I mentioned to y'all that last year I read Michael Lewis's book 'Liar's
Poker', which chronicled his years as a bond trader for Salomon Brothers
in
the 1980s (we baseball fans know him more famously for Moneyball). It was
a
very interesting read, and is one of the books that gave me a basis for
understanding what has gone on this year.
Anyway, Lewis has an article out now, revisiting Wall Street:
http://www.****tfolio.com/news-markets/national-news/****tfolio/2008/11/11/The-End-of-Wall-Streets-Boom?print=true%22
Much of it is interesting, interviewing people who saw it all coming and
put
their money behind it. But the most im****tant stuff, the part that really
explains how we got where we are today, is on the last page. Here's the
edited version:
"John Gutfreund did violence to the Wall Street social order-and got
himself
dubbed the King of Wall Street-when he turned Salomon Brothers from a
private partner****p into Wall Street's first public cor****ation.
....
He and the other partners not only made a quick killing; they transferred
the ultimate financial risk from themselves to their shareholders.
....
No investment bank owned by its employees would have levered itself 35 to
1
or bought and held $50 billion in mezzanine C.D.O.'s. I doubt any
partner****p would have sought to game the rating agencies or leap into bed
with loan sharks or even allow mezzanine C.D.O.'s to be sold to its
customers. The hoped-for short-term gain would not have justified the
long-term hit.
....
He agreed that the main effect of turning a partner****p into a cor****ation
was to transfer the financial risk to the shareholders. "When things go
wrong, it's their problem," he said-and obviously not theirs alone. When a
Wall Street investment bank screwed up badly enough, its risks became the
problem of the U.S. government. "It's laissez-faire until you get in deep
****," he said, with a half chuckle."
Colin
--
---------------------
"Science is based on a fundamental insight - that the degree to which an
idea seems true has nothing to do with whether it is true"
|
