Sold Short?

Wall Street in the American imagination is simultaneously held in a state of contempt and awe. It’s the site of both magic and misery.

The name “Wall Street” itself has become a shorthand to denote the capitalist class. Yet, Wall Street is only a segment of this class, known as Finance Capital. 

Finance Capital has become a growing segment within capitalism since the 1970s due to the decline in American manufacturing. Manufacturing took a dive during the 1970s in America due to the postwar recovery of European industries and the emergence of Asian competitors. Big swings in oil prices during the OPEC crisis of 1973, as well as inflationary spending from the Vietnam War, also broke the halcyon days of American prosperity, to which many politicians and their constituents today look to return rather than an anachronism. 

American manufacturing, amid geopolitical realignments and pressure to keep up with foreign competitors, squeezed the labor force out of the equation. Stable union jobs were outsourced to imperial outposts of the American project and staggering unemployment became a reality of a new world best articulated by Ned Beatty’s Arthur Jensen in Network: “There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today.”

In the midst of an American economy steadily bleeding thousands of manufacturing jobs, Finance Capital grew in stature as the Information Age started to take shape in the late 1970s. Banks and financial institutions that had loaned millions to manufacturers, as well as the cities and towns that hosted them, began to use the power of debt as a means to institute austerity. They were also helped by Ronald Reagan’s right-wing administration, which held unionism in absolute contempt, an attitude unseen in American politics since the early twentieth century. This allowed manufacturers as well as public services to undercut their unions. The devil’s bargain made between labor unions and management to share prosperity broke with management finally ripping the rug out from underneath labor.

In the 1980s, with manufacturing on the run, Finance Capital ascendant and the postwar myth of the “American Dream” still intact, there arose a need to maintain an image of the United States as a land of plenty. With the Cold War still in the foreground, the Reagan administration drew a hardline against the Soviet Union and wished to exude an image of wealth as an alternative to talk of “communist breadlines.” The vulgar materialism that the decade is known for was produced by federal interest rate reductions (which followed incredibly damaging interest rate hikes of the early eighties) that allowed credit to flow cheaply into markets. That decade, subsequently, is when the image of Wall Street starts to cohere in the recent American consciousness as the site of all capitalist pursuit, rather than that of Finance Capital alone. 

The image of Gordon Gekko saying “greed is good” to a conference room full of shareholders helped define a decade of excess. Donald Trump rose as an American public figure and a symbol of gauche, new money success with his name gold plated on everything from real estate to helicopters. The Lifestyles of the Rich and Famous premiered in 1984 and pumped images of champagne wishes and caviar dreams into American homes. The professional stockbroker becomes not a symbol to be reviled, but an aspirational figure. 

In 1987, one of the most consequential figures of Finance Capital emerged and replaced Paul Volcker (he of the interest rate hikes in the early 1980s) as Chairman of the Federal Reserve Board: Alan Greenspan was chosen by Reagan because he felt that Volcker wasn’t lowering interest rates enough in response to climbing federal deficits that were the result of Reagan tax cuts and an explosion in defense spending. Greenspan became the man that helped usher Finance Capital to the fore of the capitalist class. 

Throughout his tenure, Greenspan’s reduction in interest rates was also accompanied by a massive scramble among state legislatures to relax the rules governing state-chartered banks. The most famous example of this was Charlotte banker Hugh McColl’s North Carolina National Bank (NCNB). NCNB, under McColl’s tenure, pressured state legislatures throughout the Southeast in order for him to expand. Eventually, this allowed NCNB to grow into NationsBank. NationsBank grew further when Bill Clinton signed the Riegle-Neal Interstate Banking and Branching Efficiency Act in 1994. NationsBank would later become, of course, Bank of America, with further help from the Gramm-Leach-Bliley Act of 1999 to expand financial offerings into investments. The result of banks expanding across state lines and consuming competition meant a consolidation of financial institutions in America.

In this time of easy money, instant access to stock information through the Internet, and expanding financial institutions, Wall Street was no longer the hallowed meeting point between industrial vampires and Finance Capital to strictly raise money. The names that dominated manufacturing and extractive industries still lit up the now digital boards of the New York Stock Exchange, but their share prices were starting to become increasingly alienated from their actual productive capacity in America. As smaller investors and 401(k)s (rapidly replacing steady company pensions) emerged into the market with credit to spare, speculative bubbles as a result of Finance Capital became the norm within Wall Street. 

Capitalism, according to Marxist theory, is a system that is designed to violently contract due to the dynamism of capital accumulation. In an effort to expand their market share to produce profits (the lifeblood of capitalism), companies will always overproduce in an effort to anticipate demand to pay for a commodity where none existed before. If a demand to pay for this overproduction is not met, a crisis occurs. Crises of capitalism typically allow for a kind of restructuring that widens the gap of inequality. 

We’ve seen, via the speculative bubbles of the dot-com bust of 2001 and the housing crisis of 2007, that Finance Capital in America has managed to evade any sort of deep crisis and reevaluation of what it produces because it, like the manufacturing and mining tyrants of yesteryear, controls the political structure. While people with disposable income from their wages can buy in, they are vastly outnumbered by investment institutions, which have taken profits (the result of the exploitation of labor – thanks, Karl) and entered them into a market that no longer looks like the stock market of 1929 but is rather an entirely alien world of derivatives, options, calls, and credit default swaps that, by their design, drive bubbles that create the illusion of American prosperity. How else can you properly explain a stock market that continues to climb in the face of record unemployment and immiseration due to the COVID-19 pandemic? 

___________

Wall Street is a site of intense wealth, but it does not fully explain capitalism and all of its contradictions. It is, however, the most visible space where Americans direct their ire about inequality within the world. Most of this has to do with the baffling ways in which stock analysts, hedge funds and private equity firms concoct financial instruments that are designed to make money whether a stock price goes up or down. Coupled with the constant expanding of bubbles that can burst at any time, this creates constant uncertainty despite whatever “sure bet” Jim Cramer yells at you to take on CNBC. As a result, many Americans rightfully view today’s stock market as nothing more than a casino where, sure, you can win, but there’s always the risk that you may lose your shirt. 

…Which brings us to GameStop, and a spectacular phenomenon that could only be produced in our time of market mysticism. 

In the middle of January, a reddit user named DeepFuckingValue started posting in r/WallStreetBets (WSB) about buying GameStop stock ($GME) as a meme. GameStock, the sagging brick-and-mortar video game retailer, had recently undergone a change in leadership, with Ryan Cohen of Chewy (the online retailer for pet brands) taking the helm. The goal of the leadership change was to make GameStop more competitive with online retailers like Steam, whose service of direct-to-console game purchases was gaining greater market share in the midst of the pandemic. What started out as a joke to “save” the retailer from hedge funds like Melvin Capital who were short selling (essentially borrowing to place a bet the stock would fall) turned into a full-blown coordinated effort by redditors to send the stock price soaring in order to make the hedge fund lose money. 

Posts about sending GameStop “TO THE MOON” and people referencing their “diamond hands” to hold the stock fill each thread on the subreddit. There’s also some ableist language, in which the users refer to themselves as “autists” and “retards.” All of it has the manic energy of, as one of my friends who bought the stock before the boom put it, “a frat house.” This sort of chaos in the subreddit conjures up images of Martin Scorsese’s Wolf of Wall Street. I especially think of this scene when some of the redditors say, “APE TOGETHER STRONG.” 

In the past week, GameStop has increased its market value from $2 billion to $10 billion, with the stock going from a January low of $17.25/share to hovering around $350/share as I write this. Melvin Capital, which lost billions of dollars, was bailed out by two other billionaires and later sold its position in the stock before the end of the week. Another hedge fund, Citron Research, also lost money in their shorting of the stock. This massive climb in the stock, which was noticeable on January 25th and then became viral by January 26th, elicited cries of “market manipulation” from stock analysts and those ensconced in the realm of Finance Capital. These cries were made, despite the fact that firms like Tesla and Uber are highly overvalued tech companies sitting atop houses of massive corporate debt and consistent losses (Tesla’s first full year of profitability was in 2020). 

The cries for regulatory intervention were ultimately answered by Finance Capital itself with Robinhood, the investor site most redditors were using to make trades, which stopped all buying of $GME and other stocks redditors had targeted for investment. Traders on Robinhood were only allowed to close their positions. TD Ameritrade had also locked down further buys of the targeted stocks. Then, Webull, another no-fee broker that redditors had flooded to after Robinhood, shuttered its virtual trading window to these stocks as well. 

All of which led to outcries from WSB about the game being rigged. Leftists looked on in fascination while members of the political class jockeyed for favor with the redditors. This was perceived as a check against economic populism in which both AOC and Ted Cruz denounced Robinhood’s practices. 

____________

While this certainly might be a radicalizing moment for a few redditors who are witnessing the ways in which capital is able to turn the spigot off on those it views as undeserving, this moment, I think, requires further reflection. There’s certainly a lot of antagonisms on behalf of the redditors against Finance Capital; however, this simply can’t be reduced to a situation where capitalists are pitted against the poor. 

Elon Musk tweeted his support of GameStop before the momentous climb. Means Morning News host Sam Sacks was quick to point out that this was probably done after he’d already put some action in on the stock. There have been other supporters of the gambit, like billionaires Mark Cuban and Chamath Palihapitiya, who have framed this as people illuminating how capitalism should work. All of this is to say that while some composition of the reddit battalion might be working class and using their wages or stimulus money to engage in this thrilling bit, it’s more likely that many of those pumping money into the stock are some of the same speculators, billionaires and hedge funds who derive much of their value from these sorts of market manipulations. 

The reason this issue is being framed as something that looks like class conflict is because of the speed in which this was denounced roundly by investor media like CNBC and Bloomberg as well as trade windows being closed by Robinhood, Webull and TD Ameritrade. The purchase of $GME has revealed the current artificiality of the stock market as an indicator of the American economy and has given the spectacle some contours of class conflict. “It’s fairy dust,” to quote a certain Matthew McConaughey character. 

This exposure of a truth about Finance Capital that has always been innately known by the American public presents issues going forward: Namely, it suggests that there will be people pushed towards class consciousness. Yet, there are also people who are so rooted in capitalist ideology that they will heed the advice of the Cubans and Palihapitiyas of the world who suggest that it’s not the market that has failed, but the people who control it. If there are more people in the latter camp, this points to a future in which free market ghouls like Pat Toomey will tinker around the edges of capitalism, only to deliver a market in which speculative bubbles become more frequent and intense because trade windows will remain open despite volatility. 

Some will make money, like an unemployed line cook from the Bronx and a pastor in California, but these are aspirational exceptions in a world where profits are privatized and losses are collectivized.  

_____

While Wolf of Wall Street is the de rigueur reference for our current moment of money gone mad, I find a more apt comparison to this moment in the Safdie Brothers’ Uncut Gems. 

In the movie, Adam Sandler plays Howie Ratner, a jeweler in New York’s Diamond District (Be forewarned: spoilers ahead). He has all the attendant luxury goods that are supposed to signify a life of comfort: a home in suburban New Jersey, a Mercedes-Benz, children in private school, more diamonds and consumer goods than necessary. Yet, his life revolves around the libidinal thrill he receives from gambling and the problems that come with his degeneracy. 

His gambling problem puts him in debt with his brother-in-law Arno. At the film’s end, Howie has placed multiple massive bets on a Boston Celtics playoff game to pay back Arno so that Arno can call off his goons. Howie locks Arno and his muscle in a holding area in Howie’s jewelry showroom. The holding area is essentially a glass case that gets no air conditioning; Arno and his goons are trapped in the stifling heat and are forced to sit through Howie’s mania as he ecstatically watches the game. He’s finally got their attention, and he’s convinced he can beat them. 

As the clock winds down, it’s apparent that Howie hit all of his bets. He came up big. He knows he’s able to pay off Arno and then some. Even Arno, previously agitated and annoyed at his in-law, is astounded. Howie opens the holding area, and then Arno’s goons go rogue, shooting Howie point blank before they turn their attention to Arno and kill him as collateral. 

We are left with a shot lingering over Howie’s body, a bullet in his forehead but the look of pure ecstasy fixed on his face. A triumph turned into tragedy for someone who would do anything to be on the other side of a zero-sum game.