The Fall of Giants

It may be that in 20 or 100 years, they will look back on today and call it "Black Monday."

It certainly is a bell-weather, a day to recall - the fall of the two largest investment banks in the country, coming only days after the bailout of the two largest lending institutions (Fannie Mae and Freddie Mac).

I work in this industry, I have friends at Lehman, my peers at my current company all come from Merril. It's a sad, sad day.

There are a few fools who attributed Fannie and Freddie to Henry Paulson, that's just because they don't know anything, but let me be clear, FM/FM failures stem from the market they were required to play in - backing FHA loans regardless of the risk taken on by the originator.

Lehman and Merril represent collapses due to unsound investment, sure, but why did they invest unsoundly? What caused the liquidity crisis? What caused people with good credit and sound income to declare bankruptcy? These aren't sub-prime loans, these were ARM's, or Home Equity Lines of Credit (HELOCs), or Home Equity Loans (HEILs). Why are so many defaulting? Why did someone at Merril estimate that a huge percentage of their HEIL's are at risk of default?

The answer is frankly simple, peoples income have not kept up with costs of living - they can't absorb these continuing inflationary pressures. What they absorbed through their home equity in the past, is no longer available. When you include the massive debt burdened/heaped on them by the admninistration for Iraq, for FM/FM bailout, for unfunded infrastructure - all to give more money to the top, who then DIDN'T invest it in America - well, not just Joe Average is bankrupt - so to is the ability of the public to pay these debts.

As a result, make no mistake, the rocks have been hit - the hull is leaking - and no BS about ear-marks is going to make it all go away. We have huge problems, not the least of which is that good friends of mine are packing their desks for things they didn't cause, being held accountable for something they didn't do. Those who ARE responsible for this mess have cashed their stock options and fled to Bermuda. Perhaps we can brand them with a big fat black 'G' - for greed - and they can try to tell us all how greed is good.