Washington Post Business columnist Steven Pearlstein had just clipped on his ski boots for an outing with his 80-year-old father, Murray, when the phone rang. He was in Taos, New Mexico, and the powder was perfect. In New York, Bear Stearns had just collapsed.
“You had better come back,” said Maralee Schwartz, then a Post Business editor.
Pearlstein filed from Taos, flew to DC, and started pounding out columns. He was used to writing twice a week. Two became three, with a few hitting the front page. Disastrous news on your beat is good for a columnist. He started appearing on TV and showing he could explain the Wall Street calamity better than many economists.
“I saw the froth in the takeover deals and the commercial-real-estate deals, and when the very early problems started to come out about subprime, I connected the dots and saw it all as part of a much wider credit bubble that was caused by across-the-board deterioration of lending standards,” Pearlstein says.
Standards. Value. Greed. Corruption. Pearlstein, who turns 57 this month, wrote about the intricacies of credit swaps and explored the motives and human frailties that drove money managers over the cliff. “If there is a surprise here,” he wrote on October 3, “it is that anyone should be surprised by the level of greed on Wall Street.”
Over coffee one fall day he goes further.
“Making money is not what drives Wall Street money managers,” he says. “They want to win. They keep score. It’s all about male testosterone. If the guy across the room just got a bonus of $20 million, they want a bonus of $30 million. Wall Street is caught up in an arms race. It’s not just greed; it’s more about ego.”
Pearlstein neither worked on Wall Street nor has an economics degree. He learned business from working weekends at Louis Boston, his family’s clothing store in Boston, now run by his sister, Debi Greenberg, who still gives him a family discount. He learned from listening to his father and from running his own business, the Boston Observer, a weekly paper that failed after four years.
“My father catered to his customers,” says Pearlstein. “He bought fabric with them in mind, created value, and satisfied them. Who can look at Wall Street and not say, ‘You have forgotten what business is all about—treating customers right’? They just packaged deals and found another sucker to sell them to. There was no value.”
On the subject of value, Pearlstein has never been shy in criticizing the Post for losing valuable writers through the recent buyouts. “The buyouts hurt us,” he says. “The section lost so many people old enough to have lived through these things.” Such as Jerry Knight, John Berry, Paul Blustein, Kirsten Downey.
“But,” he says, “the staff, which is mainly young people, some of whom haven’t covered business or economics before, has really risen to the occasion.” Such as Neil Irwin, David Cho, Renae Merle, Zachary Goldfarb, Binyamin Applebaum, Lori Montgomery.
“They have blown me away,” he says.
Pearlstein predicts another six months of “financial mess until there’s nothing left to write off. But that’s only the beginning of problems for many people. We can expect three years of negative or slow growth.”
On a scale of one to ten, how worried is he?
“I’m not at ten,” he says. “We have the policies and the tools and the institutions to act as safety nets. I don’t think we’re looking at a Great Depression economically.”
As for personal economics, Pearlstein says he told his friends in June 2007 that he was selling his stock. He did.
“Since then,” he says, “I have been buying back in small amounts.”