As someone who has been out of the finance industry for a couple of years, it is very interesting to watch what is currently happening on Wall Street, it’s effect on the wider financial system and the economy in general. I could go on and on about the various emotions that have stirred while reading about what has been going on, but my main feeling is the same as most people, and that is anger. (And if you’re not already angry, you should be). The absurd levels of greed and self-interest that have ended up costing so much for so many is astounding.
The main point of this post is to highlight a great article that has just been published on Portfolio.com. There is a link to that article below, but before reading that article if you would like a quick lesson on the problems with the US sub-prime mortgage industry, here are a couple of links (which I’m sure many of you have probably already seen):
Firstly, a short video that attempts to explain the sub-prime collapse in simple terms.
Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.
Secondly, a humerous powerpoint presentation that has been widely circulated across the internet (click the “full screen” button to be able to read the text, then hit “esc” when finished to return to this page).
Finally, on to the article I referred to at the beginning of this post, titled The End of Wall Street’s Boom. It is written by Michael Lewis, author of a number of great books but still best known for his first book, “Liar’s Poker”. First published in 1989, Liars Poker is written as one insiders view of Wall Street investment banks (Salomon Brothers in this case). I, and probably every person that has worked in the investment industry in the last 20 years, has read this book at least once. It tells the story of how Lewis joined Salomon Brothers at the age of 26 and made a lot of money advising clients on mortgage backed securities without really knowing what he was doing. He wrote the book partly as a warning about the way investment banks work, but as Michael describes, it was taken by many as a manual on how to make a lot of money with relatively little knowledge. This latest article talks about how the things he saw happening in the 80’s have finally come back to haunt those investment banks, and all of us given what has now transpired, and how the most surpising thing to him is how long it took to happen. This article is well worth reading, and is both entertaining and informative.
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