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Old 10-05-2008, 10:43 PM   #1
Lucky1
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Default A Look At Wall Street's Shadow Market

A Look At Wall Street's Shadow Market
60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis

On Friday Congress finally passed - and President Bush signed into law - a financial rescue package in which the taxpayers will buy up Wall Street's bad investments.

The numbers are staggering, but they don't begin to explain the greed and incompetence that created this mess.

It began with a terrible bet that was magnified by reckless borrowing, complex securities, and a vast, unregulated shadow market worth nearly $60 trillion that hid the risks until it was too late to do anything about them.

And as correspondent Steve Kroft reports, it's far from being over.

<snip>
The video from tonight's 60 Minute show is at this link. It is 12 minutes long. It makes things pretty clear:
http://www.cbsnews.com/stories/2008/...n4502454.shtml
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Old 10-05-2008, 11:44 PM   #2
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Great segment -- thanks for sharing the link!

I especially liked the closing statements...


As bad as the mortgage crisis has been, 94 percent of all Americans are still paying off their loans. The problem is Wall Street placed its huge bets and side bets with all of those fancy securities on the 6 percent who are not.

"We wouldn't be in any of this trouble right now if we had just had underlying investments in mortgages. We wouldn't be in any trouble right now," says Partnoy.

He says it’s the side bets.

"You got Wall Street firms, Bear Stearns, Lehman Brothers. You got insurance companies like AIG. Merrill lost a ton of money on this," Kroft says. "Everybody's lost a ton of money. They're supposed to be the smartest investors in the world. And they did it themselves."

"They did it all on their own," Partnoy agrees. "That's the most incredible thing about this crisis is that they pushed the button themselves. They blew themselves up."

Asked how much of this was incompetence on the part of Wall Street and the people who ran it, Jim Grant tells Kroft, "The truth is that on Wall Street, a lot of people just weren't very good at their jobs. It's as simple as that."

"These people were being paid $50 to $100 million a year. Some of them, the guys that were running the places," Kroft remarks.

"There is no defending," Grant replies. "A trainee making 45,000 a year would have had the common sense not to bet the firm on mortgage contraptions that no one in the firm actually understood. That is not a deep point to comprehend. Somehow, through, I will call it a criminal neglect and incompetence, the people at the top of these firms chose to look away, to take more risk, to enrich themselves and to put the shareholders and, indeed, the country, itself, ultimately, the country's economy at risk. And it is truly not only a shame, it's a crime."
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Old 10-06-2008, 11:31 AM   #3
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This got buried in the flurry of today's news, but it's well worth watching.

Quote:
Originally Posted by Lucky1

The video from tonight's 60 Minute show is at this link. It is 12 minutes long. It makes things pretty clear:
http://www.cbsnews.com/stories/2008/...n4502454.shtml

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