New York Times Opinion Piece by Lewis and Einhorn
I usually don't bring over opinion pieces to the website, but there is a fascinating one by hedge fund manager
David Einhorn &
Michael Lewis, the author of "Liar's Poker" and for you baseball fans "Moneyball". It comes in two pieces online '
The End of the Financial World as We Know It' and '
How to Repair a Broken Financial World'
I'll post some excerpts below but these are two healthy sized pieces and if this type of thing is of interest to you, worth the full read. Since I'm so riled up about the gutting of checks and balances and the misalignment of the good of the many for the good of the few, this was a piece that struck about 50 chords with me. If you have any semi financially literate friends I'd recommend a printing of this entry or the original posts themselves - the more people who know about this white washing the better.
- AMERICANS enter the New Year in a strange new role: financial lunatics. We’ve been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet’s college graduates seemed to want nothing more out of life than a job on Wall Street.
- This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don’t know what they are doing with money, who does?
- Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?
The next portion if about
Bernie Madoff...
- What’s interesting about the Madoff scandal, in retrospect, is how little interest anyone inside the financial system had in exposing it.
- It wasn’t just Harry Markopolos who smelled a rat. As Mr. Markopolos explained in his letter, Goldman Sachs was refusing to do business with Mr. Madoff; many others doubted Mr. Madoff’s profits or assumed he was front-running his customers and steered clear of him. Between the lines, Mr. Markopolos hinted that even some of Mr. Madoff’s investors may have suspected that they were the beneficiaries of a scam. After all, it wasn’t all that hard to see that the profits were too good to be true. Some of Mr. Madoff’s investors may have reasoned that the worst that could happen to them, if the authorities put a stop to the front-running, was that a good thing would come to an end.
- The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it.
- “Greed” doesn’t cut it as a satisfying explanation for the current financial crisis. Greed was necessary but insufficient; in any case, we are as likely to eliminate greed from our national character as we are lust and envy. The fixable problem isn’t the greed of the few but the misaligned interests of the many.
- OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.
Next onto about the pathetic excuse that are
credit agencies; he who is PAID by the people whose instruments they are rating - i.e. let fox rate the chickens.
- Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages.
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