a joke.



'2.Let’s bring back the uptick rule, and make it harder to short the market. What does this do? It makes stocks go up..."

Yikes! Short sales are the new witches! Where's the evidence removing short sellers from a market makes for more efficient pricing? What about the evidence short sellers created more volatility? And in a world of automated, split second trading, simultaneous trading on multiple exchanges with multiple paths to market, and decimalization pricing just how would you intend to implement such a rule?


Wall Street executives pay politicians to loosen the standards and to allow them to do what they do, and we the people get screwed in the end.

I'm sure you get paid via "dividends" and other low-tax alternatives to regular income.

Caleb b

Occupy Wall Street is protesting corporate influence of politics, but since they aren't organized and don't really understand how the financial markets work, their occupying Wall Street instead of K Street.

John B

This is too complex and important a subject to cram into a short post. There is a book that goes into great detail decsribing all of the various causes of the mortgage debacle.

Read "Reckless Endangerment" by Gretchen Morgensen.

Note to Conservatives. She is a long time business writer for the NY Times. But she is fair.

Note to Liberals: She skewers Barney Frank, Fannie Mae, etc. But you can't blame Fox News this time.

No matter how much you have read about the mortgage crisis, you will learn so much more. Tremendous book.

Sean C.

It is fairly obvious you have never been in a crappy neighborhood.

Now I agree with your point that more accountability and blame has to go around to everyone, George Carlin even said so in these videos.

Have you never lived in/near a place that is overrun with drugs, corrupt cops, politicans, battered buildings, schools, homes, corporations who take advantage of people and their situation with debt and life through wage depreciation and benefit reductions, and banks who obvious take advantage of it all through inflationary tactics and other oligarchical tomfoolery?

Do you think I write run-on sentences for my grammatical health? Not all people are uber-rational, methodic, well-thought thinkers with robot-like problem deduction skills and a PH.d from a really good school. Some people are irrational, whimsical, emotional idealists with a PH.d from really good school....who now have massive amounts of debt (and no ways to pay it back).

As a poker player, I often deal with these "robot" types all the time. Players (often via internet) who think that there is only a certain way to play the game correctly to show profit. However, there are certain cases, you have to take abnormal lines to show profit (bluffing, slowplaying) to trick opponents, otherwise your play becomes transaprent and doesn't maximize value.

Same in football; you wouldn't punt ALL the time on 4th down, would you?

They are HUMANS with EMOTIONS and FEELINGS who WORK HARD and have been working harder than ever before, for less, just to make ends meet, never mind building for a future for their children, if they choose to have them (that's down too in my generation, BTW).

People are beat up, man. And not just poor; Im talking hard working people. People of modest means; people of the blue AND white collar proletariat. People are beat up, not from the last 4 years......but the last 25-30. And that's the problem that YOU and some of the establishment left/right can't seem to grasp when you cast your "solutions" onto people. And then that same establishment be the same ones to tell people to "calm down" when the riots start and its too late.

Again, like in poker, ways to lose pots are often corrected by identifying "leaks" in ones' game. Like calling too much, or bluffing at the wrong times versus the wrong opponents. Solutions aren't always computed. Sometimes they are found, and are often need to be found BEFORE crisis' begin. Just ask Malcolm Gladwell about concussion in the NFL to see what I mean.

In the end, we are all organisms. We're Mammals; intelligent, hairless apes, really. We were born feral (original sin), so when treated like neglected animals at a shelter, you are going to get a zoo in society.

It's simple psychological math. Just drive through your next neighborhood ghetto, or even looks at the REAL UE numbers of people 18-35 across the world (and not just what the gov't gives you) before you write a piece like this next time.

Maybe then you will understand why people "are so angry"



From Wikipedia:

James Altucher is a hedge fund manager and author.

Altucher expressed scepticism about climate change in an article for the New York Post[7], stating that the world has been cooling since 1998.

Altucher advocates legalizing insider trading,[8] arguing that "it would force asset prices to more quickly attain their 'true value'", and that the crime is extremely expensive to detect and prosecute.[9] He is also an advocate of the idea that one shouldn't send one's kids to college[10] and that one should never own a home.

I'll stick with my own opinion - thanks so much for so little James.

Mike Hunter

"I don’t know, you and I asked for those securities through our 401(k) plans. So they were just responding to demand, right?"

I don't know about you, but; I don't actively manage my 401K. I also never called up my broker and asked for any CDOs.

The people selling CDOs, along with the credit rating agencies misrepresented the product being sold. Which is why so many of them are settling out of court and paying the people who bought those securities either face value, or at least a significant percentage of the face value of the security. The last time I checked fraud is illegal. Blaming the people who where defrauded is 'blaming the victim'.

"Which now brings me to the biggest culprits yet: the accountants! Right in the middle of all of this mess, the Financial Accounting Standards Board (FASB) changed GAAP accounting rules so that you could no longer mark a mortgage-backed security according to your own statistical analysis. You had to start marking it down as soon as there were the slightest defaults and the paper started trading at lower values (this is called mark-to-market)."

Why shouldn't CDO's be marked to market?! Unlike other assets such as land or equipment which a company usually doesn't sell, the entire point of holding a security is to sell it again to realize a gain! The most rational way to present it on the balance sheet is to list it at market price.

If this makes certain companies balance sheets look bad, that’s because they're in bad financial shape! Blaming accountants for plunging stock prices is like blaming the person who called the department for the presence of a fire!

"You’re to blame too. That’s right, you. Why? Because you’re not investing in America! Why are P/E ratios relative to yields at their lowest levels ever?" "The stock market right now is irrationally low."

Really? Where did you buy your crystal ball, and where can I get one? Are you putting your money where your mouth is and investing all of your savings in long calls?

According to the widely accepted efficient market hypothesis you have no idea what the stock market is going to do next. According to the EMH all stocks are fairly priced; because, their prices include all of the publically available information that you just listed.

Also according to Robert Shiller P/E ratio's aren't at historic lows. He is in fact surprised that they aren't even lower given the current economic turmoil.

"Let’s bring back the uptick rule, and make it harder to short the market. What does this do? It makes stocks go up so companies can raise more money to hire people."

The purpose of markets isn't to ensure that stock prices increase. It's to efficiently connect savers with companies that need funds, and to channel those funds to the most promising enterprises via the efficient pricing of securities.

Again blaming people who short securities for falling stock prices, is like blaming someone who calls the police for the actions of a criminal. Shorting stocks doesn't significantly drive stock prices. The timing, certainty, and amount of the future income is what drives the price of a stock. I don’t know why anyone would want a security to be priced less efficiently.

The anger of the Occupy Wall Street crowd is justified. Big firms who helped cause this mess got government bail outs from politicians, and their employees got big bonuses. The people protesting near wall street got pink slips, pay cuts, and an earful of "class warfare" whining politicians from instead. Whether those bailouts where necessary is another issue all together.



You make rude assumptions and blame Middle America for asking for risky investments and not investing in America. Too bad many of us don't have enough money to make ends meet, let alone make investments. Try harder.


Chopping up mortgages and then selling them back to the ppl through 401k's reminds me of the farmers who chopped up the sick cows and fed em back to the heard. I don't think we have learned our lesson. We are all just mad now. #madpeopledisease


We "asked" for something through our 401k plans? Investing in America? Your audience is clearly not those sleeping in Liberty Plaza.

This movement had to start somewhere, and as Wall Street is the most visible and concentrated place for those that represent the relatively few that have made off with the most, I think it makes sense for this to happen where it's happening. If anything, it got people talking about viable solutions, including yourself.

John J.

proving once and for all that people respond to incentives.

one more stop for these uninformed protestors would be the regulators. They were the ones who said MBO's were as safe as US Treasuries, which allowed pensions to invest in them.


This misses the point so much it's not even funny.

But fine, I'll play the game. Who's to blame for the income and wealth disparity? Riddle me that. Who lobbied for the rules that the governments enacted? Sure as hell wasn't the middle class. It was the banks who lobbied for those regulations to be changed. I used to have a lot of respect for you guys. I just lost it.


Your solution for economic malaise and the end of the recession is for McDonald's (franchises) to hire more people. I think it's already the 2nd largest employer in the US (behind Walmart), perhaps that stat is the indicator of the real systemic problem that needs to be addressed?