Why Blog?

I posted a few comments related to the mess generally referred to as the mortgage crisis but got no comments. Having felt the heavy hand of the federal government in the past, I was a bit worried about what may happened if I were too critical of how we got into this mess, especially as it relates to those lovable GSE's, Fanny and Freddy. Anyhow, I deleted the posts. To summarize though, I pointed out the folly of believing that companies with leverage in excess of 100 times are actually AAA, implied government guarantee or not. I also pointed out that the profit centric nature of the Wall Street firms, the rating agencies, the mortgage originators and the law firms that brought the securities to market are at the core of the reasons why the whole thing happened in the first place. The decision makers put aside common sense and prudent judgement and substituted avarice.

Actually taking the word of people who are instructed to skew their analysis so that securities can be rated and placed is folly at its best. Further, when underwriters are naive enough to actually put their own capital at risk, one can be assured that the inmates are in charge of the asylum. Throw in a few well placed PAC's, dole out a few million and anything becomes possible. The Prudent Man Rule, what the heck is that? Seriously folks, who really needs greater than ten or $15 million a year to survive? Yes, I'll approve this deal that I haven't a clue as to how it works so long as my bonus stays in the neighborhood of $30 million.

The talking heads are now speaking about what went wrong. Nobody however, has really focused on the reasons why the Fed and the Treasury are being forced to step up to the plate. Think derivative. Think credit default swap. Think about the extent to which Fanny and Freddie are up to their armpits in that market. Think about the consequences of a failure of those guarantors in the event of a default. Think about the federal deficit, now, and then throw in another several hundred billion on top of that as a result of rewarding the incredible incompetence at the helms of all of these firms. Yes, ladies and gentlemen, we are in a pickle and it's going to get worse.

When I was in the thick of it all, I never really got it. I never really understood how seemingly intelligent people could be so centered on money to the exclusion of all else in their shallow existence. Further, how anyone could judge someone to be intelligent based solely on their ability to make money?

I've written members of congress, op-ed writers and others to tell them about the perils of participating in the sub-prime mortgage market. Nobody got it or nobody took the time to really think about what could happen. How could any reasonable person actually believe that the residential mortgage market could possibly be one-dimensional? How could any prudent person take the word of an analyst who has never lived through a down market? I know, let's take the word of the Realtors and the mortgage bankers, no, no, no, let's trust the ABA no, they have an ax to grind also. I know, let's trust the home builders - they'd never screw the banks would they? No wait, let's rely on the rating agencies. They're staffed with people who make about 10% of what the people who request their approval make. Do you suppose that people at S&P and Moody's are more interested in getting into Wall Street firms than protecting investors? No way! How about the SEC? Do you suppose that they would succumb to pressure from congress to be lax on accounting and disclosure? And, we all know that congress would never exert pressure on anyone simply because someone donated money to their campaigns, would they? And if they did, they'd totally comprehend what it was that they were pressuring for, wouldn't they?

Anyhow, I write a blog that nobody reads. It's better to vent though, isn't it?