Money, power politics and Wall Street
There is a four part documentary on the aftermath of the subprime crisis cum world financial crisis created by Wall Street in 2008. The documentary is quite lengthy and very detail in the key players involved in the crisis and the intricate handling and exposure of the toxic waste created by the brightest American financial minds, which happened to be kids really. The derivatives structured by these kids were meant to lower the risk of exposure by the banks to high risk subprime loans. But it multiplied and morphed into many other things and became a bigger risk that almost toppled the whole financial system of the world.
This documentary (http://video.pbs.org/video/2229573868/) is a must view for all regulators and govt officials meddling with their financial systems as well as finance professionals. The lessons to be learnt are many and they were obvious and avoidable but were pooh poohed away by the muscles of financial institutions and the corruption of the members of the Congress. They allowed the toxic waste to go into the system and grow without control, infecting not only Wall Street but also Main Street of America.
Have they learnt anything? With the recent loss of US$2b by JP Morgan Chase, does it tell anything? With the glorification of big earnings by the banks and hedge funds and paying themselves crazy again, do they say anything. As far as Wall Street is concerned, everything is back to normal, before crisis time, and all system is on a roll, just like the good old time. The same flawed and obscene financial system did not change a bit. Banks are still taking high risk is in derivative and proprietary tradings to make quick and easy money to pay themselves millions and billions all over again. Conservative bank practices are obsolete.
The first obvious fault of the subprime crisis was the culture of greed which led the greedy bankers to go after quick money and dumping morality and prudence in the back seat. The banks and hedge funds operators were just gambling, playing with other people’s money for quick and huge returns. And if anything wrong, like JP Morgan Chase, wait for the Fed to bail them out with the taxpayers money. They made the Fed to close both eyes, arguing that they need more freedom to execute their business. There is no need for disclosure. Deregulation and darkness fell on Wall Street. Transparency of deals by the banks and hedge funds were ignored for the bankers to hide whatever they were doing. They cooked the books, devised toxic products, engaged in proprietary tradings against their clients, all under the cover of deregulation or no regulations. They could commit mass murder in a way without anyone knowing, without transparency and accountability. All losses were reported as profits only to justify paying themselves crazily.
Without transparency, without regulations, without accountability, no one was wiser as to what was going on. The bankers kept chalking up glorious P&L, claiming billions of profits when the truth was that they were under billions of debt in taking up toxic waste and trading losses. As long as they could hide them under ingenious accounting, it was as good as sweeping everything under the carpet. And they partied and partied with ill gotten gains and kicking the problematic ball further down the road.
The simple age old wisdom that anything that cannot be told must be told as what cannot be told is simply dangerous was forgotten. That was why it could not see light and must be kept hidden. And Wall Street and the banks got away with it by bribing Congress to let them play bandits and robbers.
They even designed unfair and obscene trading systems using computers to trade against innocent small investors and no one will stand up to say it is wrong, it is unfair practice, it is cheating. And they even got their flawed and corrupted gaming system sold to the rest of the world as the system of the future, with high speed trading, derivatives and deregulation, high liquidity, high volume, high buzz and a quicker bust. They have gained access to many countries, and the stock markets are still ticking only superficially, kept alive by drips, when they are actually in the intensive ward, or nearly there.
Now the Americans are banging on the doors in Beijing to want to introduce such atrocious system to create havoc to the Chinese stock market and financial system. Would the Chinese be smart enough to say no and slam the door at the American face? They would need to seek wise counsel from the Hongkong Exchange to have a better feel of the evil in the system and the damage it is causing to the Hongkong market. There is a Chinese saying, ‘lai ze bu san, san ze bu lai.’ Pardon my translation, it basically says that those who dare to come are not easy to deal with or with ill intent. Ask a simple question, why are the Americans so forceful and persistent in wanting to break into the Chinese financial system? To do charity and bring money to the Chinese or to go in and scope everything there is in there? They have done severe damage to the Hongkong and Singapore financial market except that no one dares to admit it. The dead body is getting stiffer by the days and soon it would not be able to move completely.
Mortis rigor is only a short while away. The Chinese govt and other Asian regulators should view this documentary carefully and know what they are being led into and the dangers ahead. Would China be the last sucker to fall into the trap and become another victim of toxic waste?
Would there be any changes after this latest JP Morgan Chase failure? Some were calling for tighter regulations, invoking the Volcker’s Rule to prevent banks from proprietary trading and taking high risk. The real fault lies in the system, it is systemic, where the administrators and regulators colluded, gave their silent consent to daylight robbery. They could not see anything wrong with the system but were very clever in finding faults with the little guys. Until some of the administrators and regulators are put behind bars for being accomplices to the unfair trading practices in the financial markets, nothing will work. Never has the financial market been so deregulated, when unfair trading practices like high speed computer tradings, proprietary trading by banks against their clients, that cheating the small investors is fair game. And because New York sets the rule, the rest of the unthinking world markets just followed blindly. Were they dull or were they just having a good time with the gravy train?
Hopefully New York will set the precedence and prosecute the whole management team of NYSE for mismanagement and for allowing fraudulent trading practices into the system. Until then, the financial system and stock markets are only waiting to implode.