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Moneyball author Michael Lewis explains how Wall Street bleeped us all

Discussion in 'Sports and News' started by LWillhite, Nov 13, 2008.

  1. LWillhite

    LWillhite Member

    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
     
  2. poindexter

    poindexter Well-Known Member

    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.
     
  3. Twoback

    Twoback Active Member

    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.
     
  4. The Big Ragu

    The Big Ragu Moderator Staff Member

    I enjoyed that. I knew Steve Eisman in his Oppenheimer days. He hasn't changed. I did financial reporting and we'd do these columns on financial equities, but written for the lowest common denominator. It was not highbrow financial reporting. I'd get analysts that Institutional Investor had rated higher than him on the phone and they'd pontificate as long as I wanted about this buy and that buy and they were basically puppets for the investment bankers calling the shots. It was all a bunch of blarney. If you called Eisman, he would cus you out just for calling or if he listened for a second, he'd yell at you and slam the phone for just asking the wrong question--even though it was simply the question you had to ask because of the prevailing sentiment on Wall Street toward something. Rather than saying, "Well, Dean Eberling at Prudential is an idiot," or "Alison Deans is full of shit," he'd sigh, make a noise like his head was exploding and hang up on you. He doesn't seem to have changed a bit. I have a soft spot for people like that. They make me smile.

    As for Lewis' story, he's on the mark, but it really boils down to a simple truism in life: caveat emptor. No one forced Lehman and Merrill and the others to leverage themselves to the hilt and take big risks on a crazy asset class. And no one forced any investor to buy what was basically a steaming pile of dog doo. If Steve Eisman--and others--could see the inherent problems in these securities, others could too. People chose not to. Now those investment banks are worthless. And people who invested in those securities have lost a fortune. Caveat emptor. We should let them lie smoldering and dying; we shouldn't be bailing out fools who lost their money.
     
  5. Montezuma's Revenge

    Montezuma's Revenge Active Member

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

    goalmouth Active Member

    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.
     
  7. poindexter

    poindexter Well-Known Member

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

    The Big Ragu Moderator Staff Member

    Why not?
     
  9. 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.
     
  10. PeteyPirate

    PeteyPirate Guest

    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.
     
  11. swenk

    swenk Member

    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.
     
  12. poindexter

    poindexter Well-Known Member

    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.
     
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