Monday, October 22, 2007

Ben Stein on Wall Street

"In recent weeks, there has been another tsunami of fear about money tied up in so-called conduits. These are basically incredibly risky and foolish instruments in which money is borrowed short to be lent long. Every finance student in the world is taught be to wary of this. ... It certainly looks to little me as if the top dogs on Wall Street have made some staggering mistakes. ... Now, the ultimate Wall Street player and insider, Henry M. Paulson Jr., the Treasury secretary has bestirred himself to take serious notice of the credit problems faced by some very big lenders. He wants to create a bailout fund. ... [I]t's a bit too predictable that Mr. Paulson would basically pooh-pooh the subprime problems until major Wall Street powers got into trouble and then--presto! swing into action. It might have been inspiring had he stepped up to the plate when smaller players like home buyers were getting burned, but that's not really his style. ... Why does Citigroup need a big Treasury-sponsored organization to sell [a loan]? They can sell it right now. The problem is with the questionable loans. ... The goal is to keep Citigroup and others from taking large losses on bad loans. ... But the viscious, cruel truth is that some very greedy, selfish and yes, stupid men men fortunes on deals that were economically and/or ethically wrong. ... They got immense fees. ... Despite what looks to me like a breathtaking lack of disclosure, I have not seen any lawsuits by the [SEC] against any of these big money-center princes or principalities--not to mention crmininal investigations from other law enforcement authorities" Ben Stein in the NYT, 21 October.

Precisely my sentiments, in some cases in my words. I add "A new academic study says the elaborate adminstrative structure set up by [SOX] to protect corporate whistleblowers is just a lot of hot air", Forbes, 15 October. Just like the SEC and Justice Department. I read a banking treatise from Amsterdam which warned against borrowing short and lending long. Print date: 1587! Over 400 years ago. How smart are these Wall Street geniuses? The DOJ has time to prosecute Matha Stewart over $53,000 of avoided losses; where is it now?

No comments: