Tuesday, September 23, 2008

The lizardry of Wall Street

Here's another reason why trying to lay the current financial crisis at the feet of Fannie Mae and Freddie Mac (as Captain Fishsticks tries to do) is so much baloney. Here's the lede from a Billmon diary from yesterday:

I won't bore you with the bloody details; others, such as bonddad, have already sliced open the corpse and described the basic anatomy of the crisis, which is depressingly identical to the aftermath of every other speculative bubble since Adam and Eve tried playing the apple futures market.

Bells and whistles aside (such as the fungal growth of a $10 trillion global over-the-counter credit derivatives market, or Wall Street's blind faith in its own ability to transubstantiate subprime mortgages into AAA-rated, investment-grade paper) the only things remarkable about this bubble were how long it lasted and the scale of the recklessness.

It's the lizardry of Wall Street, all right. It's Kevin Phillips' bad capitalism driving out good capitalism, the escalating spiral of sleaze to make more and more investment products available and try to make silk purses from sow's ears. Spot particularly likes Billmon's use of the term "transubstantiate."

And it comes right back to the unfettered free market types, like Strom, Sticks, and Banaian, many of whom are too naive to understand that they are being hosed right along with the rest of us.

Speaking of the Perfesser, he had a post the other day, The Day Investment Banking Died, about Morgan Stanely and Goldman Sachs turning themselves into bank holding companies. He says this:

In writing a presentation for a conference I'm speaking at today and tomorrow, I put this into the last slide: "Remember September 21 as the day the investment banking industry died." It hasn't disappeared, certainly not in the world, but creative financing will no longer be the realm of Goldman or Morgan Stanley. It will have to move to other, newer, more nimble innovators.

Oh, we can look forward to that day, all right, Perfesser, as the day the next bubble starts. What a stunning and ironic comment from an entirely clueless man.

A thump of the tail to John Cole and the 'Farian for the link to Billmon.

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