Monday, September 15, 2008

What A Wicked Web Wall Street Weaves

Isn't it extraordinary that even though the huge Wall Street firms that keep failing one after another got to write their own rules, they were so greedy that they didn't even realize it when they began eating their own tails?

Merrill Lynch, which agreed to sell itself yesterday to Bank of America to keep from tanking, and Lehman Brothers, which is tanking and will seek bankruptcy protection because it can't find a buyer, become the latest "venerable" Wall Street institutions to be humbled in the face of hundreds of billions of dollars in losses because of a sub-prime mortgage crisis they created and other knuckle-headed investments that would quack up Scrooge McDuck.

If there is any good news in these latest developments, it is that there will be no federal (which is to say taxpayer) bailouts for Merrill and Lehman, although the jobs of upwards of 85,000 employees of the two firms are now in jeopardy and the greed the firms display will further roil financial markets and bring the U.S. economy ever closer to its knees.

Not that the firms didn't rattle their tin cups. In fact, Lehman decided to go the bankruptcy route only after its pleas for a handout were rebuffed.

At first glance, the two firms couldn't be more different: Merrill, as the nation's largest brokerage, is a household name with thousands of offices across the U.S., while Lehman's customers are big institutions.

But both, taking advantage of laws passed as a result on millions of dollars in campaign contributions (for both Republicans and Democrats) that relaxed the rules by which these firms did business combined with the lack of meaningful oversight by a Bush administration in the thrall of these Wall Street power brokers, were ripe for disaster even though they were "too big to fail." In hindsight, the only question is why it has taken so long.

The latest crisis is not the beginning of the end, as some talking heads would have it. It is the end of the beginning.

Next up are insurance giant American International Group and Washington Mutual, the nation's largest saving bank. You can bank on it.

Meanwhile, the titans of hubris at Bear Stearns, Fannie and Freddie Mae and now Merrill and Lehman are being treated with entirely too much deference by the mainstream media.

The New York Times breathlessly recounted today how Richard S. Fuld Jr., Lehman's chief executive, burned the midnight oil for days in an effort to save a 158-year-old company whose destruction he had orchestrated.

Fuld finally devised a blueprint that would split Lehman into a "good" bank and a "bad" bank, the latter's job being to unload bad mortgages and real estate. No word as to whether people opening accounts at the bad bank would be gifted free toaster ovens. But with Lehman's once lofty stock trading at $4 a share, federal overseers balked at the plan, which was contingent on a bailout anyway.

No matter, we can be sure that relief is on the way for all Americans if John McCain and Sarah Palin are elected.

Why just this morning McCain, who is a self-admitted dunce when it comes to all things economic, again asserted that "the fundamentals of the economy remain strong," which is true if you ignore all of the leaks in the dam holding back a full-blown recession.

Then there is Palin, whose own speech on the economy this morning was utterly devoid of substance but at least has the kind of economic expertise that her running mate lacks: Badgering Washington for ungodly amounts of pork, awarding high-paying government jobs to friends who have no qualifications, and milking Alaska taxpayers at every opportunity for her husband's and children's meals and travel expenses.

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