Sep 27 2008
Fall Street’s New Swear Words: Subprime and Derivatives
As Mr. Rogers used to say, “Can you spell bankrupt?” By the time Fall Street, er, Wall Street, allied with their government lackeys, gets through with us, we won’t even have a sweater against the coming long winter of (economic) discontent.
Financial institutions got greedy, first with home equitly lines of credit (now over $1.1 trillion) and then sub-prime mortgages which promised higher than “normal” returns. They misunderstood their “successes” with these items, and compounded their greed and risk when they packaged those “conditional conveyances” into even more risky derivatives. As a consequence, when their unqualified customers quit paying, the dominoes began to fall.
Banks are failing at a faster rate, and larger banks as well, than ever before. Investment banks are dumping and running back to “ordinary” status, trying to hide from their bad decisions. Mortgage institutions of all sorts, including the two largest, are destitute; burned-out shells scattered across the economic landscape like the cities of Europe at the end of World War II.
Make no mistake, it’s war. Economic devastation is just as compelling, and as damaging, as weapons of mass destruction. We’re in for a much longer war than we think, too. The recent barrage of body-blows to the economy is shocking, and the effects are being felt globally. Attempts by our government to put a happy-face on the situation aren’t showing the full extent of the damage, nor of the true expected duration of the battles to come.
There are many ideas that are better than the Paulson Plan; I hope our legislators realize that. You need to be vigilant, and active in the process to tell your Senators and Congressmen you don’t feel the need to bail out the crooks on Fall Street…
Seeya ‘Round the Ol’ Bank…
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