Enron, Tyco etc.... were totally different situations. They were internally corrupt (yes, Enron had Bush in their pocket. Big business buys politicians for a reason). They were no different than a crack whore trying to juggle 20 maxed credit cards and rent. Eventually that gig is up.
The subprime mess (Khell and I saw this 2 yrs ago) was due to something totally different. It was Greenspan dropping the fed rate to near zero. Whether he was pressured by politicians is merely conjecture with no factual backing. I suspect he got cought with his pants down.
The main culprit is the collusion between rating agencies and the big wall street houses. The "quants" they used to magically create CDO's showed mathematical risks which were so far off reality it was unreal. Nobody stopped to admit common sense. What they called a 6th sigma event was really called "joe cant afford his mortgage which just adjusted, and nor can his neighbour".
The ratings agencies got paid by the big houses (goldman, bear stearns, jp morgan etc...) to rate these bonds. They were "paid" to give good ratings. That is were the rub is, they were not impartial. They needed more mortgages to package into toxic waste, thus the mortgage brokers got in on it. They added the RE agents. RE agents got the appraisers into it. RE agents got joe public into it. Then the whole pile of them discovered NINJA loans (NINJA = No Income, NO Job or Assets).
This "subprime mess" is not just a subprime mess. It extends to leveraged buyouts, prime debt, commercial paper, everything. If you think we are in the thick of the downturn, I am sorry to inform that we are just getting out of the first inning. The snowball is just starting to roll.
When all those bonds get re-rated, watch the pension funds be forced to dump them. So far they have been "mark to mystery", but at the end of the day they will be assigned a value.
These rocket scientists who dreamt this crap up bought all the politicians from both parties.
give this man a prize...
