Warren Buffett describes credit derivatives as “financial weapons of mass destruction.” George Soros identifies credit default swaps and unlimited short selling as instruments used to carry out the bear raid on Lehman Brothers that triggered the 2008 financial meltdown. Hedge fund billionaire Leon Cooperman insists that short selling should be restrained by reinstating the uptick rule and that limits should be placed on credit default swaps and high-frequency trading before it’s too late. John Mauldin, a best-selling author and online commentator for over a million readers, calls credit default swaps a continuing crisis and an incipient debacle. Jim Cramer of CNBC fame labels credit default swaps, high-frequency trading, and leveraged ETFs “dastardly devices.” Marc Cuban, another billionaire investor, equates high-frequency trading and leveraged ETFs with financial hacking, arguing that they have ruined the market.
These individuals—experts in financial markets from across the political spectrum—have each argued that many of today’s financial instruments are extremely dangerous. All seemingly agree with Mr. Buffett that they represent financial WMDs. There should be no doubt that these financial WMDs played a significant if not defining role in the near Armageddon of 2008-09 that wiped $50 trillion of global wealth from the planet’s balance sheet. Yet, three years later, we have done virtually nothing to understand let alone disarm them.
Click the link for more.
Thanks for the link and yes, I am aware of all those aspects of the financial damage and destruction.
But I have gone beyond the mere pointing out of ‘dastardly’ instruments and rule changes (e.g. uptick).
I have gone into a search and assessment of the behaviors that led to such destructive instruments and rules.
Because all the things your link points out are at root the creation of men and women, and the real question is what allowed the internal demons of the rulemakers to take control?
Wall St. has people with internal greed streaks that are contained and quelled by law and enforcement. Take away the law and enforcement and one will witness the return of Tammany Hall crossover into banking.
http://online.wsj.com/article/SB10001424052970203716204577016092542307600.html
What allowed Tammany Hall to crossover to banking? It was the repeal of Glass-Steagall.
Willie Sutton, when asked the question of “Why did you rob banks” replied “because that’s where the money is”.
And one of the money quotes in the above link is:
“The future of his city worries Mr. Siegel. Forty years ago, New York had the most manufacturing jobs in America. But as the finance sector’s share of the national economy grew to 23% in 2007 from 7% in 1980, New York turned almost into a one-company town. Meantime, the growing claims on the public purse by those who make little to no contribution to the economy have driven up taxes and the costs of doing business.”
And how was the NY financial sector going to sustain the Big Apple with its new public sector Tammany Hall? The answer was it wasn’t able unless it could figure out where the money was, and the money was in banks.
The repeal of Glass-Steagall allowed Tammany Hall to rob the banks.
All of the HFT, CDS. MBS, 100 X 1 Leverage and the like are artifacts of the behavior.
And this robbery was not in the name of Capitalism which is a constructive force in human events. But the robbers used the cloak of Capitalism to fake out the wise guys with inquisitive minds, much in the same manner of Romney’s Bain Capital which is more aptly named Bain Vulturism.