Wednesday, September 24, 2008

2004 SEC Rule Change and The Wall St. Meltdown (Part II)

Continuing on the link trail for the SEC rule change I came across remarks referring to investment bank insider accounts attesting to leverage ratios of 1 o 45!!! Apparently it was customary during those heady times to lever back to the maximum allowed levels (a mere 1 to 30) during short regular reporting windows only.

What would you call this?
- Opportunism
- Greed
- Business Savvy
- All of the Above

Also reportedly, the SEC chairman active at the time had made a name as a "heavy-handed" regulator.

What would you call that?
- Plain Old Dumb
- Wishful Thinking
- The usual "This time its different" Laissez Faire Naevity
- All of the Above

No matter which way you slice and surely STINKS. Yes, in more than one way this is a systemic failure but let's not forget every social system is composed of organizations, which in turn are composed of living walking homo sapiens. Since when Merriam-Webster stopped printing the word "Accountability" in the dictionary? And by way of bailing out this, that and the other are we leaving the door ajar for more rescues and "get-out-of-jail free" cards down the road? Bail out or not, this time I really hope as the dust settles the landscape will be altered in a more stable way. If not, I guess the bright minds on Wall St. can always come up with an "off-balance sheet" country called United Structured Investment Vehicle of America and throw all the shoddy stuff over there conveniently claiming to have cleaned off their hands of all the dirt.

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