That Used to Be Us_ How America Fell Behind in thted and How We Can Come Back - Friedman, Thomas L. & Mandelbaum, Michael [155]
Jerry Maguire became one of the top-grossing films of all time because, Seidman argues, “it struck a chord in people tired of cutting corners. We were in the ‘Just Do It’ decade. The world was accelerating rapidly and ‘Just Do It,’ the advertising slogan of the sports shoe manufacturer Nike, captured the self-centered zeitgeist of the decade.” It was the decade when Nike’s most famous representative, Michael Jordan, turned professional basketball from a contest of cooperative, closely integrated five-man teams into a stage for individual athletic virtuosity. The spirit of the age also infected business. Managers, Seidman said, under pressure “to answer the short-term demands of an increasingly insistent capital market, looked for shortcuts and easy solutions, managing for the here and now in ways that often neglected long-term goals.”
In the decade after the release of the film, the drift from sustainable to situational values helped to trigger America’s worst economic crisis since the Great Depression. From Wall Street to Main Street, far too many Americans abandoned the save-and-invest mentality of their Depression-era parents for what became the prevailing ethos of the day, which bankers call IBG/YBG: Get whatever you can now and either “I’ll be gone” before the bill comes due or “you’ll be gone” before you really have to pay the piper.
This was at the heart of the subprime-mortgage mess. The mortgage broker who first sold a family a subprime mortgage and then passed it off to a bigger financial institution, such as Fannie Mae or Citibank, knew that he would be “gone” if and when the family buying the mortgage defaulted. No problem—his firm would no longer own the mortgage: Fannie Mae or some investment bank in Iceland would own it. So there was no risk for him personally in signing up high-risk home buyers who were sometimes actually encouraged to lie about their incomes—or lack of them. The broker told the family assuming the mortgage that the same was true for them: If they couldn’t meet the monthly payments when they started kicking in, no problem. Just walk away from the property—“you’ll be gone”—or sell it for a profit because, as we all “knew” at the time, housing prices would keep going up forever. They would never go down.
The rating agencies, whose fees and incomes depended on how many of these subprime mortgage bonds they got to rate, had an incentive to give them high ratings so they would sell more easily, leading more investment houses and banks to want to use their rating services. And if those bonds blew up, well, said the raters, IBG—“I’ll be gone.” The investment banks had a great incentive to bundle more and more mortgages into bonds and sell them all around the world because the commissions were huge and, as long as they didn’t hold too many on their own balance sheets, if they blew up, who cared? IBG—“I’ll be gone.” IBG and YBG, the essence of situational thinking, became the order of the day, while sustainable thinking—“I will behave as if I will always be here to be held accountable”—went out the window. No one summed up this attitude better than former Citigroup CEO Charles Prince, who told the Financial Times (July 9, 2007) just weeks before the credit markets entered their subprime death spiral, “As long as the music is playing, you’ve got to get up and dance.” And when that situational music was playing, far too many Americans, from Wall Street to Main Street, got up and danced.
What started in the 1980s with home entertainment systems for nothing down and nothing to pay for thirty days reached its ultimate