‘You don’t know who you can trust,’ a high-level banker told NYT columnist Floyd Norris at the Davos power summit. A pity, that.
How ironic that the subprime mess that originated in flimflamming the poor out of their last dimes is now manifesting itself at the highest reaches of the highly pyramidical world of finance and in an exactly parallel way, too. First, sleazebag real estate brokers convinced working people to sign onto impossible bank loans with hidden fees and balloon mortgage payments. They then bundled the bad deals into Scam-Paks and sold them off with the rating agencies’ collusion as top-flight, AAA securities.
The lid remained on while housing prices continued to soar irrationally, then blew off like the wooden derrick in There Will Be Blood. And There Was Blood. The banks have now tasted a little of the bitter medicine mortgage holders have been gulping down the past few months and feeling quite put out, I have no doubt, that they didn’t know what they were getting into.
They don’t know what each other’s portfolios are worth and so can’t do their usual business. Credit seizes up, and the wheels of commerce grind to, if not a halt exactly then at least a disturbingly low gear. If this keeps up, no one will be able to make money.
It’s just not fair.
I can’t think of any better moral to this story than the old saying, What goes around, comes around. Secrecy and no rules—that’s what the financial world has demanded from a parade of accomodating politicians of both parties, all liberally greased by the cash that emerged from these practices. They got their wish, and now they have plenty of time to meditate on the question, Is it good for spiritual growth for one’s prayers to be answered?
Twilight Highlights: Do you totally love the latest about the trader at Société Général dodging the internal security systems and blowing an $8 billion hole in the place? I don’t believe for a minute the assurances that this earthquake had nothing to do with the MLK-weekend stock crash and the subsequent emergency interest-rate action by the Fed. Imagine: world banking turned upside down by a single guy at a computer screen. Isn’t that special?