'$100 Billion and Counting: How Wall Street Blew Itself upBy Pam Martens, CounterPunch
Posted on January 27, 2008, Printed on January 29, 2008
The massive losses by big Wall Street firms, now topping those of the
Great Depression in relative terms, have yet to be adequately
explained. Wall Street power players are obfuscating and Congress is
too embarrassed or frightened to ask, preferring to just throw money
at the problem and hope it goes away. But as job losses and
foreclosures mount and pensions and 401(k)s shrink, public policy
measures to address the economic stresses require a full set of
unembellished facts.
The proof that Wall Street is giving mainstream media a stage-managed
version of what went wrong begins with a strange revelation by Gary
Crittenden, CFO of Citigroup, on the November 5, 2007 conference call
where he discusses what have now become the largest losses in the
firm's 196-year history. Mr. Crittenden is asked by an analyst why
the firm didn't hedge its risk. Here's his response:
"I mean I think it is a very fair question ... we are the largest
player in this [collateralized debt obligation; CDO] business and
given that we are the largest player in the business, reducing the
book by half and then putting on what at the time was three times
more hedges than we had ever had at least in our recent history,
seemed to be very aggressive actions given that we were a major
manufacturer of this product ... once this [decline in values]
process started ... the size was simply not there. The market is
simply not there to do it in size in any way and it would have been
uneconomic to do it."
What Mr. Crittenden really seems to be saying is that Wall Street,
with Citigroup leading the pack, built a vast market of complex
securities but neglected to put in place a liquid and efficient
marketplace for hedging this risk. Say, for example, big, liquid,
exchange traded indices and futures contracts that are routinely used
to hedge everything from stocks to soy beans to crude oil by as
diverse a group as Iowa farmers to Saudi princes.
In fact, the unabridged story is breathtaking in its callous
disregard for the economic well being of this nation and its people.
Exchange traded products did not emerge to hedge this risk because,
behind the scenes, Citigroup, along with 12 other big banks and
securities firms were funding a private company to gobble up all the
necessary components to keep this burgeoning cash cow to themselves
in the opaque, unregulated, over-the-counter (OTC) market, despite
the fact that they knew it was dysfunctional.'
Lees verder: http://www.alternet.org/story/74510/
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