Friday, November 28, 2008

Beating You Over The Head

I found myself nodding as I read this, but the real kicker came when I saw that the author is not some ivory-tower economics professor but head of a powerful division within a large financial services company.


Blogger Chief Jimbo said...

It's good to see the author learned his lesson being a part of Morgan Stanley (asia no less). They were one of the casualties of this whole debacle and in their lowest moment were allowed to change from an investment bank to a bank holding company and then had almost a third of their assets bought up by the Japanese.

This is a larger trend of the "oh you caught us now I don't have to keep trying to pull the wool over your eyes" admissions.

Rush Limbaugh after the 2006 elections "This is the happiest day of my life because I no longer have to defend these idiots" (paraphrase)

Real Estate mortgage brokers Pre-2008: "Sure you can afford this 5/1 ARM that is right now 40% of your income. Sure you can afford this CRA loan when you don't have a job"

Investment types are in the same boat. Pre-sept 08 - "Hey, a negative savings rate is sustainable."

Honor has been replaced with dollars. It's going to be a hard fight to put it back.

11:07 AM  
Blogger Waan said...

I'd add one more to the pre-crash list: "Sure I can borrow against my overvalued home while continuing to pile on credit card debt. I have a job."

I'm unsure about the pull-the-wool-over-your-eyes idea ... my gut feeling is that everyone was drinking from the same punch bowl and fooled themselves as much as they fooled each other. I'll never forget multiple co-workers in Eugene telling me "Real estate is the best investment because you can't lose money on it." I'd laugh if they weren't so utterly earnest (and wrong). These were people who'd witnessed several market/rate swings over the decades. What the hell was everyone thinking?

Either way, I agree about these financial types reaping what they sowed, though it's maddening to witness the reversal from "government should stay the hell out of our way" to "sooo ... how about bailout?" It's like the GM model applied to finance.

Anyway, I think the surest sign things were going tits-up was when we started seeing reality TV shows featuring house-flipping competitions. Kinda reminds me of that company back in 2000-2001 that was paying college students ridiculous money just to monitor their web habits ... I'm sure they had an insane market cap for about three months.

2:30 PM  

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