Don’t know if you saw this on CBS’ 60 Minutes last night. It was Steve Croft’s interview with author Michael Lewis.
Lewis explains, in easy to understand detail, how some of Wall Street’s finest minds managed to destroy $1.75 trillion of U.S. wealth in the subprime mortgage markets.
Lewis says it’s less a story of criminal activity and more a story of mass delusion.
As I listened, I found myself getting angry with the greedy Wall Street investment bankers who had no clue about what was unfolding and set this huge financial collapse in motion. In doing so, they have placed a financial burden equal to tens of thousands of dollars on the backs of each U.S. citizen; man, woman and child.
I found myself feeling angriest, and more frustrated with the federal agencies who were supposed to be regulating the investment. Angriest too at the elected officials from both of our political parties.
Why? Because they approved spending more than $1.5-trillion of our tax dollars to bail out the investment and insurance companies who were responsible for this financial disaster.
One cruel kicker here: The investment managers awarded themselves $20 billion in bonuses last year from the profits they made on the U.S. bailout money.
In essence, the U.S. loaned their companies interest-free loans worth billions of dollars that they invested in U.S. Treasury notes which paid guaranteed interest.
In other words: We’re going to give you taxpaper money to keep your miserably managed company afloat and then pay you interest on the money so you can make a guaranteed profit.
Lewis also notes that bond rating agencies like Standard & Poor’s and Moody’s didn’t do their jobs. They were supposed to be doing the analysis on the creditworthiness of the subprime borrowers and the structure of the complicated Wall Street mortgage securities so investors could accurately judge their risks. They didn’t.
Lewis has a gift for turning complicated, mind numbing material into fascinating, yet sobering information. His new book, “The Big Short: Inside the Doomsday Machine,” comes out later this week.
What concerns me most?
Not that Wall Street is out of touch with economic reality, Main Street America or having fiscal responsibility towards its individual investors.
What concerns me most is that our elected members of Congress and the federal institutions that are supposed to help safeguard Americans from these abuses, have largely failed to do their jobs. As a result, I believe our economy, our strength as a nation, and our future continue to be at dangerous risk.
How do you feel about all this?