Money, money, money

I’m glad to see that there is still a good amount of humour in-and-among all of the doom and gloom in the financial world. The meme-jumping Sad Guys on Trading Floors blog offers a certain amount of schadenfreude although it’s worth pointing out that not everyone in the industry is earning the obscene salaries oft-quoted. There’s also this mock cover of The Economist that made me giggle. Going back a few years gives us this extremely prescient Dilbert cartoon from 2002.

It wasn’t just Scott Adams who saw that problems may lie ahead. At the start of the year columnist Michael Lewis surmised:

I can’t think of another example of a big Wall Street firm saying so clearly through its trading positions as Goldman Sachs did over the past year that it thinks the rest of its industry, including its own people, is a bunch of idiots.

The media at large is certainly guilty of spreading fear, uncertainty and doubt. An exception to this is Robert Peston who must be the person appearing most on the BBC at the moment. His blog has been a most interesting and informative read of late. It’s kind of like what happens during the Olympics or anything else that suffers over-exposure in the media: everybody suddenly becomes an expert.

It must be nice for George Bush not to be totally to blame for a change. After the Great Depression, the Glass-Steagal Act of 1933 banned investment banks which engaged in what was perceived as high-risk securities trading and underwriting from taking insured retail deposits. In November 1999 Bill Clinton repealed this act, calling it ‘an arcane piece of Depression era legislation’. To me, this is akin to removing a big fence on a cliff just because nobody has fallen over the edge for a while.

Five years earlier, the Clinton administration asked the U.S. department of housing to come up with a National Homeownership Strategy which offered mortgage loans to those who – how shall I say – had a less than stellar financial history. The Bush administration continued this practice which ultimately resulted in the subprime crisis.

In 1938, the SEC adopted the uptick rule after conducting an inquiry into the effects of concentrated short selling during the market break of 1937. The SEC eliminated the uptick rule on July 6, 2007. The ‘credit crunch’ happened one month later.

On the day that the US National Debt Clock ran out of digits I thought you may find the Paul Grignon animated film Money as Debt interesting:

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