It's Looking Like a Bad Hand Off For Many
Posted: Monday, February 16, 2009
by Joseph Jagde
Looking in at the financial fallout, it does bring to mind a clear football analogy. A lot of people made some bad hand offs and maybe should have kept the ball themselves for a run or a throw.
What has happened is that there has been tremendous concentration of wealth in the hands of the few and the privileged, who did hawk just about everybody to hand it over to the pot, and of course a lot of people fell in line. These were after all world renowned experts who ended up being adroitly wrong. Of course many of these people are probably all around smart people who were running these shows, but having hands on that kind of money alone is enough to distort the decision making process ..
It does seem like the new President Obama is being heavily criticized already. But basically he has been given the terrible field position late in the game and touchdowns behind. It is almost like he needs to throw several Hail Mary passes to mount a reasonable comeback.
It was said by some big analysts such as Warren Buffet who several years ago called derivatives economic weapons of mass destruction that if derivatives become widely immersed in the economy that the potential for a whole scale disaster was there and could materialize into a reality. And there had been early evidence that he was right, based on the experience of the giant hedge fund running by super mathematicians which included Nobel prize winners.
Yet the allowance was towards the buildup of an exotic financial world highly saturated with these derivatives where the holder of the cards wasn't even for sure clear. Logic should have shown that all the variables could never be properly quantified and everything from there goes into much more of an actual bet.
Then the overall banking operations have been based on faulty premises that were clearly obvious but overlooked in the rushing tide towards hands on the money while it is there.
One would be the mortgages. The presumption as to who to give the mortgages almost always didn't have a single buffer towards a wrong guess. For example even if someone had the proper income stream and could maintain it, it wouldn't automatically follow that they could handle the budget especially if it is close. People when they get money, might get the spending itch, the Shopaholic itch and can't therefore get into a budget that matches what needs to be paid back and when. People only find out they have this problem after they get the money.
Another major factor is that because of vast changes in technology, it is quite hard to say what jobs are going to be in demand, whether a given profession involves sustained positioning and what the ebbs and flows are going to be of a particular demand for a particular set of job skills.
Then the whole credit card industry is based on false premising. People are to a degree baited into spending more and switched into paying exorbitant interest rates in comparison to real inflation rates and the real rate of interest is tremendous and it is bound to be that the group as a whole may not be able to meet their obligations because of this. But that isn't advertised to the consumer. The maximum on cards should have been a percentage point or two about the interest rates given on passbook savings, not 20 percent more. Now what you will see is massive defaults on credit card loans as this scheme was only sustainable in a rising tide. And the whole operation is predicated on the smart budgeting consumer, a near impossibility given how it is so hard to even budget time in a given day for anybody.
One big item is the Madoff scandal. Looking at this objectively, no matter what it was irresponsible for people to hand off all or a lot of their dough to someone who was lightly audited, so lightly it was almost nothing, made claims to returns just from the corners of his own mouth and none of the accepted protocol to substantiate his business was followed by him..
Had he been based in Siberia, he wouldn't have been able to pull of his scheme, but his heavy association with Wall Street, it's history and that he was in the United States and the former chairman of Nasdaq gave him an implicit room to get away with it. So the brand itself expanded the room to where there was enough room to cheat and find the lineup of those willing to hand off for the process.
They should have checked into who this running back was and not given him all of the plays for the whole game in advance. But that was what people did, and it would be like giving a running back all of the plays and the playbook and let him call all the plays to boot so why do you need any quarterback?.
Granted charities got ripped off by Madoff, but there weren't diligent towards their own donors and those who were working for less money because it was a charity and for a meager few more percentage points on the expected gains, they put all of the money into the hands of someone who was lightly regulated if at all, highly opaque and even if he was on the up and up could indeed have lost all of the principal legitimately. But he had cultivated a brand and used the hard to get in the club strategy quite well and this played into a culture of arrogance where he put himself out there as the guru and better than the rest and the arrogant wealthy seem to attract a mentality of lots of others wanting to buy in no matter what the real risk, let that be damned, I'm getting in.
The employees of major companies, who maybe toiled for hours upon hours doing their jobs for the company legitimately and this was probably the vast majority, handed off the whole store to a department specializing in derivatives and credit default swaps and that hand off proved to be disastrous in ways that will ultimately cost many if not most their jobs as in the case for insurance giant AIG.
Shareholders handed off their investments to management teams that didn't seem to care as much what happened to the shareholder interests in at least maintaining their investment and rather got more involved in a management style highlighted by siphoning off all of the fuel involved in the operation into the bonus pools.. And that was their hand off, give everything to me.
Now with numerous fumbles and terrible field position, the new quarterback gets the ball with some of the bad coaches still around as well, intact managers and real actual thieves, still deemed as talent that needs to be highly paid rather than rogue robbers that need to be highly jailed.
All which goes to show that once someone is a superstar or perceived to be that way, there is carte blanche to an endless deference to who they are supposed to be, whatever the mounting evidence to the contrary. Hence the endless hand offs.
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