Wall Street Over and Out

I don’t intend to return to this subject again, at least not in the foreseeable future (but then who can foresee the future!). As must be painfully obvious by now, I know next to nothing about finance, but I cannot leave the debacle of 2008/2009 behind me without a few last words from Joe Nocera of the New York Times. He is talking about the attempt by Anthony Scaramucci and others to defend Wall Street against criticism. This is what Mr Nocera has to say (italics and bold type mine):

What was most striking to me was Mr. Scaramucci’s utter refusal to accept the notion that something truly systemic had infected the financial industry during the bubble years. It was as if all the bad things that had happened — the predatory practices of the subprime lenders, the corruption of the ratings agencies, the laundering of risky mortgages into triple-A securities that were then foisted on unsuspecting investors and all the rest of it —were anomalies that had taken place in some little corner of Wall Street, while everyone else on the Street was busy financing companies and doing other good things. Although Mr. Scaramucci seemed to me to be an intelligent and well-meaning man — with a stream-of-consciousness speaking style that made for an engaging hour — he also seemed to me to be in denial. Just like the rest of Wall Street.

Joe Nocera goes on as follows:

A few hours after I spoke to Mr. Scaramucci, I went to see a screening of a new documentary about the financial crisis, “Inside Job.” (It opens next week.) Written and directed by Charles Ferguson, beautifully shot and jazzily edited, it is a film whose premise could not be more different from Mr. Scaramucci’s. Bad apples? Mr. Ferguson is firmly convinced that all of Wall Street was rotten to its core. “An out-of-control industry,” he calls it in the film.

Mr. Ferguson’s rhetoric gets a little overheated for my taste; at several points in the film he bizarrely stops to dwell on the supposed penchant of Wall Street traders for consorting with prostitutes. But what he does brilliantly is paint a compelling picture of systemic abuse.

Here is Wall Street actively encouraging subprime lenders to lower their already low standards — and then buying those loans knowing they are likely to default, but not caring. Here are traders up and down Wall Street making millions in bonuses selling products that are, in Mr. Ferguson’s words, “ticking time bombs.” Here is Moody’s, one of the three big credit ratings agency, quadrupling its profits in seven years by handing out triple-A ratings like candy. Here are the regulators, ignoring impassioned entreaties to investigate fraudulent lending practices and excessive leverage. These were not anomalies. This was standard operating procedure in the years before the crisis. “It was a great big global Ponzi scheme,” Martin Wolf, The Financial Times columnist, tells Mr. Ferguson.