The money quote, as far as I'm concerned, from Michael Lewis's new piece http://www.portfolio.com/... about Wall St. et.al. comes from Meredith Whitney, one of the first analysts to say sooth on the scam that Wall St. has been running the past 20 odd years. In October of 2007 Whitney predicted that Citigroup would need to slash its dividend or go broke. Four days later the C.E.O. of Citigroup resigned. The following January Citigroup slashed its dividend. Lewis says that Whitney "wasn't saying that Wall St. bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn't even know how to manage their own."
Which brings us to "The Bailout."
Lewis writes, "The one thing Steve (Eisman) always says is you must assume they are lying to you. They will always lie to you." Steve Eisman is one of the lead characters in Lewis's piece about the current meltdown,and the "they" Eisman is talking about are the Royalty of Finance, the Solomons, the Goldman Sachs, the Merrill Lynchs (before they ceased to exist). Eisman was Meredith Whitney's mentor before he moved on from Citigroup. Eisman not only saw what was coming (and what has actually happened), "he had the nerve to bet on his vision." That quote may rile Kossacks up, but the point is that Eisman is not one of those who now strut about saying they knew this was going to happen. He actually put his money where his mouth was and understood the risk he was taking on, because he understood that the game could not go on. Say what you will about morals, Eisman understood risk unlike, say, Hank Paulson.
Read the piece I've linked to. It's vintage Lewis, an exciting distillation of some very technical material.
The thing is, after reading it you have to ask yourself what in god's name Congress is doing letting these "titans" of finance anywhere near the Treasury. As Lewis writes in one of the final paragraphs, "The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever-more complex, their understanding diminished."
Step by step we have been lied to. It's now revealed that the money from the Treasury allocated to keep lines of credit open between banks and lenders has been used to pay bonuses to the creators of this financial nightmare we're in. There is no way in hell that Paulson or any of his proteges should be involved in the solution of the problem.
For a layman's guide to Credit Default Swaps and Collateralized Debt Obligations that reads like a novel, go to the link and read Lewis's piece.
Congress and/or Obama must stop these people from looting the treasury. The Bailout is the biggest bank heist in human history. It must be stopped.