We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Michael Lewis of Liar's Poker fame returns to Wall Street to survey the mess. (Thanks, reader.) One quote from the darkly humorous piece which explains the consequences of the investment banks' going public, thus transferring risk from themselves, as partners - to shareholders:
His (Eisman's) dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”
FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.
“No,” the guy said, “I’ve sold everything out.”
After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”
To laugh or cry, I don't which and I'm only to page 5 of 9 but I have lived through this as a mortgage broker in Florida and saw part of this happening. Just didn't know about the shorting, otherwise I would be rich and in New England or at least Tennessee and 4 seasons.
I may be broke but at least can sleep at night knowing I didn't cheat or steal or lie. Makes me angry about those that did including the customers who signed for stuff and knew they couldn't afford it. The 3 to 1 ratio for affording a house payment has been around for 50 years. Think about your own budget. About 3 times gross annual income is about equal to a typical house payment plus taxes and insurance. (apart from those fancy NE houses) The mortgage business is not rocket science.
Question: Where did all the mortgage salesman go? Internet stocks, contemporary art? Commodities? TARP? Wherever the fast buck people went, get out.
Sorry for the soapbox rant, I think I need a drink.
Please read the whole thing, its even better in the 2nd half and will help understand why The Treasury today isn't going to buy any CDO's and will put equity in the companies. Probably a better mood. Remember old Hank was the head of Goldman Sachs when all this was happening.
Still need that drink.
I loved Liar's Poker, but this article is deeply dishonest. It doesn't discuss the role of the Government, or Freddie or Fannie, in the issuance of subprime loans. Surely Michael Lewis knows better. I've no doubt there's incompetence on Wall Street, but if you want a multi-trillion dollar dose you have to go to Washington.
I'm not sure exposing the role of the congresscritters is Lewis' expertise. That will make for a whole 'nother book, perhaps penned by a scorned pageboy of Barney Franks someday.
I found the article fascinative, as Lewis writes about what he knows (always a welcome approach). I now know that am dumb enough to have succeeded on Wall Street, but too sincere and honest to have tried.
Reading this reminds me of how proud I am of my youngest daughter, now a senior Finance Major at a very expensive business school. She has determined to go into interior design, even though she has a door being held open for her at Deutsche Bank upon graduation if she wants it. What little time she has spent on Wall Street has convinced her that she would rather be praying inside St. Patrick's Cathedral than preying on those that walk by it. I think I will forward the article her way.
My stomach turned at the revelations re: the people getting mortgages who had no business being homeowners... In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.
This is just an update of Liar's Poker and Lewis Gutfreund, the "King of Wall St" in the '80's. It's written in the same Lewis, wise cracking Wall St -ese and there is some nice inside baseball here. It's an interesting read as far as it goes but does not go nearly far enough, it does not address the big story.
The big story being the unholy alliance between certain Wall St banks and the likes of the government backed Fannie Mae and Freddie Mac which started the ball rolling on the latest debacle. Literally out of the clear blue one day some Wall St player/analyst/hedge fund manager/whatever woke up and decreed that these wonderful Fannie/Freddie mortage backed securities weren't worth the paper they were written on and poof!, the household names of Wall St. evaporated right before our eyes, beginning with Bear Stearns. Now that is a big story.
But with the Democrats in charge down in Washington, it's going to take a very enterprising, right wing Woodstein Team to uncover this scandal. The dramatis personae will be superb and includes some of the biggest blowhards in Washington including Barney Frank, Chris Dodd, various Democrat hacks and hangers on, and even a cameo appearance by HRH Obama. The Wall St cast will include Jimmy Cayne and the boys at Bear Stearns, Lehman Bros., and several other investment banks and brokerage houses, some hedge fund stars, et al.
What needs to be uncovered is the collusion, overt and/or covert, implied or explicit, between the Wall St cast and those Democrats in Congress who were on the take via Fannie/Freddie campaign contributions. This is a wonderful opportunity for an enterprising author and/or team of writers to write a blockbuster best seller and hopefully see some heads roll as a result. It's the only way the American people are going to know the truth about this fiasco.
What the S&L scandals were to the late '80's--early '90's, the Fannie/Freddie scandal will be to the first decade of the 21st C. But S&L's were really small potatoes compared to Fannie/Freddie. And just think, the roots of the next Wall St debacle are already being hatched as this is written. These securities/derivatives will have new names but will nonethless be based on the age-old premise that there is always one more sucker to buy this deal at a slightly higher price. Wall St For Dummies. Enjoyed the Peter Schiff clips, the overture to 3rd and 4th qtr 2008.