Moneyball author Michael Lewis explains how Wall Street bleeped us all

When does the FBI move in on this?

 

Best quote of the story:

“It’s laissez-faire until you get in deep shit."

 

lol

 

Then it's: "MOMMY!"

 

The problem is, this industry CAN'T be regulated. The government needs it too much. It has to sell a billion bucks worth of securities every day to stay in business, and the guys who buy 'em are those crazed kids Lewis describes. Many of 'em grew up in Shanghai or Zurich, but they're pretty much the same as our crazed kids.
It's why the Secretary of the Treasury is always a poacher turned gamekeeper, like Paulson, or Robert Rubin before him. Obama will pick one too. It's self-defense.

 

The really scary thing are the derivatives. I've heard it estimated that there could be as many as $1 quadrillion of bad derivatives buried in the global financial system.

Take the global GDP and do the math, and I hope you have lots of stuff to barter with. Because that will be our economy.

WOLVERINES!

 

There isn't enough room in our prisons for everyone who's in on this.

 

The problem is, this industry CAN'T be regulated. The government needs it too much.

I don't know what this means.

 

I took Lewis to be saying that the problem was the numerous financial instruments being sold; basically more and more bets on one single roll of the die, a mortgage.

The worst part is not the greed, that's inherent in capitalism, its the rating agencies that gave junk instruments high ratings. Moody's and S&P have better be lawyering up ASAP because they were the ones that the buyers, caveat emptor notwithstanding, were relying on when they purchased those "derivatives" and/or C.D.O.s.

 

About three or four years ago I began hearing these ads on the radio for mortgages by a guy who sounded like a bookie. I should have figured out something was amiss then. (I don't hear his ads any more). I don't know how you just hit the "re-set" button on this thing. Ask the NBA who continue to draft players who have a "big upside," rather than proven ability and appear stunned when that player doesn't develop in the first three years.
A couple of ideas though:
1. If a company is "too big to fail," it is too big and should be broken up.
2. If you can't understand how a company is making money, don't invest in it.
3. If you can't understand what needs to happen for your investment to earn you a profit, don't invest in it.
4. Assume a worst case scenario for every investment and ask yourself if you can live with it. While much of Wall Street makes it's money just from keeping it moving around, try and figure out what happens when it stops moving around.
5. The business press (CNBC, Wall Street Journal) aren't there for the little guy, they are there for Wall Street. Hence, the boosterism and cheers for "great value" in down markets.
6. Nobody is going to cause a stink when everyone is making money. It's kind of like boosters at a big football or basketball school that suddenly loses a few more games than they'd like. Suddenly, they notice that the program is corrupt.

 

I believe that many institutional investors can only invest in certain rated securities. Lewis writes that some of the CDOs with a AAA should have been much lower rated. If those ratings had been properly given, then maybe some of the investments would not have been purchased. That's my hypothesis. Otherwise, there are no criminals nor culpable parties anywhere.

This is not about the small investors, this is about the institutions who control the flow of capital and the possibility of a temporary freeze in any lending. That's the problem as I read it.