I found an old scrap of paper, a Xerox copy of a book review I wrote for the New York Times back in 1995.
It's called "Gibraltar May Tumble, How Prudential-Bache created the costliest fraud scandal ever," a review of two books, actually, one by Kurt Eichenwald, the other by Kathleen Sharp, both chronicling the Prudential-Bache Securities scandal.
It's deja vu, all over again: I wrote in the review, "By 1994 the Rock had become a house of cards."
And the explanation for how it all happened?
It starts with government regulatory changes--the 1981 Reagan tax reform bill and changes in the SEC set off a boom in tax shelters and ushered in a new era of real estate, energy, and airplane leasing partnerships.
Here are the last two paragraphs of that old, old book review:
"The picture that emerges from both books is that of a fundamental system failure at a great name in American business. The lesson is not encouraging. Mr. Eichenwald labels his book 'a cautionary tale about an abuse of the investor faith that is an essential building block of the American economy.' Ms. Sharp quotes a former manager of the San Diego office of Pru-Bache Securities: 'I don't think you can use the Nuremberg defense and say, "My superior told me to do it." Yet that's what a lot of people did.'
"And from the epilogues in both books we learn where the major players are today: almost without exception, the innocent have suffered more than the guilty, the higher-ups have escaped responsibility, the smaller investors have lost the most. It's a sobering note at a time when Washington is again fiddling with the tax code and American companies are awash with cash and looking for deals. These two books suggest that eternal vigilance may also be the price of capitalism."
Or, perhaps more to the point, history doesn't have a way of repeating itself. It's afflicted with a chronic stutter.
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