Posted on 12/23/2007 6:13:39 PM PST by txzman
BASICALLY, a crossroads was passed in the Drexel/Milken scandals. Although hundreds and perhaps thousands of men and women were profiting from misconduct, only a few people, including Mr. Milken himself, went to prison. And even he emerged from prison a very rich man (and by what I see here in Los Angeles, a model citizen).
Today, in the midst of the mortgage mess, we see people breaching their fiduciary duty and getting away with it. A few may lose their jobs and wander off to a wealthy retirement. But the ordinary stockholders of the banks and mortgage companies are staggered.
(Excerpt) Read more at nytimes.com ...
My ancestors left the fields for the mines, back when mining was VERY dangerous. They knew what they were getting into, and did so to provide a more lucrative life for themselves.
Remember when you read Stein, he gives money to Hollywood radical leftist politicians.
There are several more at this site that you might be interested in.
http://www.youtube.com/watch?v=SJ_qK4g6ntM
I agree with you that 1992 was a turning point for America.
In only 15 years, we have fallen very far, and the bottom is not yet in sight.
Look at all of the Pres’l candidates. With the exception of Hunter and Thompson, you would think this was a Comedy Central production.
Like I said, he is ill-informed. I gave reasons. You haven't addressed any of my points. Just saying I am "off base" isn't an argument, and I'm not going to "go with" someone who admittedly doesn't know what he is talking about.
Every financial institution was fudging ratings to pump out business.
Moody's, Fitch etc. are the entities that rate these things. Everybody agrees that their ratings methods were horribly flawed. If you want to blame someone, blame them.
There wasn’t and isn’t a single source of reliable information available for outside investors to make properly informed decisions on incredibly obfuscated investment vehicles.
1. This is true, and again, is a reason to direct your ire at the ratings agencies.
2. All the more reason why investors who couldn't afford the risk should have stayed away.
If such peoples' exposure to these vehicles in their pension funds was so high that they are feeling the results right now, that is a reason to blame their pension fund managers.
Agreed. They failed, are paying the price, as they should.
But if you must blame someone for violating "trust" (and this is what Stein's piece is about), the blame must nevertheless go to the borrowers.
To a large extent the fraud here tends to lie with the borrowers and mortgage brokers, not with Wall Street.
Well, I like Stein and more often than not agree with him. In fact there have been times when I have found writing of his to be very moving.
I just think he is ill-informed here on this particular topic.
Ben Stein is very concerned about something in the Market, I don’t think he is sure what has happened but being Ben Stein he must speak up....my question is how rigged is this type of speculation and how much can we trust the Regulators and the Government to do the right thing?
Okay, maybe fraud was a bad word. How about this? If your doctor prescribed a pill that has many bad side effects but only told you about the good qualities, would you be less than thrilled? It is what WS does every day, both as a fiduciary and as a middleman.
By the way, Mr. Stein uses the term CMO (collateralized mortgage obligation) when they have been around since the early '80's without a major blow up.
The newer products that have caused all the uproar this time are CDO's (collateralized debt obligations).
He graduated from Columbia University in 1966 with honors in economics. He graduated from Yale Law School in 1970 as valedictorian of his class by election of his classmates. He has worked as a trial lawyer in the field of trade regulation at the Federal Trade Commission in Washington, D.C., a university adjunct at American University in Washington, D.C., at the University of California at Santa Cruz, and at Pepperdine University in Malibu, CA.
Regarding your point about who is ultimately responsible for the whole mortgage mess, I tend to fall on your side of that argument. The banks loaned to borrowers with no money down in the anticipation that even if the borrowers did default, the market was always going to go up, so how could they lose? IMHO the banks were playing the real estate bubble as much as any one. You could argue that the borrowers should have known better, but I'm sure that in many cases they were just glad to be getting a house on terms they could (at that time) afford.
I know I wouldn't have argued it if I were in that position, but then again, I always knew better than to get an ARM, because when you get an ARM, you ultimately get the other arm (Italian gesture with hand slapped into the crook of my elbow and my fist raised straight up).
He is also an ardent advocate of increased taxation.
The real problem was not with the lenders and the borrowers, it was with the packagers that bundled the loans, lied about the risk, and sold them to greedy idiots and giant financial institutions too stupid to find out the truth about what they were buying.
Too stupid and/or too lazy.
I disagree. Ben Stein is on target here.
It was up to the banks/brokers to screen the potential borrowers—they failed in their duty here. They ignored their own standards to satify their own short term greed. You have to expect that a certain percentage of people applying for a loan will be irresponsible—its just human nature.
The other factor is enforcement of the law. In this, we have been going downhill as a society. The law increasingly seems not to apply to certain groups, be they illegals or the financial elite. Clinton and OJ set the tone for this in that they were able to commit crimes (perjury and murder) and get away with it. In addition, judges are increasingly emboldened to legislate from the bench, twisting the law into whatever shaped pretzel they want. This also subverts our democratic process and creates an oligarchy of people who “know best”. If this trend is not halted, it will corrode our society like nothing else.
These problems are not new problems, but in our age of instant information, the effect they have on society is both magnified and accelerated.
Wall Street is in business, not medicine. Salesmen are salesmen, not doctors. I'm not sure what you expect them to do. That said, I think you may be exaggerating the extent to which WS traders & salesmen downplay the risks of these things. Surely they are salesmen and act like it, but then again, does a Coca-Cola salesman play up tooth decay? What do you want? Truth be told WS folks probably emphasize risks more than regular salesmen - regulations require it.
The people whose job it is to weigh risks properly and make such decisions are the money managers who invest in these things, not the traders/salesmen who peddle them per se (unless they actually have power of attorney or something). For the Nth time in this thread, the thing you are complaining about is better directed elsewhere than Wall Street.
Wall Street is who is taking most of the hits by the way, in the writedowns of these instruments they're stuck with.
By the way, Mr. Stein uses the term CMO (collateralized mortgage obligation) when they have been around since the early '80's without a major blow up. The newer products that have caused all the uproar this time are CDO's (collateralized debt obligations).
Stein is probably unaware of the difference. Anyway, it doesn't really matter to his point nor does it change the reason his complaint is misguided. All of these MBS's, CDOs, derivatives, indices, what have you - they have exploded because of the fact that recent-vintage mortgages in a certain class have stopped paying or threatened to do so at an unprecedented rate. Again, this is fundamentally about borrowers who borrowed lots of money and are reneging on paying it back, and I don't understand why someone complaining about a breach of trust doesn't aim his first volleys at those people. It may have been stupid of banks to throw around this money at the first place but that doesn't excuse the speculators and money-grubbers who snatched at it.
To the extent that there is fraud higher up in the process, a lot of it is concentrated on the mortgage brokers who pushed mortgages on people so they could flip them to Wall Street, and in some cases they may have actually committed outright fraud. Yet even in many of those cases it is ultimately the consumer's responsibility to read what he is signing and people didn't. I'm all for assigning blame but there's plenty to go around here and "Wall Street" is too easy of a target.
In that sense they are paying for it by having assets on their books that they failed to value properly. So, they made bad decisions and are paying accordingly. That's the way it's supposed to work when you make bad decisions. Where is the "fraud", why get mad at them (when they're the ones suffering), and who are exactly we supposed to send to jail?
The other factor is enforcement of the law.
To this extent, the banks are the victims. Many many of these mortgages are fraudulent in one way or another, yet the banks bought them (speculating, as you say). They are therefore the victims of that (so far) unpunished fraud. Again, how does any of this add up to a reason to get mad at "Wall Street", and not at the defrauders?
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