Inside a Wall Street’s secret society

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A journalist sneaked himself into a secret society’s party in one of the most splurge hotels in Wall Street. Guess what he found inside?

Hint: many of the club’s new members, so-called ‘neophytes’, were clothed in leotards, dressed like old ladies, and chanted songs that insulted Occupy Wall Street movement. And the journalist himself nearly got punched by a billionaire.

Read the full article on New York Magazine.

 

Excerpt:

 

I’d heard whispering about the existence of Kappa Beta Phi, whose members included both incredibly successful financiers (New York City’s Mayor Michael Bloomberg, former Goldman Sachs chairman John Whitehead, hedge-fund billionaire Paul Tudor Jones) and incredibly unsuccessful ones (Lehman Brothers CEO Dick Fuld, Bear Stearns CEO Jimmy Cayne, former New Jersey governor and MF Global flameout Jon Corzine). It was a secret fraternity, founded at the beginning of the Great Depression, that functioned as a sort of one-percenter’s Friars Club. Each year, the group’s dinner features comedy skits, musical acts in drag, and off-color jokes, and its group’s privacy mantra is “What happens at the St. Regis stays at the St. Regis.” For eight decades, it worked. No outsider in living memory had witnessed the entire proceedings firsthand.

I wanted to break the streak for several reasons. As part of my research for my book,Young Money, I’d been investigating the lives of young Wall Street bankers – the 22-year-olds toiling at the bottom of the financial sector’s food chain. I knew what made those people tick. But in my career as a financial journalist, one question that proved stubbornly elusive was what happened to Wall Streeters as they climbed the ladder to adulthood. Whenever I’d interviewed CEOs and chairmen at big Wall Street firms, they were always too guarded, too on-message and wrapped in media-relations armor to reveal anything interesting about the psychology of the ultra-wealthy. But if I could somehow see these barons in their natural environment, with their defenses down, I might be able to understand the world my young subjects were stepping into.

So when I learned when and where Kappa Beta Phi’s annual dinner was being held, I knew I needed to try to go.

Inside Nauru

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Nauru, one of the world’s smallest countries with a population hardly surpassing 10,000 people, has experienced what people, having gained enough of its history, would obviously dub a ‘wheel of fortune’. Once when its phosphate reserves were among the largest on the planet, the nation could easily afford all the affinities provided. Investment was made globally, in numerous businesses, real estate projects, and even a huge musical production in United States (which later ended up in a similarly huge flop as well).

Then came the reversal of fortune, near the closing end of 20th century.

At the moment, with the reserves almost completely used up, and with very little savings, excluding their gone-wrong businesses’ bad debts, the tiny Pacific nation is hopelessly putting its final hope on Australia, one of its largest, and most influential, foreign donors. The country, as part of an agreement with the latter to accommodate illegal migrants detained in Australia, has for years received, in turn, over hundred million dollars in terms of foreign aid, mostly used for their annual expenditure. With things going upside down, in less than a generation, the whole nation has suffered from financial difficulties.

A former Australian financial adviser for Nauruan government described his half-year experience dealing with the people, and in particular, how he helped them reforming the country’s already dilapidated financial and budgetary sectors.

Read his full article on Australian Financial Review.

Excerpt:

One of my responsibilities was signing every spending receipt in the whole government. This was a big reform that had stopped money leaking out of the Nauru budget. Every cent of expenditure was confirmed by the Budget Adviser. It made sense, but it was an enormous pain.

Hundreds of complex spending receipts came over my desk every week. And then there was public sector pay.

Nauru had thousands of public servants, and every pay cheque had to be signed, by me or the head of the department. The Secretary of Finance did exactly what I would have done in his shoes, and delegated.

I saw and signed everyone’s pay cheque, from the president down to the gardeners who controlled weeds near the airstrip. The lowest pay was $180 a fortnight; the highest only about $350 – even for the president.