Newman's 'Hud' reflected Wall Street's ethical stench

Last week both Paul Newman and Wall Street, as we have known it, died. And in the two deaths lies an interesting parallel.

One of the roles that lifted Newman to stardom was Hud Bannon, the ruthless young man who ruined everything and everyone he touched.

Hud, the central character in Martin Ritt's 1963 drama of the same name, has no regard for the consequences of his actions. So little concern has Hud that he is perfectly willing to sell diseased cattle to unsuspecting ranchers so that he can take the cash and live in the high lifestyle he covets.

Here's Hud, expressing his world view to his father, Homer: "This country is run on epidemics, where you been? Price fixing, crooked TV shows, inflated expense accounts. How many honest men you know? Why you separate the saints from the sinners, you're lucky to wind up with Abraham Lincoln."

Hud must have been the role model for all those Bear Stearns, AIG, Lehman Brothers and Merrill Lynch executives — sell some diseased mortgages to the saps and use the bonus money to pay for their South Hampton houses.

As I replayed the recent Wall Street collapses over in my mind, I realized that all three of the major financial institutions I worked for — behemoths in their time — have been killed off by staggeringly inept management and unbridled greed.

My first job on Wall Street was as a trainee at Bankers Trust, then the nation's fifthlargest bank that catered to Fortune 500 companies and the wealthy individuals who owned and managed them.

For months, I was educated in the art of financial accounting — how to read and analyze a credit report and how to determine if a company merited a loan.

My superiors, unfortunately, didn't have the commitment to honesty and integrity that had been drilled into us novices.

Although I was long gone by the 1990s when disaster struck, Bankers Trust eventually suffered a series of reversals and lawsuits for misleading customers from which it could not recover.

Included in the evidence presented against the bank were audio tapes of several officers crowing gleefully that their clients would never be able to understand the complex derivative transactions executed on their behalf.

In 1998, Germany's Deutsche Bank acquired Bankers Trust.

My next stop on Wall Street was at Merrill Lynch, the "Thundering Herd," as it was widely known.

Among the many wonderful things about working for Merrill was that it was universally recognized as the most well-capitalized firm on the Street. Everyone knew and trusted Merrill Lynch.

In 1971, Merrill Lynch, Pierce, Fenner and Smith went public to become Merrill Lynch and Company. Over time, the new holding company developed into a multinational corporation that operated in more than 40 countries and managed nearly $2 trillion in assets.

But then in 2003, after three prosperous decades, Merrill named the avaricious Stanley O'Neal Chief Executive Officer and chairman. O'Neal's baby was the sub-prime mortgage.

Now Merrill, after reporting a $10 billion fourth quarter 2007 loss and a $2 billion net loss in the first quarter 2008, is gone, off to its new Bank of America headquarters in Charlotte, N.C.

As with Bankers Trust, I bailed out of Merrill Lynch when things were still good.

But unfortunately, my next stop, the Seattle First National Bank, didn't know when to leave well enough alone, either.

For years, Seafirst — the largest bank in the Pacific Northwest — made traditional unsecured loans to Boeing, Weyerhaeuser, and Georgia-Pacific. Seafirst dominated the retail banking market, taking in millions of dollars in demand deposits.

In short, things in Seattle were boring but profitable.

One day in the early 1980s, without warning, Seafirst decided to participate in the worthless energy loan portfolio of Oklahoma's Penn Square Bank.

Seafirst knew nothing about the oil industry and was completely hoodwinked by the Penn Square crooks. None of the loans would have been approved under the guidelines I learned in my early Bankers Trust training.

Before anyone knew what happened, Penn Square collapsed, taking with it Seafirst as well as America's seventh-largest bank, Continental Illinois National Bank and Trust.

To save Seafirst from being seized by the federal government a la Washington Mutual, Bank of America rescued it. Eventually, the Seafirst name disappeared.

Bankers Trust, strike one; Merrill, strike two; and Seafirst, strike three.

An odd footnote to my corporate history is that despite their billions of dollars and global influence, the giant corporations I worked for are long gone.

But I'm still around to tell you about what it was like to work for them.

In addition to "Hud," Joe Guzzardi recommends "The Hustler," "Cool Hand Luke" and two other Newman films from later in his career, "The Verdict" and "Road to Perdition." Contact him at guzzjoe@yahoo.com.

Reader Feedback

El Rushbo wrote on Oct 7, 2008 2:12 PM:

" With the stock market falling like a rock, and pension funds devalued close to $2 trillion in the last couple weeks I wonder how much more cities like Lodi with defined benefit pension plans for police and fire are gonna be expected to fork over to cover these liabilities? Might be a good story for the Sentinel to cover. "

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