Corrente

If you have "no place to go," come here!

So, why not criminalize so-called "financial engineering"?

lambert's picture
Submitted by lambert on Mon, 09/15/2008 - 9:29am

After the smart money got out, things went to shit, quelle surprise. WaPo sifts the rubble:

Regulators of all stripes have had difficulty getting the information they need to fully understand the risks that financial firms are taking. The $50 trillion corporate derivatives market is a model of obscurity. The same could be said of many structured debt products, which slice up mortgages, credit card debts, or corporate loans in such ways that understanding how risky they are requires a PhD in mathematics.

Indeed, it is increasingly clear that Wall Street chief executives themselves didn't fully understand the risks they were taking on during the boom years of this decade; they have seemed as blindsided as any regulator.

The problems on Wall Street may go deeper. Financial firms have expanded vastly in the past decade, hiring tens of thousands of bright business school graduates to engineer new financial products, find ever more complicated ways to manage other peoples' money, and dream up new ways to combine, divide, and recombine corporate America.

Some large portion of that work, it now appears, wasn't really creating any value for the company's clients or for the U.S. economy. No matter how many times crummy mortgage loans are recombined into clever packages, they're still crummy.

Isn't this, almost literally, a shell game? And if the con is worked on The Street for trillions, instead of on the street for a little cash, does that make it any more legal?

In a perfect world, those excesses would be corrected by a gradual, orderly decline, in which a few firms get bought out by competitors, some modest layoffs occur, and Wall Street cuts back on its hiring for a few years.

In the real world, that correction is occurring before our eyes, through a series of convulsive weekends in which the entire financial world appears at risk of coming off the rails.

I don't care if the entire financial world down, and I hope they lose everything, instead of just "other people's money." I just hope they don't take us all down with them.

0
No votes yet

Comments

Lahdee's picture
Submitted by Lahdee on

they will take us down a trickle at a time. They've already effected women in the workforce. Unfortunately the middle class appears firmly in the cross hairs. I can't see capital taking the fall for this.

Submitted by gob on

It was in Oklahoma City,
It was on a Christmas Day,
There was a whole car load of groceries
Come with a note to say:

Well, you say that I'm an outlaw,
You say that I'm a thief.
Here's a Christmas dinner
For the families on relief.

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home.

--Woody Guthrie

Policy not party!

Truth Partisan's picture
Submitted by Truth Partisan on

Yes!

I'm in--let's criminalize it all with required--required, like I don't know, in a bankruptcy bill--removal of personal assets.
We have to let the free market operate after all--if you play, you have to pay. Isn't that what some people are telling the sub-prime mortgage holders who want to keep their homes?

Justice, for all.

elixir's picture
Submitted by elixir on

paragraph particularly bleak.

"About 43 percent of all working women earn half or more of their family's income, said Anne Ladky, executive director of Women Employed, a national women's advocacy group based in Chicago. And since many women work part-time, seasonally and in low-wage, high-turnover jobs, they often have a harder time qualifying for unemployment benefits, Ladky said."

I love this job!

Imelda Blahnik's picture
Submitted by Imelda Blahnik on

I hope they lose everything, instead of just “other people’s money.”

Unfortunately, some of the "big money" invested in hedge funds that invested in CDOs and CDSs and other "creative" *cough* instruments sold by Lehmen et al are pension funds and municipal and state governments. In other words, Joe and Jane 6 pack.

Plus look for many more banks to fail, with obligations that far exceed the funds of the FDIC, which will require the US Govt (i.e. Joe and Jane Taxpayer) to provide the difference.

Us "other people" are on the hook one way or the other.

Turlock