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Economics

脱轨的科技巨头

Nov 24, 2022 Jonathan Levy

芝加哥—加密货币交易所FTX的倒闭是美国漫长的金融欺诈的新篇章，也是一个大麻烦。企业重组专家约翰·雷三世（John Ray III）说："在我的职业生涯中，我从未见过如此彻底的企业控制失败和如此完全缺乏值得信赖的财务信息的情况。"他现在正在负责处置FTX的破产事宜。

FTX的倒闭只是自2021年4月加密货币价值首次下跌以来行业崩塌的最新事件。但不仅仅是加密货币。在市场将Meta公司市值削减了890亿美元之后，其首席执行官马克·扎克伯格（Mark Zuckerberg）宣布将裁员13%（11000人）。然后，埃隆·马斯克（Elon Musk）花440亿美元收购推特不出几天——着实一鸣惊人——许多人开始担心该平台的未来。

挥舞数十亿美元意图建立企业帝国（包括慈善事业）的奇人在美国屡见不鲜。当我阅读名誉扫地的FTX公司创始人兼前首席执行官山姆·班克曼-弗里德（Sam Bankman-Fried）的事迹时，我想起了19世纪60年代末的 "伊利战争"，当时魅力四射的金融家们很容易获得巨额资本和信贷，他们试图建立美国第一批伟大的商业公司：横贯大陆的铁路。铁路建成了，但财务浪费和企业阴谋也是惊人的。

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John Handel Nov 28, 2022

Historians often warn of analogizing between the past and present. Essays like this are the reason why. Jonathan Levy argues that the parallels between the corruption of late 19th century railway tycoons and the blowup of Sam Bankman-Fried’s crypto exchange, FTX, “seem clear.” But the only thing this essay makes clear is that the comparison between 19th century railways and cryptocurrency is a deeply misguided one to make.

There are three major points upon which Levy’s comparison falls apart.

The Nature of the Players. Levy depicts the war for control of the Erie railway, fought between Jay Gould, Jim Fisk, and Daniel Drew on one side, and Cornelius Vanderbilt on the other, as ripe with fraud and misdealings. He is, of course, correct on this point. Learning of Vanderbilt’s intended takeover of the railway, Gould, Fisk, and Drew began issuing practically worthless, watered down shares for Vanderbilt to purchase. Levy conveniently ends his retelling of the story with Gould, Fisk, and Drew fleeing the jurisdiction of New York to New Jersey, seemingly safe and having gotten one over on Vanderbilt. But the story doesn’t actually end there. Vanderbilt, the most wealthy man in America at the time, conceded defeat in the fight for control over the railroad, but forced a settlement in which Gould & co. paid him $4.5 million in return for the watered down shares he’d purchased. Vanderbilt’s pride was no doubt bruised, but he was made financially whole.

The Erie War was fundamentally a power struggle between a handful of the wealthiest men in America, in which the loser (Vanderbilt) recouped nearly all of his actual financial losses. To analogize this to Bankman-Fried using the deposits of his exchange’s customers to pay off the losses incurred by his personal hedge fund is to miss the point entirely. Bankman-Fried saw billions of his own personal wealth evaporate overnight while his thousands of customers will recuperate only pennies on the dollar of their deposits at best. The Erie War was a battle of financial titans who resorted to dirty tricks to one-up each other. The FTX blowup was blatant fraud perpetrated against thousands of unsuspecting smaller investors who will never be made whole again.

The systemic importance of crypto. Levy ends his historical example by noting the two great financial crises of the railroad age: 1873 and 1893. Once again, this is both historically disingenuous, and a poor parallel to the present. While over-speculation in railways certainly contributed to both the panics of 1873 and 1893, neither crisis was caused by over-speculation in railways alone. Droughts and bad harvests, bank-runs on critical financial institutions in Europe, and the monetary policies of states abroad, all contributed to the great panics of the 19th century. Over-speculation in railways may have been a symptom of the financially irresponsible times, but it was not itself the causal engine of these major financial crises.

To equate these panics with crypto is, again, to entirely miss the point. Both panics were catastrophic. The panic 1873 plunged the global economy into a years long recession. Meanwhile, the collapse of crypto has had a negligible effect on the rest of the financial system and the global economy. Crypto is a monopoly game, played with monopoly money, that has hurt the individuals who were convinced to buy into the game with actual money, but has not had systemic effects on the global economy as such.

Crypto isn’t a real asset. This is the most important point that Levy’s comparison problematically overlooks. Was there fraud and corruption in late 19th century railways? Certainly! Did many railway investments go bad and become unprofitable? Yes! But, did railways meaningfully contribute to the economic growth of the United States and serve key social and economic functions? Yes.

The various Railway Bubbles of the 19th century, in both the United States and other countries like Great Britain, were what William Janeway has called “productive bubbles.” Over-speculation in railways enabled many unprofitable railway companies to be born, to lay track, build engines, and begin services. When the bubble burst, companies failed, and investors lost money. But the railway companies that survived (often run by Gilded Age Tycoons like Gould or Vanderbilt) could purchase those that had failed and incorporate their tracks into a larger, existing network. The Erie Railway, for instance, continued to run until the 1950s when it merged with another company. Remnants of its track are still operated by the Norfolk Southern Railway, a class 1 freight railroad.

When the crypto bubble burst, there was nothing similar to recuperate. The “assets” on FTX’s balance sheet were primarily crypto-currencies the company had issued itself. The ostensible value of the coins as marked in the balance sheet was nothing close to what they were actually worth in the market. That is because they were self-referential pieces of monopoly money that had no value or function beyond being a speculative asset within the crypto-currency ecosystem. As Bankman-Fried himself admitted on a now infamous episode of Odd Lots, crypto was nothing more than a ponzi scheme that relied on dumb money continuing to come in, so that the “smart money” could pay themselves out. When interest rates rose and smaller investors did not have the same incentives to invest in crypto, the con played itself out and the “smart money” like Bankman-Fried, was made to look stupid.

Even as corrupt and occasionally fraudulent as 19th century railways were, they still had real economic value. Crypto does not.

This leads me to my final point: Levy’s confusing assertion that the blowup of FTX should lead us to reconsider the regulatory principle of “public utility.” While he admits that “it is not clear that cryptocurrency offers any essential public service,” he parrots Massimo Amato and Luca Fantacci by arguing that crypto has nevertheless posed the “right question” about how we regulate the financial system. It is never stated by Levy what that question actually is.

As Stephen Cecchetti and Kim Schoenhotlz have argued, the regulatory lesson to take from crypto currency is that there isn’t one. As a fundamentally useless “asset,” endowing crypto with regulatory legitimacy can only be a mistake. “The overriding goal of policymakers should be to keep crypto systemically irrelevant. The best way to do this is let it implode under the pressure of its unsafe and unsound business practices.” Far better to let crypto burn on the outside, than make any moves that would further connect it to the global financial system.

It is unfortunate that a historian as erudite and renowned as Levy would make these fundamental mistakes of both historical interpretation and policy prescription. But his essay at least will serve as a helpful reminder about the ease with which misleading historical analogies may be abused.
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