11/22/08 And Now A Business Report From Greenwich Roundup's South African Office

Worse than corrupt, they were stupid

Business Day

BY TONY LEON

Washington DC (or the northwestern section of it, at any rate) is not the place to find it. It is virtually recession-proof, given the high numbers around here who work for government or are involved in lobbying it.....

.....But Greenwich, Connecticut seemed to be a better place to take the weakening pulse of the wealth creators (and latterly destroyers) of the American and world financial markets. One of the wealthiest enclaves in the US, it headquarters the major hedge fund companies and financial service corporations, and is home to some of America’s richest people.

Last Saturday, we approached this gleaming citadel of American capitalism . A friend pointed out two imposing and shiny structures that house UBS Investment Bank’s American trading operations — which boasts the largest trading floor in the world — and the Royal Bank of Scotland (RBS).

Both stand today as monuments to the subprime crisis which has caused them to write down, and write off, tens of billions of dollars of dodgy mortgages and credit default swaps.

RBS has become a state-owned asset of Gordon Brown, and UBS’s fate is even worse: last week a US federal grand jury indicted its head of global wealth management on a slew of charges relating to tax evasion .

Our walk along the main street of Greenwich was even more instructive of what Paul Krugman, winner of this year’s Nobel Prize for Economics, recently termed “the long-feared capitulation of American consumers”.

On this crisp autumnal morning, there were hardly any shoppers around in the chic boutiques and luxury store fronts. We were the only visitors at a luggage store. The shop assistant said the dearth of customers was “soul- destroying”. Greenwich might be the high end of American retail, but the desertion of its stores is now reflected across the board.....

.....The marvel of the US economy is that 60% of its citizens own shares , from Warren Buffett to Joe Six-Pack. But it is now demonstrating the defects of this quality: like its wealth, the misery is now spread about, by no means equally.

“The sage of Nebraska”, as Buffett, America’s wealthiest man, is known, has suffered paper losses of $15,9bn due to the stock market plunge. But he’s still worth an estimated $45,8bn. For most Americans, however, the cushion is far less stuffed and their prosperity far more imperilled.

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