Saturday, October 04, 2008

Blunt Financial Instruments Used for the Crime (cont'd)

More memorable quotes on the last three weeks of high drama:

"The riverboat-gambling scheme of investment banking"

"As long as people are compensated hugely for taking risks with other people’s money, and do not suffer equally on the downside, then those risks will inevitably become outrageous. Whether markets are efficient or not I don’t know for sure, but I do know that if there’s a way for someone to make money at another’s expense, he will. In spades. I want out."

"These companies need to tie compensation to long- rather than short-term performance. This won’t be popular on Wall Street, but if we want to turn investment banking back to performing something useful and positive rather than some sort of riverboat-gambling scheme on which we are all unwitting participants, then there’s not much choice."

- "For Wall Street, Greed Wasn’t Good Enough"
by Paul Wilmott, founder of Wilmott, a journal of quantitative finance
NYT Op-Ed section (9/17)

Lehman's reward for failure

">> 'But things are looking up for the long-suffering employees of investment bank Lehman Brothers.'

"But wait. Wasn’t it Lehman that filed for bankruptcy just last week?

"Yes, it was.

"But as luck would have it, that sorry, sorry turn of events apparently had no effect on the $2.5 billion the bank set aside for staff bonuses. So, according to The Independent, Barclays, which is buying Lehman Brothers for $1.75 billion, plans to make good on those bonuses, though it has no obligation to do so.

"Two-and-a-half billion. Plus whatever portion of that $39 billion they were given last year. And then there are the pay and severance packages. Lehman Brothers Chairman and CEO Richard Fuld Jr. made $34 million in 2007. He also banked $490 million from selling Lehman stock.

"Such is the price of failure."

- "Lehman Brothers: $2.5 Billion for a Bankruptcy Well Done"
from Digital Daily by John Paczkowski
on All Things Digital

From 1999 to 2007, Paczkowski wrote the award-winning tech news Web log Good Morning Silicon Valley for the San Jose Mercury News

With all this about the brokers and bankers, let's not forget how this is playing out with The Rest Of Us; for example,

Tent Cities Spread In U.S. As Economy Sags
Foreclosure Crisis Blamed For Rise Of Homeless Camps In Cities

RENO, Nev., Sept. 19, 2008
"From Seattle to Athens, Ga., homeless advocacy groups and city agencies are reporting the most visible rise in homeless encampments in a generation."

"Nearly 61 percent of local and state homeless coalitions say they've experienced a rise in homelessness since the foreclosure crisis began in 2007, according to a report by the National Coalition for the Homeless. The group says the problem has worsened since the report's release in April, with foreclosures mounting, gas and food prices rising and the job market tightening."

" 'It's clear that poverty and homelessness have increased,' said Michael Stoops, acting executive director of the coalition. 'The economy is in chaos, we're in an unofficial recession and Americans are worried, from the homeless to the middle class, about their future.' "

"The phenomenon of encampments has caught advocacy groups somewhat by surprise, largely because of how quickly they have sprung up."


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