From the book The Trauma Myth: The Truth About the Sexual Abuse of Children and Its Aftermath by Susan A. Clancy.
I found the above article counter to my preconceived notions, but quite believable once the author explained.
I have been reading the book 13 Bankers, The Wall Street Takeover, and the Next Financial Meltdown, by Simon Johnson and James Kwak.
Simon Johnson is Ronald A. Kurtz Professor of Entrepreneurship at MIT’s Sloan School of Management and a senior fellow of the Peterson Institute for International Economics. He is coauthor, with James Kwak, of The Baseline Scenario, a leading economic blog, described by Paul Krugman as “a must-read” and by Bill Moyers as “one of the most informative news sites in the blogoshpere.”
James Kwak has had a successful business career as a consultant for McKinsey & Company and as a software entrepreneur.
There are too many important passages to quote here, but there are a few key ones that I want to remember.
INTRODUCTION 5 Why did this happen? Why did even the near-collapse of the finan- cial system, and its desperate rescue by two reluctant administrations, fail to give the government any real leverage over the major banks? By March 2009, the Wall Street banks were not just any interest group. Over the past thirty years, they had become one of the wealth- iest industries in the history of the American economy, and one of the most powerful political forces in Washington. Financial sector money poured into the campaign war chests of congressional representatives. Investment bankers and their allies assumed top positions in the White House and the Treasury Department. Most important, as banking became more complicated, more prestigious, and more lucra- tive, the ideology of Wall Street -- that unfettered innovation and unregulated financial markets were good for America and the world- became the consensus position in Washington on both sides of the political aisle. Campaign contributions and the revolving door be- tween the private sector and government service gave Wall Street banks influence in Washington, but their ultimate victory lay in shift- ing the conventional wisdom in their favor, to the point where their
page 76 of 13 Bankers.
The total volume of private mortgage-backed securities (excluding those issued by Ginnie Mae, Fannie Mae, and Freddie Mac) grew from $11 billion in 1984 to over $200 billion in 1994 to close to $3 trillion in 2007.
page 117 of 13 Bankers.
Kevin Murphy, Andrei Schliefer, and Robert Vishny have argued that society benefits more when talented people become entrepreneurs who start companies and create real innovations than when they go into rent-seeking activities that redistribute rather than increase wealth. If this is true, then this diversion of talent to Wall Street constituted a real tax on economic growth over the last two decades.
Even though I have been saying that the diversion of talent to Wall Street is a major driver of us out-sourcing our technology, I recognize one weakness in the above quote.
As I have also said these ideas are not binary, either rent seeking is good or it is not. Or real innovations are good or they are not. The real issue is one of balance. Without sufficient rent-seeking activities, entrepreneurs would stymied by lack of capital. Too much rent-seeking and we lose too many entrepreneurs of “real” innovation.
THE BEST DEAL EVER 121 THE GOLDEN GOOSE The boom in real estate and finance in the 2000s resulted from the explosive combination of a handful of financial "innovations" that were invented or greatly expanded in the 1990s: structured finance, credit default swaps, and subprime lending. Most financial regulators looked on the creation of this new money machine with benevolent indiffer- ence. Structured financial products were sold largely to "sophisticated" investors such as hedge funds and university endowments and therefore subject to limited oversight by the Securities and Exchange Commis- sion; credit default swaps were insulated by regulatory inattention and then by the Commodity Futures Modernization Act; subprime lending was winked at by the Federal Reserve. That was how the financial sec- tor wanted it, and Washington was happy to oblige.
THE BEST DEAL EVER 123 Asset-backed structured products became Wall Street's new cash cows, in the form of mortgage-backed securities (MBS) and their cousins, collateralized debt obligations (CDOs). The original mortgage- backed securities created by Ginnie Mae in the late 1960s were "pass- through" securities: mortgages were combined in a pool, and each security had an equal claim on the mortgage payments from that pool, spreading the risk evenly. Private MBS, however, are typically divided into different tranches, or classes, that have different levels of risk and pay different interest rates. Because the "senior" tranches have the first claim on all the mortgage payments, they have the least risk, and the credit rating agencies routinely stamped them with their AAA rating-the same rating given to U.S. government bonds. The "junior" tranches are riskier, but therefore pay higher interest rates to investors.* A CDO is similar, except that instead of being built out of whole mortgages it is built out of mortgage-backed securities or securities backed by other assets (such as credit card loans, auto loans, or student loans)^ By building CDOs out of junior, high-yielding MBS tranches, *In a stylized example, an MBS offering might be composed of 85 percent senior MBS and 15 percent junior MBS. If 5 percent of the underlying mortgages default, the junior investors will lose one-third of their money, but the senior investors will lose nothing. The senior investors only lose if over 15 percent of the underlying mortgages default. By con- trast, in a pass-through MBS, there are no tranches; if 5 percent of the mortgages default, all investors lose 5 percent of their money.
THE BEST DEAL EVER 139 A McClatchy investigation found that even as the housing market was starting to crumble, Moody's was forcing out executives who ques- tioned the agency's high ratings of structured products and filling its compliance department with people who had specialized in giving those ratings.53
See the March 4, 2003 article, Buffett warns on investment ‘time bomb’, for the following quote:
But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.
Remember the above snippets when you hear Warren Buffet’s testimony before the Financial Crisis Inquiry Commission on June 2, 2010.
As the largest single investor in Moody’s, he thought that there was no way for people to know in the midst of a bubble that they were in the midst of a bubble. So you could not fault Moody’s for the ratings that turned out to be not so good.
It pains me to have to post this item, Not in My Jewish Name, By Rob Kall.
I am a Jew and I am outraged and ashamed by the acts Israel has perpetrated. I am not a self hating Jew, not an anti-semite, as some religious extremist Jews have accused me and other Jews who criticize Israel.
This is what we said about George Bush’s actions – “Not in my name as a US citizen.” I have even less control over what happens in Israel, but I want my own government to know that I do not support what Israel is doing.
Even more disturbing is the article posted as a link in one of the comments to the above, Obama’s Timidity and Deaths at Sea by Ray McGovern.
Even before I read the above two pieces, I had commented that Israel’s actions have shown that they have lost their minds. They have gone so off track that they do not even know how to estimate the consequences of their actions anymore.
I was thinking of the similarity to the incident portrayed in the book and movie Exodus. In this incident, as I remember it, Jewish refugees from World War II were trying to run the British blockade against Jewish immigrants to Israel. In this case, the blockade runners depended on the modicum of human decency that the British would have to display as this played out in the international press.
I am sure that current day Israeli politicians are well aware of that incident. Its success was probably what frightened them most about the current attempt to duplicate it by the Palestinians and their sympathizers.
However, given their knowledge of this history, their response was the most foolish thing I have ever seen.
If the Israelis expected no resistance, then what was the necessity of the element of surprise in the commandos boarding the ship? If the Israelis did expect resistance, then how stupid was it to deposit commandos into the midst of 600 protesters by dropping them one at a time down a rope from a helicopter?
Either way you look at it, you have to wonder how a friend should respond when he or she notices a person having gone off their rocker and starting to engage in indefensible behavior. At some point a true friend must stop diverting their eyes when they see what is going on.
The incident referred to in this political cartoon could obviously never happen in Arizona. Right? Perhaps the cartoonist is even joking about it happening in Chicago.
Well, maybe not. The local NBC affilliate in Chicago has the story American Citizen Faced Deportation
And now, Gutierrez, who’s fighting for national immigration reform, wants answers.
“You know what this proves to you? That in Arizona, they want everybody to be able to prove they’re legally in the country. They want everybody to prove that they’re an American citizen. Here we had an American citizen, that the federal government, not state authorities, but the federal government, with all their technology and all their information capacity that they have, could not determine, for more than three days, his status as an American citizen. It’s very, very, very dangerous ground to tread,” the Chicago Democrat said.