Some people might blame it on my age. They might say I have an affinity for those who have as much white hair as I do (which I've had since my mid-thirties, by the way. Not that that makes me smart or anything -- I've just been born with a certain kind of gene).
However, I don't think so. I can't say that for sure, of course, but even when I was much younger I enjoyed listening to the wisdom of those who've been around a while -- and who've clearly learned a few hard lessons along the way.
Still, that's not to say that I have an automatic respect for age or apparent authority. I don't. People have to earn it. Just because they've seen a few things in their days doesn't mean they've actually learned anything.
In fact, it seems to me that some people never quite get it, no matter how many times they've been hit over the head with the two-by-four of wisdom. In my case, I admit I have more than a few scars from when I haven't paid attention, but I've certainly come to appreciate that there are plenty of things I still don't know -- and need to learn.
In any case, I found the following commentary from Wall Street Journal editorial board member Brian Carney, "The Credit Crisis Is Going to Get Worse," about a guy who's been around the block a few times, to be more than a little interesting.
Twenty years ago, Ted Forstmann contributed a scathing – and prescient – op-ed to this newspaper warning that the junk-bond craze was about to end badly: "Today's financial age has become a period of unbridled excess with accepted risk soaring out of proportion to possible reward," he wrote in October 1988. "Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid."
Within a year, the junk-bond market had collapsed, and within 18 months Drexel Burnham Lambert, the leading firm of the junk-bond world, was bankrupt. Mr. Forstmann sees even worse trouble coming today.
For a curmudgeon, he is a cheerful man. When we met for lunch recently in a tony midtown restaurant, he was wearing a well-tailored suit, a blue shirt and a yellow tie. He spoke with the calm self-assurance of someone who has something to say but nothing left to prove.
"We are in a credit crisis the likes of which I've never seen in my lifetime," Mr. Forstmann warns. He adds: "The credit problems in this country are considerably worse than people have said or know. I didn't even know subprime mortgages existed and I was worried about the credit crisis."
Mr. Forstmann denies being an expert in the capital markets. But he does have some experience with them. He was present at the creation of the private-equity business. The firm he co-founded, Forstmann Little, rode the original private-equity boom in the 1980s while skirting the excesses of the junk-bond craze in the later years. It was for a time the most successful private-equity firm in the world, renowned for both its outsize returns and its caution. For two years after Mr. Forstmann wrote his 1988 op-ed, Forstmann Little sat on $2 billion in uninvested funds, waiting for the right opportunities. Savvy investments in Dr. Pepper and Gulfstream, among others over the years, helped make Mr. Forstmann a billionaire.
These days, he devotes most of his professional attention to IMG, the sports and entertainment agency. But the economy has him worried.
Mr. Forstmann's argument about the present crisis starts with the money supply. After Sept. 11, 2001, the Federal Reserve pumped so much money into the financial system that it distorted the incentives and the decision making of everyone in finance. He illustrates this with what he calls his "little children's story": Once upon a time, when credit conditions and the costs of borrowing money were normal, the bank opened at 9:00 a.m. and closed at 5:00 p.m. For eight hours a day, bankers made loans and took deposits, and then they went home.
But after 9/11, the Fed opened the spigot.
