Moneyball author Michael Lewis explains how Wall Street bleeped us all

Brilliant article that got me to understand how Wall Street investment banks just might have been the biggest fraud in American history. Unbelievably galling. You probably need 20-30 minutes to read this, but it's worth it. About three-fourths of the way, it explains why the money lost is far, far greater than the actual mortgage defaults.

Between this and the sordid AIG tales...sheesh.

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?tid=true&print=true

LW

 

I read this yesterday. It is staggering. And completely sickening. I've seen all these bits in other articles but Billy Beane (ok, bad joke) did a fantastic job of tieing it together.

On the ratings agencies, who polished subprime turds into AAA securities:

"He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.


What Wall Street has done to this country is catastrophic. Its incalculable. Yet there are no reprisals. Nobody held accounted for. We have a very very sick country.

 

You're right Lindsey.
There's a paragraph in there that explains why the subprime crisis went so far beyond a bunch of people defaulting on their mortgages that is the single most lucid thing I've read on this crisis.
Lewis is an impressive writer, able to make complex issues digestible -- sometimes by just conceding they're too complex to be digested.

 

This isn't making me feel better about the economy.

 

50 million active mortgages in the US; about 1.5M in or in danger of foreclosure. Shows you how many ways Wall Street sliced and diced to have gotten where we are.

 

Shrugging your shoulders and saying caveat emptor is simply just not an acceptable answer to this.

 

Unfortunately, there will never be an acceptable answer to fix this problem. Fastest way to grown an economy is by creating jobs and if you're businessman on steady ground financially, why would you care to move your cheap labor in Mexico or China back to the United States? The government can't afford to offer sweetheart deals to businessmen who have $ signs pumping through their veins. The American greed doesn't care about "Joe the Plumber" when "William the CEO" has enough money to support the next 5 generations of "William the CEO's".

If I say go fix the auto-industry, what about other American manufacturing companies dying on the vine and trying to holdout from going Global (i.e. ship jobs to Mexico, China, etc.)... it really is going to be a difficult mess that I don't believe anyone in congress has the ability to comprehend, let alone fix.

 

Which is why inherited wealth is the welfare that nobody wants to talk about. If rich people just made enough to keep themselves rich so that their kids would actually have to make an effort, it would be a step in the right direction.

 

Major book to follow; Lewis just signed a big deal to write about this mess. If I can find a link, I'll post it.

 

Ratings agencies have been paid premium dollars to provide a service. Either fraudulently or though negligence, they didn’t even come close to providing that service. They should be held accountable. Slapping AAA ratings on POS and then saying “buyer beware” is bullshit. And it happened in every step along the chain.

Our economy, and business in general is only is good as the trust you have in the other party. The Jim Rome theory of “if you aren’t cheating, you’re not trying” is obviously alive and true in Wall Street. But there is a heavy price to pay for that. Trillions, in fact.