Michael Lewis Explains How Big Wall Streeters Screw the Nation

AIG FP in London mid-2005 A.D.  Gene Park (in the Connecticut office of AIG-FP) saw Al Frost announcing new credit-default-swap deals at an alarming rate….”We were doing every single deal with every single Wall Street firm except Citigroup.”…

When traders asked Frost why Wall Street was suddenly so eager to do business with AIG, says a trader, “he would explain that they liked us because we could act quickly.”  Park put two and two together and guessed that the nature of these piles of consumer loans insured by AIG-FP was changing, that they contained alot more subprime mortgages than anyone (outside of huge Wall Street houses) knew, and that if US homeowners began to default in sharply greater numbers AIG didn’t have anywhere near the capital required to cover the losses….

Still, Cassano (heading AIG-FP) agreed to meet with all the big Wall Street firms and discuss the logic of their deals–to investigate how a bunch of shaky loans could be transformed into AAA-rated bonds.  Together with Park and a few others, Cassano set out on a series of meetings (2006) with Morgan Stanley, Goldman Sachs and the rest–all of whom argued how unlikely it was for housing prices to fall all at once.  “They all said the same thing,” said one of the traders present.  (The lone exception, he said, was Goldman Sachs.  Two months after their meeting with the investment banks, one of the AIG-FP traders bumped into the Goldman guy who had defended the bonds, who said, Between you and me, you’re right.  These things are going to blow up.)  The AIG-FP executives present were shocked by how little actual thought or analysis seemed to underpin the subprime-mortgage machine:  it was simply a bet that US home prices would never fall….

“I’m convinced that our imput into the system led to a substanital portion of the increase in housing prices in the US.  We facilitated a trillion dollars in mortgages,” says one trader.  “Just us (AIG-FP).”  Every firm on Wall Street was making fantastic sums of money from this machine, but for the machine to keep running the Wall Street firms needed someone to take the risk.  When Gene Park informed them that AIG-FP would no longer do so–Hello, my name is Gene Park and I’m closing down your business–he became the most hated man on Wall Street.

-Michael Lewis:  Vanity Fair, August 2009, pp. 137-8.  However, even in the Vanity Fair magazine article there is alot more exposing the lie than just the above quote.

Fast forward to 2010 when Michael Lewis:  The Big Short was published, exposing umpteen more in plain English.  “That’s when I started to see the social implications,” Steve Eisman said.  “If you are going to start a regulatory regime from scratch, you’d design it to protect middle- and lower middle-income people, because the opportunity for them to get ripped off was so high.  Instead what we had was a regime where those were the people who were protected the least.”  -pp. 18-9 of The Big Short 

Yea, Wall Street big wheels with their counterparts high in government influence/control are the “Mongol”-overlords of America and the West!  But don’t believe me, read The Big Short–pages 30, 72, 73 (The CDO was in effect a credit laundering service for the residents of Lower Middle Class America.  For Wall Street it was a machine that turned lead into gold.),   pp. 78,  82, 126-7, 143, all these are the most devastating and readable and logical passages–indictments and exposures of Wall Street manipulation/perverse architecture of financial products currently available, bar none!

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