Next Shoe to Drop
Friday, September 5th, 2008There’s much more to the below post, go give it a read. At least in the next 4 to 10 years, we will finally be able to say the Credit Crisis is over. (/Sarcasm off)
We’re entering that exciting phase of any financial crisis when the lawsuits come fast and furious, criminal charges are lodged, and Wall Street firms agree to pay hundreds of millions of dollars for having snookered their customers once again.
In recent weeks, Merrill Lynch, Goldman Sachs, Deutsche Bank, Citigroup, J.P. Morgan Chase, Morgan Stanley, UBS and Wachovia have reached settlements with state regulators under which they agreed to pay more than $500 million in fines and penalties. They have also agreed to buy back more than $50 billion in so-called auction-rate securities from retail investors who had been misled into believing that those securities were as safe as shares in money-market funds.
Steven Pearlstein - A Con Game In Pinstripes - washingtonpost.com.
I particularly liked the following paragraph.
What is so telling about these stories — and, rest assured, there will be many more before we’re finished — is that they come only a few years after these same companies reached similar settlements for defrauding many of the same investors during the telecom and dot-com boom. While the fraud back then had more to do with bogus research and accounting and manipulation of initial public offerings, it is clear that they sprang from the same slimy ethical culture that has produced the current credit crisis. Wall Street has become a fundamentally corrupt enterprise in which the motto is: “We’ll do anything for a fee.”
In a way I sympathize with the investors, fraud is fraud. However, when you invest in instruments that you ken nae unnerstan, you bear the risk of the instruments losing money.
