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TechnoratiThe Crimes of Wall Street: What Are We Going to Do Before Its Too Late?
There is a term in finance called "moral hazard." It refers to policies and practices that reward wrong doing by banker and investors instead of allowing them to suffer their losses in the win-lose environment of the rigged casino that we refer to as markets.
On one level, it suggests that yes, there is some notion of rules and, dare I say, "morality" lurking in the anything goes if I don't get caught financial vampire land responsible for the collapse of credit markets in the aftermath of the disclosure of the subprime ("subcrime") scandal.
The bankers themselves are furiously debating what to do as they post record losses. The Bank of England opposes cutting the cost of credit, something that many expect the US Federal Reserve Bank is about to announce as a "moral hazard." Other bankers overseas are bitterly denouncing their American counterparts. Two banks in Germany had to be rescued.
There seems to be an air of desperation among financiers, also known as "masters of the universe" who always project confidence.
Measures are being taken similar to locking the barn door after the horses are gone. The Securities and Exchange Commission, the nominal regulators were caught napping. They are only now setting up "Enforcement Groups," including one on subprime abuses. They say they are going to be looking at "everyone involved."
Already big banks and credit rating companies that certified the crooked "securitization packages as kosher are firing top executives. Hedge Funds are reporting "shock losses." There is a clear "Contagion" as losses in one sector spread to others. Only the high price of oil is keeping the market afloat.
The industry and government response may be too little too late. Already the dominos are falling as these problems move into the real world or "real economy" as Treasury Secretary ad ex-Goldman Sachs chief Hank Paulson puts it. Just read the headlines in newspapers like the Financial Times.
"RISE FORECAST IN COMPANY DEFAULT RATES'
"Company default rates are forecast to rise nearly 300 percent as the credit squeeze it's the wider economy and raises the prospects of a global recession."
Note: Its not just homeowners who are defaulting anymore. Companies are. One expert says we are already in a recession even though, technically, the economy has to be "contracting" for two quarters for a recession to be acknowledged.
But, those in the know know its happening. They just don't want to panic the rest of us. This headline says it all: THE R-WORD SURFACES ON WALL STEEET. The White House is predictably complacent but the head of the National Bureau of Economics, Martin Feldstein, says there is a "very serious risk of a very serious downturn."
Part of the reason this is happening is because the predators who came up with all these securitization and derivative scams were enabled by big Wall Street investment houses with the Bush Administration looking the other way. They figured it would only entrap poor people they didn't care about and so not affect them. How wrong they were.
And can you believe that these geniuses don't know how much of their own investments are contaminated by funny money (ie. asset based securities with no real assets backing them.)
The London based writer William Bowles demystifies this problem:
So for example, the so-called sub-prime lending catastrophe (let's not forget the poor schmucks who are getting their houses repossessed, a fact that's rarely mentioned in news coverage of the crisis) is made even more of a catastrophe by the fact that the billions in debts owed to banks has been 'broken up' into millions of 'small' debts and then 'repackaged' with a bunch of other financial notes and then sold off to some clever cuts in the investment section of an institution, who sees yet another chance to actually print the money (rather than producing something real).It's fucking brilliant. What's more, because financial trading has been deregulated pretty well globally, these debts have been sold, resold, repackaged, resold, split, recombined, and had who knows what else done to them, right across the planet!
So that's what they mean when they say they don't know where the debts are."
The Financial Times put this more politely. "CREDIT TURMOIL SHOWS THAT NOT ALL INNOVATION HAS BEEN BENFICIAL." They lament: No more champagne and "bumper bonuses" for the scammers.
This is the time bomb that may be freaking out the big boys now but the rest of us will be affected as this crisis "rolls out" with rising unemployment and a credit squeeze. Billions are at stake. Tens of thousands have lost jobs. The housing sector, a core part of the economy is a mess. People are having their homes stolen. Other speculators, in our country and others, are waiting to pounce and pick up bargains at fire sale prices.
So isn't it time for the media to blow the whistle on this white collar crime wave before, and not after the collapse that many see coming?
Where are the organizations and politicians demanding the prosecution of wrong doers in what is clearly a criminal conspiracy and "ponzi scheme" of unprecedented proportions? Where is NBC News' "To CATCH A PREDATOR" program? They are certainly not 'following the money," the key imperative for journalism or targeting the big time predators. And they are not alone.
We are reading more stories like "I can't afford my life" detailing the economic noose so many families are experiencing but little about why its happening and who has been profiting off so much misery.
Millions of Americans are affected by why are so many people sucking their thumbs and looking the other way? How can we make this a people's issue, not just a financial story? Who has the courage to take this on? Who is ready to act?
News Dissector Danny Schechter is "blogger-in chief" of Mediachannel.org, His new film is IN DEBT WE TRUST: America Before the Bubble Burst (Indebtwetrust.com) Comments to Dissector@mediachannel.org
16 Comments so far
Show AllI know almost nothing of the way Wall Street works. But I do know a couple of things. No one has ever come to "bail me out" And no one has ever made the general public pay for my mistakes.
The Chinese and Japanese already own the USA in a sense. Who got us into this position? Not me, that's for sure
If it entails economic ruin for the USA, well then let the cards fall where they may. My situation, if I were still living in the USA could hardly have gotten worse. It's time for those who actually do have something to lose to lose it. The rest of "we the people" don't have a seat at this table of the powerful.
There's nothing left to take from us. It's time for the wealthy to pay the piper.
"What are we going to do before it's too late?"
Nothing.
Paul Bramscher:
Excellent perspective but colored with the contempt for the "Baby Boomers". Not all of us have fat portfolios. Almost all of us have worked hard, transitioning thru America's so-called industrial, technological and information ages. Believe me when I say, we're as disappointed as you. Like the boomers you'll have to be nimble and fast on your feet -all the way to the grave I'm afraid. No guarantees in this world.
the roller coaster carrying us all is in that tormenting impossibly slow climb to the top of the run. it slows to an impossible crawl, almost arresting at the apex, then, without warning we cross the rubicon and down we go,
real fast - wheeeeeeee
This mess go right to the fundamentals. According to Adam Smith as long as every body look after his own interests every body will be well off. Of course this is the biggest con game of the age and we all know it even if we are too lazy to admit it.
If this Adam Smith Fucckk is right why do we have losers and winners. According to that logic the losers must be those who are ultruistic and did not look to protect their own arses. Therefore they deserve what they got. This is stupid argument isn't it?
The truth is that the clever ones are successful in looking after their own interests and the stupid one are not. In the end the clever ones took the stupid ones to the cleaners but not before convincing the stupid ones that they lose because it is their own fault and not because the whole con-game is staked against them winning.
The one good thing this time was that it was the speculators and the financiers that got caught, not the poor.
The poor who didn't think they could afford a house were given deals they couldn't refuse. Interest only adjustable rate mortgages with low entry level teaser rates. When the rates started going up and the poor couldn't afford the payments they just walked away. They weren't any worse off than if they had just been paying rent the whole time. The financiers and speculators though that fronted the money were left with houses they couldn't sell to recoup their money and would lose money even if they could because the homes became devalued because so many were hitting the market.
Lobo Gris
"BEFORE IT IS TOO LATE"? Sorry Danny, it is already 'too late'. We WILL have a depression, __ and soon. It will hit sooner if Bush gives the command to bomb Iran. We are not prepared for a depression. The United States as a Union,__ will collapse. It is not going to be pretty, Americans will fully understnd, that war really is Hell.
The enron debacle was exactly this way. The investment vehicles used by Ken Lay's financial CFO Fastlow were so complicated that nobody in the company except Fastlow understood them. Their hallmarks were roundrobbin off-book loans to each other which, as long as the market kept going up, resulted in huge yields which Fastlow was paid commissions on: (as I recall) over 500 million in "management fees" went to him until those sums were discovered paid to him and the bottom dropped out and he resigned; knowing full well what was coming: rapid and ireversable collapse. Fastlow went quickly to the government (in the book "Conspiracy of Fools", "a true story") and turned states evidence against all the other corporate officers in turn for a light sentence. Ken Lay died, but nobody ever saw the body...... closed casket then cremation... very convenient.
I think this Enron "white collar crime" virus spread to other CEO's of banks, and we are quite possibly all in a great deal of trouble. Maybe that's part of the reason gold is shooting up?
pacplyer
We can't expect the MSM to treat these issues in any way other than what benefits them, or suits their world view. Additionally, Comarc may be correct: that the financial industry's pundits actually don't understand the situation on the ground.
I've long tried to grapple with two paradoxical trends: (1) The massive off-shoring of valuable manufacturing and IT jobs for the X/Y Generations and their adjusted LOSS in wealth versus (2) a massive spike in real estate costs, booming stock market, etc.
I've come to conclude that Boomers (the "Me" Generation) made a short-term killing with cheap communist/sweatshop labor and their retirement portfolios, but within the next 5-20 years when they're forced to sell their McMansions and move to nursing homes they'll have only dead-broke X-Gens, and illegal immigrants -- the people they've hosed -- as purchasers. A significant crash will happen around that time, if not before.
Capitalism is a matter of degrees. Of our annual income, how much is based on your own labor? How much is based on your inherited family wealth + investments? Probably the vast bulk of the financial industry pundits are financially independent, long-accustomed to just watching their money magically trickle into their accounts like rain, wind, etc. They're so incredibly stupid that they undoubtedly assume that this is the situation for everyone. Your parents had a few million, you're getting $50-100K/year in dividends, for no work at all -- just entitlement money for being already rich. We've long reached a point where having money is more important than working.
That, of course, is not sustainable for the long run.
The fascinating thing is that most of the people in the financial industry don't understand it. If I remember the story I heard, when the people who thought of this came up with this little shell game, they thought that was the best part. No one could understand it.
For most people here, they wouldn't be investing in this stuff. These bundles of all sorts of debts were the sorts of things that other banks and financial institutions would buy. You don't see adds on TV trying to get suckers to buy into these sorts of instruments.
Where this impacts the people on this site is on the other end. What did they do when they got their home mortgage? Did they stick to the old stand-by of a 15 or 30 year fixed rate mortgage? Or did the take some other option that the mortgage broker said would lower their monthly payments? Its the people who did the latter, especially to buy something they couldn't really afford on the assumption that home prices would keep rising and they'd make some money in a few years, that are the ones getting squeezed now. Those fancy new mortgages that seemed to have lower payments are the ones that now have adjustable rates risig on them, or big baloon payments coming into effect.
And yep, those are exactly the ads you still see on TV trying to get more suckers to put some good money into the system to help cover the losses from the bad.
Nothing.
Except save the rich, natch. Ken Lay was CEO of the century, remember?
God Bless the United States of Anarchy.
Live in the streets all ye americans, it's what ye master would have ye do.
If you don't understand it, don't invest in it. You're better off collecting interest and/or buying gold than gambling in the Wall St casino that is totally rigged in favor of the big money which owns the casino.
"all professions are conspiracies against the laity."
---mark twain
hazmat's law of insurance: "if you could understand it, you wouldn't buy it."
This is so complicated. Who outside of those in the business can understand it? Its like someone showed me how the chess pieces move and then pitted me against a master. No wonder the average schmuck just shakes his head and moves on to the next outrage. What can anyone do at an individual level when he doesn't even have a clue.
"God Bless the United States of Anarchy"
That Blessing (Anarchy) is only conferred on Corporations and the wealthy. They play fast and loose without rules. When they are asked to play by the rules, they get to write them. The rest of us, we get the USA Patriot Act (AKA The Shaft),which was written by people who play without rules.
I keep expecting the American people to wake up, but I've finally concluded there is about as much chance of that as there is my eleven year-old dog learning to roll-over. He's still struggling with that one, and he's now becoming senile. I am beginning to loose my unbridled American optimism that things have the potential to get better, more so with the typical American voter than with the dog. The dog...he will figure it out.