Nobody Knows Anything

To be accurate, the headline phrase, penned by screenwriter William Goldman some twenty years ago, referred to the entertainment industry. But it seems a pretty decent description of the current situation back here in the real world. In a recent example, it emerges that Merrill Lynch and its then soon-to-be owner Bank of America made a minor mistake in their assessment of the former’s projected earnings for the last quarter of 2008. This was, you will recall, the period immediately prior to the year-end consummation on the deal, when a cool $3.6 billion in bonuses was being distributed to top-level Merrill executives. Perhaps distracted by the size of their windfalls, these same geniuses were somehow a bit off in their estimate of Merrill’s quarterly loss. By about 100%, as it turned out. Instead of losing $8.3 billion – oops – turned out to be $15.3 billion.

Let’s pause for a moment to consider. The bonuses represented almost half of the originally projected quarterly loss. (For all of 2008, if you were wondering, the loss was $27 billion.) At the risk of cynicism, one might think the estimated loss error was intentional. “Hey, good news! Our bonuses were only a quarter of our losses, not half like we originally thought.”

Not that Merrill didn’t – and doesn’t – have multitudinous company in the ongoing perp walk of humbled former financial masters of the universe. New York City’s offer to provide retraining for those unwillingly separated from the Wall Street lush life risks becoming the kind of mob-scene usually associated with the distribution of free money, an act which, come to think, it vaguely resembles.

Meanwhile, 230 miles away at the southern end of the BosWash corridor, those we would hope are the current generation’s brightest and best are feverishly putting the finishing touches on the next iteration of the final, comprehensive package designed to restore confidence in the financial markets, end the housing crisis, bail out the auto companies (and any other industry with a lobbyist worth his salt), fix healthcare, rebuild the infrastructure, improve education, reduce global warming and, for good measure, put a chicken in every pot.

Maybe not that last one. “A chicken in every pot” was one part of a Herbert Hoover slogan during his successful 1928 Presidential campaign. But the other was “a car in every garage,” which as an idea might be a bit more useful. It’s hard to get a grip on an accurate number, but Treasury officials have recently indicated willingness to pump as much as $2.5 trillion (that’s “trillion” with a “t”) into the financial system. Besides representing a very tall stack of hundred-dollar bills, that amount would cover a $21,000 payment to each and every U.S. household – enough for a pretty decent set of new wheels, the production of which would certainly improve the health of the auto industry. Sounds like a plan.

But then I probably don’t know anything, either.