When did money become the way, the only way, we thought about the world?
Ayad Akhtar, creator of “Junk,” Broadway’s newest treatment of Wall Street, traces it all back to the 1980s, when corporate raiders and private equity upended finance, and made profligate use of leverage to take over storied blue-chip firms like RJR Nabisco and Revlon
Their ascendancy helped mark the spread of debt into every crevice of our lives.
Employing this tumultuous era as his backdrop, “Junk” — which opens at New York’s Lincoln Center on Nov. 2 — attempts to ask how Wall Street had underwritten not just the enormous growth and wealth seen in the past few decades, but also our values. To Akhtar, the story of the last 30 years has been about America’s “gradual transformation under the imprint of finance.”
Back in the 1980s, Akhtar feels the nation’s values were still contested. “Now, the only thing of value is money, individual rights are paramount, ownership means shareholder rights. But back then there was still an urgency to ask the question,” he said in an interview with MarketWatch.
In “Junk,” Akhtar gives a play-by-play account of how Robert Merkin, the head of a private equity firm, looks to acquire a multibillion dollar steel conglomerate with seemingly worthless and high-interest corporate bonds in the name of shareholder value and efficiency.
His deal outrages the WASP-dominated boardrooms and their white-shoe advisers, and Merkin’s success threatens to dislodge the establishment from its easy perch. He also draws controversy as divisions will need to be slashed and workers laid off to pay down the mountain of debt generated from the purchase. Merkin’s actions unleash a heated debate over whether a company’s allegiance is to its shareholders, or its employees, or even society.
In a nod to that era, Merkin, who declaims “debt as an asset,” is inspired by the life of Michael Milken, the junk bond king who in 1990 pleaded guilty to felony charges for violating federal securities laws.
Akhtar borrowed liberally from bestsellers like “Den of Thieves” and “The Predator’s Ball” that chronicle leveraged buyouts led by Milken’s firm, Drexel Burnham Lambert. Looking at corporate America now, Akhtar said, it’s clear the junk bond kings have won.
He points out that “GM no longer makes cars to make cars, but makes cars to sell the car loans that yield five percent.” After all, to sustain GM’s
ambitious revenue and profit forecasts, Americans have to keep buying cars.
Merkin’s actions unleash a heated debate over whether a company’s allegiance is to its shareholders, or its employees, or even society.
But once the market is saturated, car companies can only justify their lofty share prices if a previously disregarded corner of the population — for example, a fresh college graduate who can’t buy a car outright — borrows the money.
This idea of growth at any cost, including mounting debt taken on by consumers, Akhtar said, has even extended to the once sacrosanct realm of higher education. Though parents and students condemn rising tuition fees, they don’t know why the cost of college has run at a pace well above inflation.
“Well it’s because American universities have taken on $2 trillion of debt,” Akhtar said. “They have to service that debt. And the more debt they take on, the more tax writeoffs they have, so tuitions have to go up. No one understands the basic mechanism that is putting pressure on all quarters — debt and leverage.”
Yet those who have tried to oppose this tidal wave are often swept away. In the play, Leo Tresler, an investment banker and Merkin’s rival, criticizes Merkin for issuing paper promises to buy corporations that produce things of real, tangible value.
But eventually, even Tresler succumbs and issues high-interest bonds to match Merkin’s bid, conceding his self-worth is entirely tied to his money-making prowess.
“In the end, it doesn’t matter. The system has its own imperatives. Those who win are those who align themselves with the system,” Akhtar said.
Even Akhtar, as a critic, doesn’t feel immune. He sweeps his arm across the room, pointing out that the travertine-lined lobby of Lincoln Center Theater was financed by the Rockefellers. He adds that the president of the theater’s board was the co-CEO of the Carlyle Group, one of the largest private-equity groups in the world.
It’s why it’s necessary that his play not work as a “simple screed against capitalism,” which he felt was naive.
“Everybody is complicit. It’s easy to criticize capitalism, but it’s even easier to enjoy its benefits,” he said.
“Junk” is playing at the Lincoln Center Theater.