The Volokh Conspiracy

Circulating on Wall Street:

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV
SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

(Hat tip: Manny Klausner)
Bill Poser (mail) (www):
Aren't you in Edmonton?
9.24.2008 1:20am
Kazinski:
Its kind of funny, that Phil Gramm's name keeps coming up. He seems to be the guy Democrats have decided fits the bill best as a Republican fall guy, mainly because of his sponsorship of the Commodity Futures Modernization act of 2000, they have to go back that far because Gramm left the Senate in 2003. He's was the only person prominently mentioned in this spoof, he was the only real villain mentioned in Terry Gross's interview with Gretchen Morgenson on Fresh Air tonight.

The reasoning goes that because the CFMA deregulated credit default swaps, then that of course opened the door to subprime lending. But of course anyone with a rudimentary knowledge of economics would realize that that was not the problem. Being able to securitize the risk of default and market it is just like stock options and oil futures, it is a way to spread risk, not create it. The problem of course was nobody was accurately pricing the risks of credit defaults. In a housing bubble that still would have happened even if all the risks were left bundled with the original debt instruments.

Credit default swaps did not create risk, they didn't magnify it, all they did was spread it around.
9.24.2008 1:41am
419 Observer:
I'm glad to see the author typed the message in all caps. Good job on the grammar too. But the punctuation used is far too regular to be legitimate. There should have been some spaces before some of the periods and commas.
9.24.2008 1:47am
ARCraig (mail):
I think the reason Phil Gramm's name keeps coming up has more to do with the fact that he's so close to McCain, and is by far McCain's most likely choice for Secretary of the Treasury.

The sheer economic ignorance driving this, the most intrusive government intervention in the market since FDR, is truly stunning. FDR and the New Deal was dead wrong, but at least they had dead wrong prominent economists advising them. This whole gagglefark is the sort of "from the gut" thinking that you'd expect from Stephen Colbert. And regardless of how exactly we divvy up partisan blame for how we got here (a rather pointless exercise in and of itself), John McCain and the GOP and Barack Obama and the Dems are both dead wrong on where we go from here.
9.24.2008 2:10am
Sua Tremendita (mail):
Tremendous!
9.24.2008 2:59am
Tom Hanna (www):
He forgot to mention the modalities. What about the modalities?

I was just reading a bit about the Panic of 1907, which this latest round bears a lot of resemblance to. Three big events pulled the nation through that crisis and one of them was when John D. Rockefeller pledged half his fortune to maintain the credit of the United States. I guess if he were alive today, at least one American would email WALLSTREETBAILOUT@TREASURY.GOV.
9.24.2008 6:01am
Source:
This was written by Ari Melber.
9.24.2008 7:57am
A.W. (mail):
eiiiieeee! my eyes!!! waaaaay too much allcaps.
9.24.2008 9:51am
Adam J:
Kazinski- I dunno, I think credit default swaps certainly excerbated the problem. The swaps seemed to centralize the risk of default in the investment banks, who apparently idiotically thought they were virtually risk free. And the swaps expanded the market for these morgage backed securities... because now an investor could purchase a morgate backed security &have it insured thru a swap.
9.24.2008 10:47am
Houston Lawyer:
They really needed to work in prescription drugs and male member enlargement to get the best effect.

I forget, was Phil Gramm the emperor of the United States when that bill was enacted, or was it passed by both houses of Congress and signed by President Clinton?
9.24.2008 10:52am
Hoosier:
(I think it's a trick. Don't respond.)
9.24.2008 10:56am
William Spieler (mail) (www):
For all you internet archaeologists, this is the earliest posting of the joke I've seen so far based on timestamps.
9.24.2008 11:26am
The Unbeliever:
Seems legit. Send him your account info, what's the worst that could happen?
9.24.2008 12:18pm
Dan Weber (www):
This was actually posted to another thread right here on VC yesterday morning

http://volokh.com/posts/1222146031.shtml#444539
9.24.2008 12:27pm
amateur archeologist:
Speiler,

The Angry Bear post you linked to is datelined Tuesday, September 23, 2008, 9:17 AM.

Christopher Hayes' posting at The Nation's Capitolism blog is datelined Monday, September 22, 2008, 3:59pm. And note his update: He didn't originate it, but received it in email.
9.24.2008 12:31pm
neurodoc:
AS A SENATOR, YOU MAY KNOW HIM...
I'm suspicious. Henry Paulson graduated from Dartmouth and Harvard B School. I just don't believe he would dangle a participle.
9.24.2008 12:43pm
Mad Max:
Yup, it's all Phil Gramm's fault...



Fannie Mae and Freddie Mac Invest in Democrats


(For an updated chart that includes contributions from Freddie Mac and Fannie Mae's PACs and employees to ALL lawmakers back to 1989, including to their leadership PACs, go here.) The federal government recently announced that it will come to the rescue of Freddie Mac and Fannie Mae, two embattled mortgage buyers that for years have pursued a lobbying strategy to get lawmakers on their side. Both companies have poured money into lobbying and campaign contributions to federal candidates, parties and committees as a general tactic, but they've also directed those contributions strategically. In the 2006 election cycle, Fannie Mae was giving 53 percent of its total $1.3 million in contributions to Republicans, who controlled Congress at that time. This cycle, with Democrats in control, they've reversed course, giving the party 56 percent of their total $1.1 million in contributions. Similarly, Freddie Mac has given 53 percent of its $555,700 in contributions to Democrats this cycle, compared to the 44 percent it gave during 2006.

Top Recipients of Fannie Mae and Freddie Mac
Campaign Contributions, 1989-2008

Dodd, Christopher J (D-CT)
Kerry, John (D-MA)
Obama, Barack (D-IL)
Clinton, Hillary (D-NY)
Kanjorski, Paul E (D-PA)
9.24.2008 1:25pm
Dilan Esper (mail) (www):
Max:

It turns out McCain's campaign manager Rick Davis has lied about being on Freddie Mac's payroll up until the bailout.

Look, this is BIPARTISAN rot. Both parties suck up to Wall Street. I have no problem admitting Democratic relationships with Fannie Mae/Freddie Mac and others are sleazy. But Phil Gramm's a sleazeball as well.

The problem is we are in an election campaign and everything therefore has to be all the other party's fault.
9.24.2008 2:59pm
David Warner:
Dilan,

"It turns out McCain's campaign manager Rick Davis has lied about being on Freddie Mac's payroll up until the bailout."

Based on an anonymously sourced account in the error-riddled Grey Dowager? Please provide more credible information.

"But Phil Gramm's a sleazeball as well."

Actually no. It is entirely possible that Gramm suffers from an overly optimistic view of either human nature or the capacity of markets to function in an environment where regulations are so seriously warped by that nature.

Dodd, Bush, Rangel, et. al. likely suffered from a similar excess of confidence in the power of regulations to achieve social change and secure opportunity for their constituents.

Raines, Johnson, Gorelick, et. al. on the other hand did take advantage of their position to enrich themselves, as did hundreds of thousands on main street who took advantage of the bubbling market and the implicit fed guarantee of mortgages to flip their real-estate investments for short-term tax-free capital gains. Likewise Wall Street debt packagers.

Tragedy of the commons 101.

How do you explain the party-line Dem vote against stopping it in 2005?
9.24.2008 3:16pm
Lily (mail):

It turns out McCain's campaign manager Rick Davis has lied about being on Freddie Mac's payroll up until the bailout.

HIS FIRM was paid by FM. Its a different thing. Not quite like the $100K+ in direct donations received by Obama.
9.24.2008 3:43pm
Dilan Esper (mail) (www):
I would invite everyone to go to talkingpointsmemo.com, Josh Marshall's site, for information about Rick Davis' relationship with Freddie Mac. He clearly lied about the nature of his involvement, and just as clearly, his actual relationship illustrates my point about bipartisan rot.

As for Phil Gramm, I am old enough to remember when he actually campaigned for the Republican Party presidential nomination on the single argument that he could raise more money from special interests than anyone and therefore was the best guy to run against the Democrats. Seriously.

So no, it's not that he's some principled conservative who has an optimistic view about markets.
9.24.2008 5:07pm
Dilan Esper (mail) (www):
Here's another good summary of the Davis-Freddie Mac relationship:

http://www.campaignmoney.org/pressroom/2008/09/24
/davis-freddie-mac

Again, the rot is bipartisan.
9.24.2008 5:22pm
Dilan Esper (mail) (www):
And here's one more on Davis and Freddie Mac (quoting Newsweek):

Link
9.24.2008 5:28pm
Andrew J. Lazarus (mail):
Lily, you might want to review what it means to be a (major) partner in a firm. Technically you usually hire the firm. The member of the firm they were interested in? Davis. Being paid for access to McCain.
9.24.2008 5:35pm
neurodoc:
But Phil Gramm's a sleazeball as well.
And he looks more like a turtle than any one else on the national scene. (James Carville looks decidedly reptilian too, but more like a snake.)
9.24.2008 5:48pm
rdan (mail) (www):
Your Urgent Help Needed

FYI...per my e-mail, the original was written and posted by spencer at Angry Bear.
9.24.2008 9:12pm
David Warner:
Dilan,

I'm still only seeing two anonymous sources. I'll need more than the echoes of that around your chamber. And you still haven't answered my question regarding Dem obstruction of Fannie Mae reform. I'm also curious why the R majority couldn't get it out of committee.

Bush of course was pimping no-down-payment mortgages at the time.

I still don't think Gramm was corrupt (nor was Frank, Rangel, Bush, et. al.), they just let their various and at times coinciding ideological goals get in the way of their sense. They generated special interest money because the interests were interested in what they were already doing, not the other way around. Dodd is mostly in this category, but got a little on the side from Countrywide.
9.24.2008 11:37pm