How Did Wall Street Get Into This Mess?
Backing up our contentions from earlier today... from MSN's Jim Jubak on How Wall Street Got Into This Mess:
"the global investment community wanted to believe that Wall Street and other centers of financial engineering could manufacture investment-grade, long-term debt to meet the huge demand of insurance companies, pension funds and central governments for predictable, long-lived and safe interest-paying investments.
These marks were willing to suspend belief. Because, you see, it's the only way out for an aging world that's running a huge shortage of the real stuff.
So investors were all too willing to buy fake investment-grade paper -- at prices commanded by the real investment-grade stuff -- until finally the con was revealed as assets were marked to market at 50% or less of their assumed value.
The managers of retirement assets could have said no to Wall Street. Some managers did. But others signed up to be conned. They heard what they wanted to hear.
They closed their eyes and ears to the voices in their own heads questioning if you really could turn straw into gold by slicing up a pool of speculative-grade credits.
And they decided to overlook what they knew of the history of other Wall Street miracles of financial engineering. The record is full of instances where Wall Street inventions haven't behaved as advertised."
"the global investment community wanted to believe that Wall Street and other centers of financial engineering could manufacture investment-grade, long-term debt to meet the huge demand of insurance companies, pension funds and central governments for predictable, long-lived and safe interest-paying investments.
These marks were willing to suspend belief. Because, you see, it's the only way out for an aging world that's running a huge shortage of the real stuff.
So investors were all too willing to buy fake investment-grade paper -- at prices commanded by the real investment-grade stuff -- until finally the con was revealed as assets were marked to market at 50% or less of their assumed value.
The managers of retirement assets could have said no to Wall Street. Some managers did. But others signed up to be conned. They heard what they wanted to hear.
They closed their eyes and ears to the voices in their own heads questioning if you really could turn straw into gold by slicing up a pool of speculative-grade credits.
And they decided to overlook what they knew of the history of other Wall Street miracles of financial engineering. The record is full of instances where Wall Street inventions haven't behaved as advertised."
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