Michael Lewis on the Collapse of Wall Street

A very limited and microscopic view of economic catastrophe; only a small part of the scandal and nothing more than red meat for the left-liberal crowd and specifically designed to appeal to what must be assumed to be the typical reader of Vanity Fair. In the broader analysis, the Federal Government created demand for financing for a tsunami of mortgages and your representatives in Washington well understood that Wall Street's role in the sub-prime mess was merely to provide liquidity to support a mortgage market which had become part of a scheme to encourage contributions to the Democrats in exchange for payoffs in the form of mortgage resources allocated for political purposes, misfeasance in bank oversight and regulation through the Community Reinvestment Act, and malfeasance in securities regulation. All of this benefited no entity more than the Democrat Party.

The majority of Wall Street players donate heavily to Democrats. The majority of readers of Vanity Fair undoubtedly donate heavily to Democrats. The Democrats supported Fannie Mae and Freddie Mac in promoting sub-prime mortgages, prevented reform of the those government sponsored entities, and depended on Wall Street to sort out the junk and distribute the risk.

Therefore, the readers of Vanity Fair, helped in their own ways large and small, to create the mess. They read articles such as the one by Mr. Lewis to personalize the rage and transfer the guilt. They read not to inform but only to make themselves feel better. As is the case with all scams, it had a great come-on: it was all in a good cause, to help the disadvantaged. Better yet, the real suckers think they have someone else to blame.

David Bernabucci of FL 12:21AM January 26, 2009

The whole thing amounts to a hudge ponzi scheme that is just leading to the unraveling of America, so the terrorists are getting their satisfaction watching us all go down the drain.

Junette of CA 12:55AM January 25, 2009

I did not finish the whole article because I've been there, I know the story and I want to share a few thoughts. The theme of my comment is how bad people took over the leadership.

In 1969, just out of college, I joined my grandfather's municipal bond house and started selling munis. To get a license then you took a mimeographed True/False test at the state capitol that took less than an hour. Note this carefully: the bond market was then regulated by the people who owned/managed the companies and the great majority of them were regulated quite strictly. Most houses back then simply did not handle 'junk'. I'm not talking about a few principled holdouts here but MOST HOUSES.

Also back then, your customers instilled honesty in you because many of them had survived the '30s and they could not be fooled. The only way you could sell those battle-hardened old guys was by offering the highest quality. Otherwise you were off their list. You didn't get a second chance.

Now the bad part. When I started out, the bad guys were just getting a toe hold. One example is of an enterprising salesman (call him John) who made his company a cool million through an act of legal financial manipulation. His company took the money and they shouldn't have. They should have fired John both out of principle and self-interest. Self-interest because a few years later John left to start his own company and took a lot of their sales force with him. John's company went on to make millions and millions through manipulation of the system. And they sold a lot of junk in the process and a lot of people (who could be fooled) lost money. I always dispised John.

Starting in the '70 and excellerating to the present, the story of John and how he prospered was multiplied throughout the system. The John's of this world came to occupy the top spots and the fish rotted from the head down.

I believe that the process of bad characters taking over leadership responsbilities is not limited to the financial area but has progressed through every profession: medicine, law, politics, etc. I also believe it is a cyclical problem where, at a certain point in the cycle, people relax standards.

Here is my fear: power and responsbility are now being taken away from the bad actors in the financial sphere and given to bad actors in the political sphere. The financial crooks had the power to fool only the fools. The political crooks, who have not yet been exposed, have the power to force their destructive will down our throats and that process is just getting started.

So the fallout from the financial meltdown is upon us but we are not moving into the light. We are simply moving from one dark place to another, even darker, place. The work of exposing and removing the bad actors in the political sphere will be much harder but it must happen before we can get back to a place where honesty and probity are valued again. Personally, I think it is going to take a revolution.

Steve of MN 1:29PM January 24, 2009