Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager
by N+1 (cor)
Reviewed by Scott McLemee
Jim Barnett, the title character of Mary McCarthy's story "A Portrait of the Intellectual as a Yale Man", is a genial and self-assured American liberal who becomes radicalised -- however temporarily and unsystematically -- following the crash of 1929. He is modelled on various real-life figures (John Chamberlain, Dwight Macdonald and James Burnham) who would have been recognizable when it appeared in The Company She Keeps (1942). But he could be alive now, after all. The type is perennial; for the influx of young Ivy Leaguers into literary and political circles is continuous, and prone to what Marx would call a crisis of overproduction.
Musing over social conditions with an old classmate following a game of tennis, Barnett exercises a subtle influence on public opinion. "Later that evening," McCarthy writes, the friend "might remark to his wife that maybe it would be a good idea (didn't she think) to lay in a stock of durable consumer goods -- in case, oh, in case of inflation, or revolution, or anything like that. His wife would interpret this in terms of cans and leave a big order for Heinz's baked beans, Campbell's tomato soup, and somebody else's chicken a la king with the grocer the next day. This was the phenomenon known as the dissemination of ideas."
The author's tone here is cool and ironic. She is exorcising, or at least placing in containment, the trauma of just a few years earlier: the experience of economic disaster, the menace of impending social breakdown. But her character shares this mood of studied detachment. It is something he absorbs from his education: "A certain intellectual prodigality had been cultivated in the students; it was bad taste to admire anything too wholeheartedly." With global depression in the background, it is permissible to dip a toe into the waters of radicalism, and maybe even a foot; but one knows better than to go skinny-dipping.
In Keith Gessen's 2008 novel All the Sad Young Literary Men the central characters were all so many variations on Jim Barnett -- even if they had come of age during the economic boom of the 1990s, and even if they were Harvard men, like the author himself. And now, with Diary of a Very Bad Year, contemporary life catches up with the circumstances of McCarthy's satire. Through a series of interviews with an unnamed hedge-fund manager, Gessen chronicles the financial upheaval of 2007 and 2008, and its aftershocks during the first year of the Obama administration.
This is a work of reportage and not of fiction; the anonymous hedge-fund manager has gone on to write for business publications under the pseudonym HFM. But these transcripts are also a kind of literary performance -- dialogues as much as interviews, with the participants taking shape on the page as distinct characters or social types. They were originally published by the cultural magazine n+1 and (in spite of the book's title) cover almost two years. We are given a chronicle of political and economic events in the section headings, but there is also an implicit personal narrative which, however incidental ends up looming very large in the arc of the book.
Gessen, the interviewer, positions himself as a naif. He knows, and acknowledges knowing, nothing about economics. By contrast, HFM is identified not simply as a native informant from Wall Street but as someone with an interesting and complex background, for whom finance is, writes Gessen, "an intellectual vocation." He has a background in the humanities and as well as some aptitude for understanding the mathematical techniques used by his underlings to analyse and navigate the seas of global speculative activity.
HFM is articulate, and when he ventures too far into the jargon of his profession, the interviewer is there as the reader's proxy to ask for a clarification of terms. The shakiness of the subprime mortgage market in 2007 sets off a chain reaction leading, by autumn of 2008, to the spectre of total financial collapse -- followed by a "recovery" that HFM sees as precariously balanced between the risk of a deflationary spiral and chronic inflation. By the end of the book, he has decided to retire and settle down in Austin, Texas, a college town far from the maddening churn of the global markets.
The line between candour and cynicism is sometimes very fine -- as when HFM remarks that "a lot of economics has the dynamic of a Ponzi scheme [because] it really only works when you're expanding," or his musing that the silver lining of a financial convulsion is that it allows a firm to make layoffs in areas where personnel are overcompensated. HFM is sharp about the role of banks in provoking the crisis. He calls for toughness with certain institutions "where losses need to be distributed to the point where shareholders are wiped out, and even other parts of the capital structure are forced to endure permanent losses."
But the finesse of hedge funds in avoiding regulative oversight does not come up. Indeed, the very term "hedge fund" is nowhere defined in US securities laws. By one estimate there were more than 8,000 hedge funds as of 2007, managing some $2 trillion in assets. They resemble mutual funds but because they accept only private investments from small numbers of very wealthy investors, they are exempt from the same regulations. In 2004, the Securities and Exchange Commission issued a rule that would have obliged them to register. But hedge-fund managers successfully brought suit to block this in 2006. HFM's decision to retire (presented here as the result of exhaustion, frustration, and a wholly understandable conviction that there must be more to life) coincided with a wave of calls in the US Congress in late 2009 for more government oversight over hedge funds.
A friend who is a financial advice columnist (let's call him FAC) read Diary of a Very Bad Year and found it less riveting than I did. "The starry-eyed interviewer seemed to bow in the presence of someone who had economic thoughts," he told me, "but HFM's economic judgements seemed to me fairly standard-issue and unexceptional," and the sort of thing familiar to readers of The Wall Street Journal.
Nor was FAC persuaded that this "expose" would really demystify the crisis: "The liberal arts background of HFM hasn't stopped him from absorbing a party-line Wall Street confidence in equilibrium-seeking markets, along with an unwavering opposition to regulation in spite of the near-catastrophe of 2008."
But as packaged here, the wisdom of Wall Street comes with a certain oppositional sheen. This, as McCarthy's narrator put it, is "the phenomenon known as the dissemination of ideas". Meanwhile, a recent estimate is that the world's richest people have lately put some $10 trillion of their own wealth into savings -- withdrawing it from the vicissitudes of the economy, let alone from any effort to create jobs. This is a circumstance that might make a less ironic soul begin to think radical thoughts. "It's funny, though," to quote HFM, from the final pages of this book. "It's funny how quickly people forget."
Scott McLemee is a recipient of the US National Book Critics Circle award for excellence in reviewing.
This review originally appeared in The National