Wrote this a year ago, pleased that people seem to be waking up to what amounted to a massive wealth transfer …
The real-life facts behind this fiasco still seem relatively unknown on Main Street, so a quick rundown might help. To recap:
1. Big national banks lent to saps without credit history.
2. They then pooled these terrible loans into bonds.
3. Afterward, they duped the ratings agencies into labeling the bonds AAA, or “safe.”
4. They sold the bonds to you, through your 401(k), to individual investors who didn’t know any better, or to anyone managing large pools of money.
5. They then took out insurance against the looming disaster by swapping what amounted to credit insurance all over the place, spreading the risk throughout the world.
6. Finally, just for good measure, they bet against their own awful bonds.
7. Relax, give yourself a $20 million bonus, and wait for the Fed to realize they’ve got to intervene.
8. Vacation! Anyone up for drinks in Bimini?
The truly crazy thing was how little responsibility anyone running as fast as possible into a brick wall bothered to take. Quite the contrary — fiscally responsible firms were punished for not being involved in what amounted to the greatest robber baron money grab of the past 100 years.
