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A Memo From Wall St. (Thank You)

Matt 2012/06/19 12:35:58
Obama Did It !
Bush Did It !
Congress Did It !
They ALL Did It !
Alternate Opinion . . .
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From Barrons Online

By BARRY L. RITHOLTZ


Uncle Sam the enabler.






To: Washington, D.C.

From: Wall Street

Re: Credit Crisis


Dear D.C.,


WOW, WE'VE MADE QUITE A MESS OF THINGS here on Wall
Street: Fannie and Freddie in conservatorship, investment banks in the
tank, AIG nationalized. Thanks for sending us your new trillion-dollar
bailout.


We on Wall Street feel somewhat compelled to take at least some
responsibility. We used excessive leverage, failed to maintain adequate
capital, engaged in reckless speculation, created new complex
derivatives. We focused on short-term profits at the expense of
sustainability. We not only undermined our own firms, we destabilized
the financial sector and roiled the global economy, to boot. And we got
huge bonuses.


But here's a news flash for you, D.C.: We could not have done it
without you. We may be drunks, but you were our enablers: Your
legislative, executive, and administrative decisions made possible all
that we did. Our recklessness would not have reached its soaring heights
but for your governmental incompetence.


THIS MEMO PROVIDES A BRIEF HISTORY OF your actions that helped create this crisis.


1997: Federal Reserve Chairman Alan Greenspan's
famous "irrational exuberance" speech in 1996 was somehow ignored by,
um, Fed Chairman Greenspan. The Fed missed the opportunity to change
margin requirements. Had the Fed acted, the bubble would not have
inflated as much, and the subsequent crash would not have been as
severe.


1998: Long Term Capital Management was
undercapitalized, used enormous amounts of leverage to purchase all
manner of thinly traded, hard-to-value paper. It failed, and under the
authority of the Federal Reserve a "private-sector" rescue plan was
cobbled together. Had these bankers suffered big losses from LTCM, they
might have thought twice before jumping into the exact same business
model of undercapitalized, overleveraged, thinly traded, hard-to-value
paper. Instead, they reaffirmed Benjamin Disraeli's famous aphorism:
"What we learn from history is that we do not learn from history."


1999: The Financial Services Modernization Act
repealed Glass-Steagall, a law that had separated the commercial-banking
industry from Wall Street, and the two industries, plus insurance, came
together again. Banks became bigger, clumsier, and hard to manage.
Apparently, risk-management became all but impossible, even as banks had
greater access to larger pools of capital.


2000: The Commodities Futures Modernization Act
defined financial commodities such as "interest rates, currency prices,
and stock indexes" as "excluded commodities." They could trade off the
futures exchanges, with minimal oversight by the Commodity Futures
Trading Commission. Neither the Securities and Exchange Commission, nor
the Federal Reserve, nor any state insurance regulators had the ability
to supervise or regulate the writing of credit-default swaps by hedge
funds, investment banks or insurance companies.


2001-'03: Alan Greenspan's Fed dropped federal-fund
rates to 1%. Lulled into a false belief that inflation was not a
problem, the Fed then kept rates at 1% for more than a year. This set
off an inflationary spiral in housing, and a desperate hunt for yield by
fixed-income managers.


2003-'07: The Federal Reserve failed to use its
supervisory and regulatory authority over banks, mortgage underwriters
and other lenders, who abandoned such standards as employment history,
income, down payments, credit rating, assets, property loan-to-value
ratio and debt-servicing ability. The borrower's ability to repay these
mortgages was replaced with the lender's ability to securitize and
repackage them.


2004: The SEC waived its leverage rules. Previously,
broker/dealer net-capital rules limited firms to a maximum
debt-to-net-capital ratio of 12 to 1. This 2004 exemption allowed them
to exceed this leverage rule. Only five firms -- Goldman Sachs, Merrill
Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley -- were granted
this exemption; they promptly levered up 20, 30 and even 40 to 1.


2005-'07: Unscrupulous home appraisers found that
they could attract more business by inflating appraisals. Intrinsic
value was ignored, so referrals kept coming in. This helped borrowers
obtain financing at prices that were increasingly unsupportable. When
honest appraisers petitioned both Congress and the bureaucracy to
intervene in the widespread fraud, neither branch of government acted.


THERE'S ACTUALLY A LOT MORE ! (At the link provided)

http://online.barrons.com/article/SB122246742997580395.html#t...


Very truly yours,

Wall Street


BARRY L. RITHOLTZ is CEO of Fusion IQ, a research firm, and blogs on financial topics at bigpicture.typepad.com.



Read More: http://online.barrons.com/article/SB12224674299758...

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Top Opinion

  • Bingo's Faddah 2012/06/19 12:58:09
    They ALL Did It !
    Bingo's Faddah
    +8
    It's a shame that Americans can't see that their entire government and big business handlers are the enemy. Until they do, and actually do something about it, they will continue to slide deeper into the toilet and lose everything.
    When food means Chinese food, it's already too late.

    enemy continue slide deeper toilet lose food chinese food late

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  • cheshirewayne 2012/06/30 18:38:49
    Alternate Opinion . . .
    cheshirewayne
    +1
    Clinton did it. I know you've never heard of “The National Homeownership Strategy: Partners in the American Dream", It was a program that strong armed the banks into giving big housing loans to low income familys. When they couldn't pay it back, the banks foreclosed, adding to the banks inventory. Banks then used that inventory as assets and claimed their taxable value on their books.

    in 2005, Bush sent several letters to congress, through McCain, to try and stop and fix this, they were shot down by Barney Frank, who is butt buddies with a higher up at Freddie Mac, and they were all making big bucks off ripping off the poor.

    Once the Democrats retook congress in 2007, they then screwed the banks by passing a law that banks could not claim the value of their foreclosed assets on their books.

    If you believe in conspiracytheories, it almost as if it was done on purpose.

    http://www.youtube.com/watch?...
  • Matt cheshir... 2012/06/30 19:35:14
    Matt
    It was done on purpose. The big Wall St. banks, (who control politicians) gobbled up the smaller banks with their bailout money, got the assets too, plus the FREDDIE, FANNIE, and private insurance, plus the AIG bailout, and crashed the smaller banks, charities, and pension plans with their fraudulently rated derivatives..
  • cheshir... Matt 2012/06/30 19:50:37
    cheshirewayne
    +1
    I find it interesting that the people (Democrats) that maniplulate the systems to their favor are the first to scream that the "free market system" doesn't work. Obama's puppet masters are making a fortune off of this economic downturn.
  • Matt cheshir... 2012/06/30 20:24:06
    Matt
    ALL of them are looting this country. The differences between our political parties is merely verbal and cosmetic, much like the hype that separates professional wrestlers. They all serve the same masters. Obama bailouts were no less moral than Bush bailouts. The same could be said for Obama wars.
  • DefendnProtect 2012/06/29 22:04:56 (edited)
    They ALL Did It !
    DefendnProtect
    +1
    I wonder how many people know banks have a monopoly to create debt money out of thin air (wouldn't it be nice you could create your own 1 million mortgage only payable to yourself?).

    Recommended docu money is debt..


    If you really want to know how the money industry rules politics and causes depressions in the US this docu is excellent..
  • Bozette 2012/06/27 11:48:34
    They ALL Did It !
    Bozette
    +2
    ...and we let it happen. Many seem to forget about politics after the presidential election is over and take a vacation from politics until the next one rolls around. It is our duty to hold our representatives - on every level of government - to do our bidding and to account to us. For far too many years, the majority of Americans have not done so.
  • harley oldman 2012/06/21 17:04:32
    They ALL Did It !
    harley oldman
    +2
    Every F/n one of them should be lined up and dealt with severerly.........!
    This includes ALL the Govt. first.
  • Jeremiah 2012/06/20 23:34:59
    Alternate Opinion . . .
    Jeremiah
    +2
    Almost all of the above did it. We can't blame this one on Obama. All the damage had been done before he took office.

    Most economists agree on one remedy: reinstate Glass-Steagall. It might need a few tweaks to update it for today's economy, but the basic law did a good job of regulating the financial industry since the Great Depression. Perhaps the best way of reinstating it is to simply repeal Gramm-Leach-Bliley, the Financial Services Modernization Act which ironically took us back to the 1930's.
  • FeedFwd ~POTL 2012/06/20 19:54:29 (edited)
    They ALL Did It !
    FeedFwd ~POTL
    +3
    The problems started in the business cycle in the name of helping by creating a central bank called the FED. Instead of letting the market act freely and putting the responsibility for the market on participants, the government tried to control the economy and and protect the market participants. This (along with global financial efforts taken at the end of WWI including tariffs that led to trade wars) inevitably led to the Great Depression and when the government decided to meddle during the depression when banks failed and the government decided to prevent it from happening again by offering government backed insurance (SLIC, FDIC, etc). Since then, there has been an ever growing drive to insulate people from their fiduciary responsibilities when managing or protecting other people's money. People who manage money now have essentially no liability if they make a mistake and they must compete with others to produce better returns to attract customers. Inevitably higher returns come at higher risk and like a snowball rolling downhill, the risks keep getting larger and larger.
  • stormy rae 2012/06/20 05:12:27
    They ALL Did It !
    stormy rae
    +2
    they all did it, and bitchin bout it on sh will not accomplish deseating congress obama and the admin along with wall st and the rest, get off you arse and change the game
  • Steve J~PWCM~JLA 2012/06/20 00:12:10
    Alternate Opinion . . .
    Steve J~PWCM~JLA
    +2
    It is all caused by the Government. So perhaps downsizing would be beneficial?
  • Jeremiah Steve J... 2012/06/20 23:37:07
    Jeremiah
    Wall Street had nothing to do with it? We can't blame the current government, since they weren't in power yet when the damage was being done.
  • Steve J... Jeremiah 2012/06/21 14:19:09
    Steve J~PWCM~JLA
    Barney? Chris?

    Nice to see you Jeremiah. Still pawning off you fabrications?
  • Jeremiah Steve J... 2012/06/21 14:28:07
    Jeremiah
    +1
    Neither Barney Frank nor Chris Dodd were in positions of power or influence while the damage was being done. Remember, the Dems didn't take control of Congress until 2007, years after Wall Street had become a casino. I know it is a popular Republican talking point to blame Dodd and Frank, and Fannie and Freddie, but the facts just don't seem to agree with the talking points.

    Nice to see you too. Yep, still seeking the truth.
  • Steve J... Jeremiah 2012/06/25 21:08:04
    Steve J~PWCM~JLA
    Let me help you.


  • Jeremiah Steve J... 2012/06/26 00:27:18
    Jeremiah
    Let me guess. It's another edited video. Why do you let others do your talking for you?
  • Steve J... Jeremiah 2012/06/28 18:41:57
    Steve J~PWCM~JLA
    I don't. But it is a very accurate representation. And I'm not a video editor. But of course, you don't want to know the truth.
  • Jeremiah Steve J... 2012/06/28 23:18:04
    Jeremiah
    You and I disagree in our interpretation of the word "accurate."

    I always seek the truth. I have made it a lifetime quest. For example, I know it is true that ACA is fully Constitutional because the U.S. Supreme Court ruled it so.
  • Steve J... Jeremiah 2012/07/02 18:59:37
    Steve J~PWCM~JLA
    Well, that's true. And you search for a very interesting "truth".
  • Jeremiah Steve J... 2012/07/02 23:01:20
    Jeremiah
    Always. Wherever I find it. It is a never ending mission.
  • templer003 2012/06/19 23:51:34
    They ALL Did It !
    templer003
    +2
    No one person or political party is to blame in this, they all carry the same amount of guilt.
    Either for not having the moral fortitude or compass to just say no to the greed, or for not having the backbone to come out and stop it.
    The worst of the blame go's to those who knowingly brought this on and then went even further all for the so called almighty dollar.....
    Our nation can no longer afford to have these kinds of elected people or bankers etc. on Wall Street it IS time to have a very deep cleaning....
  • firelooker 2012/06/19 23:45:44
    They ALL Did It !
    firelooker
    +3
    Wall st and Washington share the blame.
  • Dwight PWCM 2012/06/19 18:50:05
    They ALL Did It !
    Dwight PWCM
    +3
    Anyone who shelled out tax dollars to bail them out, or refused to enforce regulation already on the books should be paying Us back.
  • DDogbreath 2012/06/19 18:12:38
    They ALL Did It !
    DDogbreath
    +4
    Bring back "the stocks" (no not the Wall St. ones) and "Tar & Feathering"!

    stocks wall tar feathering



    stocks wall tar feathering
  • Matt DDogbreath 2012/06/19 19:37:44
    Matt
    +3
    Stocks and bonds !
    Karaoke
  • Tinka123 2012/06/19 17:03:19
    They ALL Did It !
    Tinka123
    +4
    And now the SCOTUS has granted their corporate 'collectives' rights tantamount to those of individuals. Wasn't that nice of them? Now they can spend more of our money promoting our demise... yes, we're paying for our own demise. What a mess.
  • Beccy 2012/06/19 16:58:32
    They ALL Did It !
    Beccy
    +2
    IF something had been done during the saving and loan crisis this would have never happened. The government turns their heads while the bankers rob the poor and middle classes blind. After Americans came out in numbers and begged congress not to bail out the bankers and they did it anyway the country lost it's soul. Every mortgage in the country would have been paid off with money left over for what was gifted to the bankers.
  • Chewy 2012/06/19 16:51:41
    Bush Did It !
    Chewy
    +4
    Bush did it...he and his GOP banking buddies and all their cronism ways. Here's to W : The finger gif
  • tommyg ... Chewy 2012/06/19 17:22:29
    tommyg - POTL- PWCM-JLA
    +2
    Come on dude.....open your eyes. They all played a part.
  • Jeremiah tommyg ... 2012/06/20 23:39:59
    Jeremiah
    We can't blame Obama for this one.
  • tommyg ... Jeremiah 2012/06/21 00:33:24
    tommyg - POTL- PWCM-JLA
    +1
    You telling me Congress didn't have anything to do with this?
  • Jeremiah tommyg ... 2012/06/21 14:31:31
    Jeremiah
    +1
    No I am not. A Republican Congress passed Gramm-Leach-Bliley, which gutted Glass-Steagall and erased the separation between banking and brokering, permitting the big banks to speculate with depositors' money. Another win for deregulation.

    Want to fix things? Begin by reinstating Glass-Steagall.
  • DDogbreath Chewy 2012/06/19 18:04:52
    DDogbreath
    +3
    A history lesson you should chew on for a while...

  • Chewy DDogbreath 2012/06/19 23:26:01
    Chewy
    +1
    A history lesson? LOL....a damn video off Youtube? Are you an Alex Jones fan? Do you believe in UFOs too?
  • DDogbreath Chewy 2012/06/19 23:28:37
    DDogbreath
    +3
    I CHALLENGE you to find anything inaccurate.
  • Chewy DDogbreath 2012/06/19 23:30:31
  • DDogbreath Chewy 2012/06/19 23:37:38
    DDogbreath
    +3
    What are you going to do "pussy out"?
  • DDogbreath DDogbreath 2012/06/20 04:15:57
    DDogbreath
    +1
    All I here are... Crickets Chirping...
  • Jeremiah DDogbreath 2012/06/20 23:40:50
    Jeremiah
    +1
    Obama was not in office yet when the damage was being done.
  • DDogbreath Jeremiah 2012/06/20 23:49:34 (edited)
    DDogbreath
    +1
    You had better watch it again. Can you say Bill Clinton?

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