Wall Street Report Tries to Dissect Financial Meltdown

Highlights

• E. Gerald Corrigan, a managing director at Goldman Sachs & a chairman of the Counterparty Risk Management Policy Group III: " Virtually everybody was frankly slow in recognizing that we were on the cusp of a really draconian crisis,”.
• Wall Street: "Created complex structures that masked connections between asset classes as well as compensation incentives that pushed traders to take risky steps for short-term gain. The industry’s failings have now translated into pain for the broader economy, the report said."
• As Bear Stearns struggled: " in early March, investors feared that too many of those links would collapse if the bank folded — leading some Wall Street executives to say that Bear Stearns was not too-big-to-fail but rather too-interconnected-to-fail."
• Accounting for bundles of Mortgage loan Packages: "Those have been kept off the balance sheet, and many in the industry think that rules that would put the bundles back on the books should apply only to the future. The report suggests putting loan packages from the past — which will force many banks to raise more capital from investors."

Comments

Three Little Monkeys: See no Evil, Hear no evil, Speak no Evil and we all profit handsomely. The report itself is worth a quick glance if you have the time. Just read the intro and Summary and you quickly get the picture regarding what did and didn't happen.
Report - CRMPG3 Link: http://www.crmpolicygroup.org/

2+2=8: Through the magic of high finance and well oiled Credit Ratings support - the insane became sane. Yes, big profits for everyone and AAA ratings to boot.

Who can complain: and no one did. The Best brains on Wallstreet never saw it coming. I am sure the kids fresh out of school and hired to formulate the financial engineering structures didn't. How could they, they wrote expensive moving averages that work very well until the cyclical downturn. Then, like any good moving average does, informs you are upside down on the trade after the fact.

Leadership and Guidance: Nowhere to be found. Structured finance became to profitable to stop. With no regulations, off balance sheet advantages, and a Fed & White House to fully support you when you falter.

$500 Billions later: Nobody did anything wrong except for the poor slobs that really believed the Rating Agencies and Wallstreet story Book bond values. No crime, no foul - now the American tax payer can pay the tab.

Jim