When our financial system melted down I was shocked, but not exactly surprised. I had a sense of déjà vu. It was as if I had seen this plot before, and people were acting like characters in a novel I had read long ago. And in fact, I had. Two novels, actually -- Moral Hazard and The House of All Nations (out of print).
One was written more than six decades after the first, but by some weird coincidence, both were written by Australian women novelists who had spent some time working in American financial institutions -- both as outsiders, women in a man's world. Together, they forever changed my view of high finance.
I reviewed them for the literary quarterly Third Coast long before our financial meltdown. Since the subject is more timely than ever, I thought I'd put a slightly revised version up here.
Kate Jennings (hardcover, 192 pages, Fourth Estate, 2002);
The House of All Nations
Christina Stead (hardcover, 787 pages, Simon and Schuster, 1938; Holt, Rinehart and Winston, 1972; out of print)
It's difficult to write good fiction about high finance. The heady brew of greed, testosterone and willful gullibility that so recently bubbled on Wall Street is great potboiler material, but can it be decanted into literary fiction as well?
Two remarkable novels, Christina Stead's The House of All Nations and Kate Jennings' Moral Hazard, suggest that serious fiction can succeed with this material, although most novelists seem happy to concede the terrain to journalists and talking heads.
Both books are by women novelists writing about a traditionally male bastion. Both are Australians with no financial experience who worked for several years in American investment banks, Jennings some sixty years after Stead. Maybe it helps to be an outsider.
"Nobody ever had enough money," says Jules Bertillon, the central character in Stead's 1938 masterpiece, one of the best novels ever written about the world of finance, a sprawling, panoramic epic based on the American investment bank Stead worked at in Paris during the early thirties.
The title reference is to an upscale brothel in Paris patronized by the bankers and their clients , and that pretty much catches the tone of this sardonic comedy of manners. Stead memorably dissects the human follies that link financiers and their clients, as well as the market forces that seem to drive unregulated financial systems toward ever greater excess, and ultimately, chaos.
No one who read The House of All Nations would have been surprised by the recent financial meltdown. Unfortunately, it’s quite a slog for most readers -- 787 pages crammed with now obscure historical references and often stilted dialogue. But if you can find the time and patience to immerse yourself in Stead’s world and let it wash over you, you won’t be sorry -- and you’ll never look at the “financial industry” the same way again.
Kate Jennings' view of the New York investment banking world of the nineties is more impressionistic and concise, runs only 175 pages, and is written with a poet’s precision of language. Moral Hazard is more personal than The House of All Nations, more autobiographical, and more contemporary in every way. It also pursues a more risky narrative strategy.
The protagonist, Cath, is a feminist, a veteran of the radical politics of the sixties, and an admitted financial idiot: “I could barely tell a stock from a bond. Balancing my checkbook was beyond me, much less understanding option trees.” Her husband Bailey is diagnosed with Alzheimer’s, she needs money to pay for his care, and a friend finds her a well-paid job as a speechwriter for a prominent investment bank.
Although Jennings herself -- a poet and author of one other novel, Snake -- did go to work on Wall Street to support an older husband with Alzheimer's, that's mere biography. Moral Hazard is a novel. It succeeds or fails as a novel, not a memoir. In the end, she's likely to win you over, with her language, her impeccable sense of pitch and her engaging, tough-minded tone. We can identify with the protagonist, and her outsider status makes her all the more effective a mole for the rest of us in as she burrows into “a firm whose ethic was borrowed in equal parts from the Marines, the CIA, and Las Vegas. A firm where women were about as welcome as fleas in a sleeping bag.”
The novel spans six years and is made up of two intertwined, complementary narratives. Each concerns a failure of memory -- Bailey’s on the one hand, the banking industry’s on the other. Bailey’s cognitive decline is told with sensitivity and skill. The bankers are sketched deftly and colorfully. Bailey’s crisis ends in death. The banking industry’s crisis almost blows up the entire financial system, although the perturbation scarcely is noticed by the general public and nothing really changes.
“To date, no follow-up. Nothing. Nada. As if afflicted with Alzheimer’s, the Fed [Federal Reserve] remains adamant that banks can police themselves,” Cath muses after the collapse of a hedge fund modeled on Long Term Capital Management. The spectacular demise of LTCM in 1998 was an eye-opener for industry insiders, but after a bailout arranged by the Fed it was quickly forgotten. “Deregulation rackets along like a runaway train, banking lobbyists clinging to its side, climbing into the cab, waving from the windows, hollering in their exhilaration. Hoo-ha.”
One of Cath’s bosses liked to check if she had been paying attention by asking her at the end of a meeting, “Now, what’s our take-away?” The reader’s take-away from Moral Hazard is a powerful, frightening metaphor about Wall Street and the failure of memory.
And that title, Moral Hazard? That's the term for the tendency of individuals who are insulated from the consequences of their greed and recklessness, either by insurance or by government, to -- guess what -- go right ahead and indulge their greed and recklessness. Moral hazard was at the heart of the near disaster in 1998, and since nobody seemed to learn from it, at the heart of the much worse meltdown a decade later. And as Stead and Jennings remind us, it's not as if there weren't warnings. Will we learn now? That remains to be seen.