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Chopstick
02-02-2011, 12:00 PM
<span style="color: #006600"><span style='font-family: Comic Sans MS'>Wall Street’s Collapse to Be Mystery Forever: Jonathan Weil
By Jonathan Weil - Jan 27, 2011 9:00 PM ET

To get to the heart of what went wrong with the report released yesterday by the Financial Crisis Inquiry Commission, check out its account on page 254 of how the largest investor in a cash fund managed by Bank of America suddenly pulled out $20 billion of its money in November 2007.

The withdrawal crippled the fund, which had $40 billion of assets at its peak, forcing Bank of America to step in and prop it up. The commission included a note about the episode in the back of its report.

“The identity of the investor has never been publicly disclosed,” it says. The note then referred readers to the source of the information: A couple of stories published in December 2007 by Bloomberg News and the New York Times.

<span style="color: #000099">OK so who did that? Who has billions at their disposal and a history of destabilizing banking systems? I don't know about you guys but it's a short list for me.</span>

And here I had thought the purpose of the commission’s inquiry was to uncover new facts that the public didn’t already know. Such as: The identity of the mystery investor that single- handedly kneecapped Bank of America’s Columbia Strategic Cash Portfolio, once the largest cash fund of its kind in the U.S. The commission had subpoena power. It should have been able to get this information. It didn’t, though.

This, in journalistic parlance, is what we call a clip job. And that’s the trouble with much of the commission’s 545-page report. There’s lots of breezy, magazine-style, narrative prose. But there’s not much new information.

You can tell the writers knew they were sprinkling MSG on a bunch of recycled material, too, by the way they described their sources. The text and accompanying notes often seem deliberately unclear about whether the commission had dug up its own facts, or was rehashing information already disclosed in court records, news articles or other congressional inquiries.

Old News

For instance, we’re told how a former Bear Stearns hedge- fund manager, Matthew Tannin, sent an e-mail in April 2007 to colleague Ralph Cioffi that said: “Looks pretty damn ugly.” (A few days later they told investors they were confident about their funds, which held subprime mortgage bonds.) The report cites the e-mail as the source for the quote. What it doesn’t say is that the e-mail came out in court records that were widely publicized in 2009.

The report does break some morsels of news. Before it imploded, Bear Stearns used to rely on “window dressing” to make its quarterly balance sheets look smaller. Moody’s Investors Service assumed a 4 percent annual increase in home prices to justify AAA ratings for mortgage-backed securities that later blew up. More such tidbits surely will emerge as reporters and bloggers plow through the report’s pages.

Stating the Obvious

The bulk of it, though, covers ground that was largely known, or at least not all that surprising. (I bought my copy at a local bookstore in Manhattan on Wednesday, the day before the commission’s intended release date, and spent the last two days reading it.)

The report’s conclusions were obvious: The financial crisis was man-made and avoidable. Regulators and credit-rating companies blew it. Banks and homeowners borrowed too much. Companies such as AIG and Lehman Brothers had horrible governance. Ethics and accountability broke down. The government panicked when the crisis hit in 2008. And so forth.

The lack of new insights dovetailed with the commission’s non-confrontational approach. More than 700 people granted interviews, most behind closed doors. Only seldom did the panel issue subpoenas.

Ferdinand Pecora, the chief counsel who led the Senate Banking Committee’s landmark hearings on the 1929 stock market crash, wrote a memoir years later called “Wall Street Under Oath.” A good title for this week’s report would be Wall Street on the Couch.” It remains to be seen whether the commission will make public all the investigative materials it accumulated, as the Pecora Commission did in 1934.

Predictable Failure

The FCIC’s failure was predictable from the start. To examine the causes of the financial crisis, Congress created a bipartisan panel of 10 political appointees led by Democrat Phil Angelides, a former California state treasurer. What was needed was a nonpartisan investigation directed by seasoned prosecutors (like Pecora was) who know how to cross-examine witnesses and get answers.

Whereas Pecora had no fixed deadline, Congress gave the crisis commission until December 2010 to complete its inquiry. Witnesses who didn’t want to cooperate fully could simply milk the clock. The panel got a budget of less than $10 million to investigate all the causes of the financial crisis. Lehman’s bankruptcy examiner got $42 million to produce a 2,200-page report on the failure of a single company.

This week’s report will serve a useful purpose. For anyone who doesn’t know much about the financial crisis, the book is a good, condensed version that’s worth reading, even if it doesn’t add much to the public’s body of knowledge.

“There is still much to learn, much to investigate, and much to fix,” the commission wrote in the preface to its report. That also would make a fitting epitaph.</span> </span>

Soflasnapper
02-02-2011, 01:16 PM
Massive crimes of great enormity were committed in this disaster. It is the power of those criminals we see here on display to assure they will never be brought to justice, AND won't lose money on their frauds.

Some have traced the fraud's origin to 3 Wall Street traders meeting over lunch at a Chinese restaurant, who designed the investment scheme to fail so they could profit betting (short) against it. And whether this was their plan at the origin or not, we know from Goldman-Sachs e-mails that they KNEW they would be saved by their short positions (they called it 'The Big Short' (tm)). Some of these e-mails contained the question, 'what about our clients who are not in on 'The Big Short' (tm)? It was clear they knew they would be ruined.

Problem: the short bet was covered by AIG, who couldn't pay off the bet. Answer: AIG gets what, $150 billion or something, which they then use to pay the counterparties (GS and European banks).

Chopstick
02-02-2011, 03:34 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">Massive crimes of great enormity were committed in this disaster. It is the power of those criminals we see here on display to assure they will never be brought to justice, AND won't lose money on their frauds.

</div></div>

I agree. Theories and investigations about what went on will go on for decades to come. They will produce just enough to quite the people down. They are never going to let anyone know what really happened. Everyone is dirty from capital hill through wall street and into the world governments and financial centers. The scale of the thing is almost incomprehensible.

Even the ultra-sophisticated financial professionals got taken. Now that I think about it, it probably did not start out that way. I am thinking that it may have started out as a smaller scale scheme and after a while it took on a life of it's own and got way bigger and out of control than anyone anticipated. The financial pricing models of those securities was based on historical housing prices. Historically, housing prices were tied to CPI. When housing prices became uncoupled from CPI actual prices went outside of the models. Also, even tough there had been localized depressions of housing prices, there had never been a nation wide drop in housing prices which blew up the models completely and caused the complex derivative securities structure built on them to go bug nuts.

cushioncrawler
02-02-2011, 03:39 PM
This iz mainly bullkrap anyhow. Koz, like i sayd before, money changing hands iz only a krisis for the loozer -- and every dollar lost iz allso a dollar gained -- so how kum a krisis for the usofa.

How kum -- well, its koz the usofa system stinx.

Some Wall St guys go into a room to play poker. Next morning they came out -- and the gov asks how it all went.
"Nah, no good, we all lost -- and another thing, and so did u".
mac.

Chopstick
02-02-2011, 03:48 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: cushioncrawler</div><div class="ubbcode-body">
Some Wall St guys go into a room to play poker. Next morning they came out -- and the gov asks how it all went.
"Nah, no good, we all lost -- and another thing, and so did u".
mac. </div></div>

LOL. /forums/images/%%GRAEMLIN_URL%%/laugh.gif

From now on that is my official explanation of what happened.

Sev
02-02-2011, 05:04 PM
Mac Mac Mac. AHHAHA!!

LWW
02-03-2011, 03:29 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Chopstick</div><div class="ubbcode-body"><span style="color: #000099">OK so who did that? Who has billions at their disposal and a history of destabilizing banking systems? I don't know about you guys but it's a short list for me.</span> </div></div>

Gyorgy Soros would be my first guess.

He has dome pretty much the same thing before ... breaking the Bank of England and causing the late 90's SE Asian crisis, as well as being a convicted Phrench Phelon for insider trading.

Add in that he would have governmental cover in that, as his people have clearly claimed, he has bought and paid for the Democratic party.

LWW

Gayle in MD
02-03-2011, 10:22 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: cushioncrawler</div><div class="ubbcode-body">This iz mainly bullkrap anyhow. Koz, like i sayd before, money changing hands iz only a krisis for the loozer -- and every dollar lost iz allso a dollar gained -- so how kum a krisis for the usofa.

How kum -- well, its koz the usofa system stinx.

Some Wall St guys go into a room to play poker. Next morning they came out -- and the gov asks how it all went.
"Nah, no good, we all lost -- and another thing, and so did u".
mac. </div></div>

And thank goodness Republicans have seen to it that they all got nice tax cuts, AFTER they bilked the whole country.

If it wasn't a massive redistribution of wealth, through fraud, on a grand scale, by the greedy pigs at the top, I'd like to know what one would call it! /forums/images/%%GRAEMLIN_URL%%/smirk.gif

LWW
02-03-2011, 11:13 AM
Excellent post.

LWW