Robert Rubin spoke early in 2000 at the height of the internet bubble to a group put together and keynoted speaker Jack Grubman who was a stock analyst and close friend of Bernie Ebbers, the WorldCom creator who is now in jail. Rubin argued "a new paradigm that renders irrelevant so many traditional concerns about downturns, risk and sound policy....would be contrary to all of human history..." Grubman shrugged it off but one on his arch rivals, also at the meeting was one Susan Kalla, an independent telecom stock analyst who oft disagreed with Grubman. The following morning Susan Kalla called her stock broker and sold off all her telecom stocks.....Grubman? He was banned from Wall Street forever and paid a large settlement.
BTW, in the middle of that was none other than Henry (Hank) Paulson...our Tres. Sec'y. The head of the NYSE, a fellow by the name of Richard Grasso was recently exonerated by a court over allegations pursued by former DA and ousted Gov. Spitzer.... Grasso once called Paulson a "snake"....all the above from "Blood on the Streets, a book by Charles Gasparino.
20 years earlier it was a bank called Penn Square in Oklahoma City which sold oil field loans to eager banks like Chase Manhattan, Seattle First, and Continental of Ill. Same mentality. The banker, a man who often showed up at work wearing mickey mouse ears or batman ears that wiggled, etc. by the name of Bill Patterson. His boss was "old family" banker from the small town of Healdton, OK. He lent anyone any amount...millions and Chase Manhattan, etc. goobled these loans up without even proper documentation... so. Who was at fault?.. the crooked banker or the greedy big bank begging to be gored?...The banker flew to NY and Chicago to sell these deals without any proof that the assets claimed even existed. People like that were called "pigeon stalkers"....and big banks should have worn shirts that said "cheat me" on them.
It is hard to keep a score card on who is the crookedest. Fannie management? The banks that sold these crummy deals? The politicos who pushed for more and more loans in the cause of "home ownership"? Insiders off Wall St. now calling the shots for the government like Paulson...they are either sapient fools or incredibly clever thieves.
Fannie/Freddy will be diluted. The liquidity problem remains. Since it is obvious (and should have been from the earliest times) Fannie and Freddie will be bailed out regardless the scope of problem, the presence of fraud, the damage done the taxpayer pocket....Wall Street will ride them to zero because they can and make money all the way down...knowing full well the Government will ride to the rescue, paying off their bribe and cutting the stockholder's value to zero.
