Thursday, September 18, 2008

Wall Street and Big Banks: a Nation of Greed

The lack of oversight and failure to follow regulatory rules clearly contributed to the financial crisis in which we enmeshed. However, without boundless greed on the part of the major Wall Street institutions and large banks throughout America the possible financial catastrophe we are facing would have never occurred. People all over America played their part by wanting houses they couldn't afford, and mortgage brokers with the morals of loan sharks were only too happy to accommodate them.

On Wall Street a game of musical chairs has begun and only Goldman Sachs and Morgan Stanley are left after Bear Stearns, Lehman Brothers, and Merrill Lynch found themselves sitting on the metaphorical floor. What is particularly appalling about the way this fiscal crisis played out was the continuous lying by the CEOs and CFOs of the major institutions on Wall Street. At first it was a small problem, then it was a little bigger, and finally it kept getting worse and worse until an economic tsunami washed over the nation and most probably the rest of the world.

We find out that financial institutions, such as Lehman Brothers, were leveraged up to thirty to one in some of their investments. This means they had $1 of assets for every $30 of liabilities for vast portions of their investment portfolio. And their investment portfolio was contained bundled mortgages from people who were encouraged to lie about their ability to pay them. When is enough, enough ever on Wall Street? The question is its own answer. There are undoubtedly good and honest people who worked for Lehman Brothers and other now deceased institutions, and continue to work for Goldman Sachs and Morgan Stanley. However, the moral climate of corporate greed was so pervasive that the people in charge not only lied to us, they lied to themselves.

So, the government has to step in time and time again using taxpayer money in what many are calling the socialization of the financial system. I don't know enough about the intricate finances to be aware of solutions other than those the government has undertaken. But the incestuous nature of the situation couldn't be more apparent when current secretary of the treasury Henry Paulson, formally CEO of Goldman Sachs, is orchestrating the bailout of the financial system with the institutions that caused the need for the bailout. From where I nervously sit, it appears that Henry Paulson is doing all he can to save the system. But if the system wasn't so morally corrupt and incestuously tied together it would not have needed saving.

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