Ten Reasons for the Financial Collapse of America

by Francine on January 6, 2010

Gucci shoes
BMWs
Driver-attended Lexus sedans
Park Avenue apartments
Westchester Country clubs
Greenwich mansions
Jackson Hole Vacations
NetJet accounts
Black town cars
Island summer homes
Manhattan steak houses

OK,  those aren't the real reasons; but they are the outward trappings.  The "real" ten reasons are probably the seven deadly sins, de-regulation, globalization, and the decline of public education.

However, those ten symbols (to which all the major characters in this gripping narrative had  unfettered access), although never  part of the lifestyle of the average American, are part of every Wall Street banker's repertoire.. Even as they failed to mark their worthless assets to market ( translation: tell the truth about the crap they had securitized ) and continued to demonstrate unfamiliarity with the numbers in the businesses they were supposed to be running, these CEOs were living in unbridled luxury thinking they were taking part in "real life."

By now you probably can guess that I'm reading Andrew Ross Sorkin's "Too Big to Fail" and it is making me sick. From what I can tell, none of these investment banking firms or mega-banks had so much as a controller to tell them when to stop spending. Throwing around  multi-billion dollar numbers in deals that repeatedly bet the farm (or the firm), they operated in an atmosphere of outright denial about what money actually means. Even the ones from poor backgrounds forgot that their portfolios of toxic assets contained the remnants of other peoples' lives.

And none of those people, with the exception of Dick Fuld of Lehmann Brothers, a hot-tempered egotist, have lost their jobs. They're still in position: John Mack of Morgan Stanley, Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JP Morgan Chase,  Vikram Pandit of Citibank, and Ken Lewis of B of A. Not to mention Tim Geithner, then head of the New York Fed, now Treasury Secretary. These guys vandalized our financial system and were never apprehended. As far as they were concerned, they did nothing wrong. They moved pieces on a board, and played to win, that's all. When it doesn't work out, they say "holy shit," and scramble for the bailout exits.

Almost two years later, their assets are still toxic. Lehmann crumbled, but my own experience trying to get a mortgage modification has convinced me their real estate division still refuses to mark its assets to market; they still want to value my home, now worth $511,000, at the $769,000 it was worth in 2005. If they didn't, they'd modify my mortgage.  But that would mean they would take the write down. Instead, I take it. And I don't mean just me, I mean  every middle class American who owns a home, lost a job, or can't get a loan. We are all taking it.

I also take the new "inactivity fee" for not using my Citibank credit card, and the new "transfer fee" for moving money from my business line of credit to my checking account to pay a bill. And I take the "finance charge" on my Visa, and the ATM fee, and the overdraft fee. We have to take those, so the bankers can keep their compensation.

The fees are going up even as I write this, as the banks fight to get their profits locked in before the new regulations start in February.

Simon Johnson, one of the writers of "The Baseline Scenario" has voted with his feet. He has closed his accounts at the big banks. He can't trust them. He knows they won't help him. They will do anything to preserve their hegemony. They don't even trust each other. In Sorkin's book, even in the most dire circumstances, the ethos is always "don't help the competition." Only when they think the competition's death might bring them down as well do they offer to work together. Wall Street is all about WIIFM: what's in it for me.

In the mean time, the rest of us have learned a different lesson. In our world, where people can no longer afford to eat out or take a vacation, we've learned we MUST work together, sharing what little resources we have left so we can survive in this brave new world the bankers have brought us.

Posted via email from Not Really Stealthmode

{ 15 comments… read them below or add one }

michaeljbarber January 6, 2010 at 3:09 pm

This is like the good old saying “Don't hate the player, hate the game” where the player is US banks and the game is the government.

I'd love to place all the blame on the bankers, but they took advantage of everything the government allowed them to do. They got creative. Yes, it was incredibly destructive to OUR world, but you need to look no further than DC for not regulating an industry that is/was smarter than they are. The blame has to be shared across multiple parties. It too limiting to simply blame the big banks.

aac74 January 6, 2010 at 4:04 pm

Regulation will not solve anything. Madoff had regulators breathing down his neck all the time !

If you are really looking for a solution you have to look to the people who were complaining about what was going on before the crash. The only people who seemed to have a problem with the wall street/fannie mae/freddie mac /AIG/Federal Reserve/congress axis of evil were the austro-libertarian cabal of Ron Paul, Peter Schiff, Lew Rockwell et al. i.e. the ultra right wing gold bug fruit loops !

The bailouts started in 1990 with savings and loans, moved into high gear with long term capital management in 1998 and what we just had was the final blow off.

The debt/bubble (rather than savings/production) based economy started in the 90's with the FED leasing gold to created a carry trade to drive the price of gold down and stocks up, it moved into high gear in 2001 with the FED/Bush plan of ultra easy money combined with massive deficit spending to create a 'permanent stimulus'. The current stimulus is the final blow off.

http://www.youtube.com/watch?v=Aq1N70vym1g

http://www.amazon.com/Crash-Proof-2-0-Economic-

http://mises.org/story/2533

hardaway January 6, 2010 at 6:06 pm

Good point. Glass-Steagall should not have been repealed. Among other
things. But if you read this book you will see that the bankers ARE the
government, just like in health care the lobbyists are the government. It's
a revolving door of greed. Public service is a joke.

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aac74 January 9, 2010 at 4:00 pm

After all the financial engineering we have had over the last 10 years do you not think Wall Street could have got around Glass-Steagall or any other set of regulations some way ?

hardaway January 9, 2010 at 4:02 pm

Probably. But after you read “Too Big to Fail” you realize even the free
market people understood that the regulators had failed them.

aac74 January 9, 2010 at 5:29 pm

There are two types of 'free market' people:

a) The evil main stream republican/Ronald Reagan/freshwater/Chicago school/neo-classical/monetarist now 'rational expectation'/big government/bomb Iran/inflation works/borrow and spend/Goldman Sachs is doing God's Work/the great depression was caused by a collapse in the money supply/the boom is healthy and the recession is a problem that needs to be fixed by increasing the money supply people

b) Our heroes the austro-liberatrian/gold bug/Barry Goldwater/don't bomb them first/end the FED/destroy the department of education/deflation makes you rich/main street first/savings and production/ the great depression was a normal recession till Hoover tried to prop up prices and stimulate the economy/the boom is the problem and the recession the cure crackpots

Type b) believes that the only regulation that you need is the fear of failure and ruin that you get in a real 'free market'. This is the only thing that can check greed because regulation can always be circumvented over time – even the KGB could not kill the black market in gasoline and Levis with all their regulators!
e.g. they oppose the very idea of the FDIC because if it didn't exist banks would have to compete for deposits based on their safety, how big their reserves were, the quality of their loan book etc… When was the last time JD Power rated your bank on its stability ?

Type b) is all about the long term. Yes for a few years the 1998 bailout of long term capital management looked like a master stroke that saved the world. After all you don't want a massive stock crash and world recession do you ?

aac74 January 9, 2010 at 11:00 pm

After all the financial engineering we have had over the last 10 years do you not think Wall Street could have got around Glass-Steagall or any other set of regulations some way ?

hardaway January 9, 2010 at 11:02 pm

Probably. But after you read “Too Big to Fail” you realize even the freernmarket people understood that the regulators had failed them.

aac74 January 10, 2010 at 12:29 am

There are two types of ‘free market’ people: rnrna) The evil main stream republican/Ronald Reagan/freshwater/Chicago school/neo-classical/monetarist now ‘rational expectation’/big government/bomb Iran/inflation works/borrow and spend/Goldman Sachs is doing God’s Work/the great depression was caused by a collapse in the money supply/the boom is healthy and the recession is a problem that needs to be fixed by increasing the money supply peoplernrnb) Our heroes the austro-liberatrian/gold bug/Barry Goldwater/don’t bomb them first/end the FED/destroy the department of education/deflation makes you rich/main street first/savings and production/ the great depression was a normal recession till Hoover tried to prop up prices and stimulate the economy/the boom is the problem and the recession the cure crackpotsrnrnType b) believes that the only regulation that you need is the fear of failure and ruin that you get in a real ‘free market’. This is the only thing that can check greed because regulation can always be circumvented over time – even the KGB could not kill the black market in gasoline and Levis with all their regulators! rne.g. they oppose the very idea of the FDIC because if it didn’t exist banks would have to compete for deposits based on their safety, how big their reserves were, the quality of their loan book etc… When was the last time JD Power rated your bank on its stability ?rnrnType b) is all about the long term. Yes for a few years the 1998 bailout of long term capital management looked like a master stroke that saved the world. After all you don’t want a massive stock crash and world recession do you ?

hardaway August 21, 2010 at 9:17 pm

Learn from experts how to start or grow your business, even in this economy. Come to AZEC10 (http://www.azec10.com).

rnrn

I’d like to remind you that we have significant discounts for early registration at http://azec10.eventbrite.com

rnrn

AZEC10 is the premier Arizona conference directly geared to entrepreneurs, and people come from everywhere (even Canada) to attend.This year’s speakers include industry analyst and wen-strategist Jeremiah Owyang (@jowyang); Bay Area VC Dave McClure (@davemcclure), Flowtown co-founder Ethan Bloch (@ebloch), Infustionsoft founder Clate Mask (@infusionsoft), and entrepreneurial photographer Kris Krug (@kk).

rnrn

This is a personal invitation to you, to join me.

This email was sent to
You can instantly unsubscribe from these emails by clicking the link below:
http://unsubscribe.flowtown.com/contacts/57d7277715afcd1e67cb1870a51ac2ef4ac34f21/unsubscribe

rn

hardaway August 21, 2010 at 9:22 pm

Learn from experts how to start or grow your business, even in this economy. Come to AZEC10 (http://www.azec10.com).

rnrn

I’d like to remind you that we have significant discounts for early registration at http://azec10.eventbrite.com

rnrn

AZEC10 is the premier Arizona conference directly geared to entrepreneurs, and people come from everywhere (even Canada) to attend.This year’s speakers include industry analyst and wen-strategist Jeremiah Owyang (@jowyang); Bay Area VC Dave McClure (@davemcclure), Flowtown co-founder Ethan Bloch (@ebloch), Infustionsoft founder Clate Mask (@infusionsoft), and entrepreneurial photographer Kris Krug (@kk).

rnrn

This is a personal invitation to you, to join me.

This email was sent to
You can instantly unsubscribe from these emails by clicking the link below:
http://unsubscribe.flowtown.com/contacts/2f6714cc3495031da248442de163fbf4fca3957c/unsubscribe

rn

hardaway August 22, 2010 at 9:19 pm

Here’s my personal invitation to attend AZEC10 (http://www.azec10.com), the premier conference in Arizona to help entrepreneurs start and grow businesses. Here, VCs and entrepreneurs and resources meet and learn from each other.

rnrn

This year’s cast of characters includes Bay Area VC Dave McClure (@davemcclure), web strategist and industry analyst Jeremiah Owyang (@jowyang), Infusionsoft founder Clate Mask (@infusionsoft), legendary entrepreneur/photographer Kris Krug (@kk) and a host of Arizona companies and resources,

rnrn

Early Bird Registration is available at http://azec10.eventbrite.com, and I hope to see you there!

This email was sent to
You can instantly unsubscribe from these emails by clicking the link below:
http://unsubscribe.flowtown.com/contacts/57d7277715afcd1e67cb1870a51ac2ef4ac34f21/unsubscribe

rn

hardaway August 22, 2010 at 9:23 pm

Here’s my personal invitation to attend AZEC10 (http://www.azec10.com), the premier conference in Arizona to help entrepreneurs start and grow businesses. Here, VCs and entrepreneurs and resources meet and learn from each other.

rnrn

This year’s cast of characters includes Bay Area VC Dave McClure (@davemcclure), web strategist and industry analyst Jeremiah Owyang (@jowyang), Infusionsoft founder Clate Mask (@infusionsoft), legendary entrepreneur/photographer Kris Krug (@kk) and a host of Arizona companies and resources,

rnrn

Early Bird Registration is available at http://azec10.eventbrite.com, and I hope to see you there!

This email was sent to
You can instantly unsubscribe from these emails by clicking the link below:
http://unsubscribe.flowtown.com/contacts/2f6714cc3495031da248442de163fbf4fca3957c/unsubscribe

rn

Economic trend forecasters April 19, 2011 at 2:02 pm

Hmmmmmm

Your Ten reasons are really impressive….I liked your Ten Reasons for the Financial Collapse of America

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