Vacuuming up The Street
About three years ago, Aaron Haspel presented a spirited defense of the “prototypical Wall Street guy,” to whom he affixed the name “Chet.”
Chet’s a bit harder to defend these days, as Greg Hlatky will tell you:
[W]ith all the bailout packages, injections of liquidity and equity stakes taken out by the government, Chet — bless his heart! — now works for me. Here’s my first and last message to Chet: you’re fired. Immediately and permanently.
If stupidity was criminal, Chet would be on Death Row. Much as I would like to take away all Chet’s ill-gotten gains, that would be time-consuming and expensive. So this is the sentence the American taxpayer should be handing down to all the Chets out there: we’re going to take away your livelihood. You’re out, never again permitted to handle any money other than your own. That includes working retail, by the way.
Did you create or sell mortgage-backed securities? Out. Did you underwrite such? Out. Have anything to do with relaxation of lending standards? Out. Leverage your balance sheet to the max? Out. Hold any position with Fannie and/or Freddie other than maintenance or secretarial? Out. Sell houses based on subprime loans? Out. Devise or promote NINJA loans? Out. And so on.
There’s no hole deep enough to drop Chet down, but at least we can make sure that he doesn’t do any more damage to the taxpayer. My only concern about Chet is that he’ll go into consulting, telling companies how to fire swaths of employees due to the poor economic conditions caused by his own malfeasance.
I have a better idea. Between now and 2016 we’ll need thousands of new plumbers. Let’s send Chet to vocational school. Admittedly, he might not make quite as much money — unless, of course, he works weekends.
Charles Pergiel »
20 October 2008 · 8:53 pm
“Have anything to do with relaxation of lending standards?” This is what I have been trying to figure out and no one is talking. I remember reading about it at the time (maybe five years ago? ten?) but that is all. Someone decided to relax lending standards and that is where this whole disaster started. So what I want to know is who did it? I supposed eventually they all did, but this is serious business. They guy at the front desk processing loan applications did not make this decision. It was the guys at the top of the heap and I want their names.
CGHill »
20 October 2008 · 9:56 pm
At least some of it — certainly not all of it — is due to government action.
The Community Reinvestment Act catches a lot of flak, much of it undeserved, for contributing to this mess. The CRA dates back to 1977, not a great time for the economy, but not one reeling from a credit crunch either.
The real impact of fecal matter against air-movement device came when the Clinton administration, responding to community-organizer types, moved to allow the securitization of subprime loans. Again, this didn’t cause a problem in itself, until Wall Street moved into securitization in a big way. (By most accounts I’ve seen, Bear Stearns was the first to take the plunge.) Add to this the mandate given to Fannie Mae and Freddie Mac to greatly increase the number of loans given to borrowers of lower qualifications, and the fact that packaging all these things into third-party units drew lots of investors hoping to use $1 of their money and $20 of other people’s, stir, allow to boil over, and only then uncover. It’s a recipe with a whole lot of cooks. Call it a fearsome example of the Law of Unintended Consequences.
Jeff Brokaw »
21 October 2008 · 4:04 pm
Yes, there is lots of blame to go around here. I personally view the purposeful decision to enforce policies that ignore risk, and make loans to people who didn’t qualify for them (by any sane definition), to be the single biggest screw up here. This is because these risks were known, they were quantifiable, and yet they were trumped by fantasies about social justice. Post-modernism via Fed policy.
But of course, it wasn’t a screw-up at all, in the minds of ACORN and other like-minded extortionists, who threatened lawsuits against banks that didn’t make loans to every stiff that walked in the door. Guess who used to be one of those attorneys? He’s running for president now. (cue jeopardy theme)
This is foolishness. Yet all the press coverage is about Wall St., Republican lobbying groups, deregulation, etc. OK, fine, let’s look at that, and while we’re at it, let’s look at government-mandated extortion so that rich white liberals in Washington could look good and buy poor black votes. Right? That’s what is really going on here, at least in large part. Who are we kidding?
Huh. Trading money and favors for votes. Yeah, sounds like “change” to me! Also, “Chicago politics”. Better put on your cynical hat, you’re going to need it.
As for Wall St., I don’t see it had much choice; once that horse was out of the barn, the competition was on to make money from it, somehow. Staying out of the game is probably not really an option.
Yes, greed is a problem, but it starts in Washington, with the gravy train they enjoy at our expense. I’m more interested in fixing that.
My $.02 anyway.
CGHill »
21 October 2008 · 5:25 pm
Well, as someone much wiser than I once noted, social justice is to justice what social disease is to disease.
Inasmuch as I fell slightly short of the requirements for top-grade loans myself, I am at least somewhat reluctant to condemn the whole idea of subprime mortgages as evil/wicked/stupid/whatever; if they’d been truly hardassed about things, I’d still be in the CrappiFlats™ to this day.
That said, I did have enough sense not to borrow the entire amount they were willing to finance – why ask for trouble? – and I’ve kept up the payments quite respectably.
Jeff Brokaw »
22 October 2008 · 7:50 pm
I don’t have a problem with the idea of offering subprime mortgages, as long as the lender is doing it because they want to, instead of being coerced and extorted into it by dipstick gubmint bureaucrats / community organizers with one hand in the till.
Re: having enough sense not to borrow the entire amount … if only having “enough” sense were more common, then it would be common sense! Seems to be in short supply though.