The 1980s mantra “Greed is Good” is coming home to roost as 9-figure salaried managers across Wall Street are waking up this morning to the realisation that the good times may be over, their days numbered and the game, if not over, is in the bottom of the 9th with their team down by 11-runs.
Their lobbyist buddies in Washington bamboozled the Republican government into a period of zero regulation and oversight. The inmates ran the asylum and “Laissez Les Bon Temps Roulez,” Let the Good Times Roll, was the motto of the street.
Credit markets, sensing an opportunity to make money and deflect blame rolled out dodgy re-packaged mortgage backed securities made from loans most could not qualify for. The end result is the sub-prime mortgage fiasco that placed Fannie and Freddie in federal receivership, killed Bear Stearns and now has Lehman Brothers in its sights.
$16 billion dollars in mortgage security write-downs had the street jittery and many expecting a government assisted takeover as JP Morgan did to Bear Stearns this spring.
Lehman Brothers stock lost another 20% of its value yesterday and investors are bracing for more bad news. What did management do? They talked about denial being a river in Egypt and glowingly presented their bold plan for the future in a news conference while also being rumoured to be in discussion with Bank of America about a shotgun wedding.
So another multi-billion dollar bailout with legacy auto makers GM and Ford, and various airlines wanting the same thing from Washington. As Senator Everret Dirksen said, “A billion here, a billion there, pretty soon it adds up to real money.”
Do we expect the Chinese, Japanese, Russians and oil oligarchs in the Mideast to fund our consumer lifestyle forever? That would be very dangerous indeed.
