Posted on 10/14/2009 8:54:44 AM PDT by SeekAndFind
“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”
The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.
“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”
He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.
“O.K.,” I said. “Let’s hear it.”
“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.
“But weren’t there smart guys on Wall Street in the first place?” I asked.
He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said.
(Excerpt) Read more at nytimes.com ...
I read til it said 8 or 10 years ago.....IT’S BUSH’S FAULT!
Of course he was the one who called on congress multiple times to reign in fannie and freddie/ACORN etc...
what a pathetic article. please tell me this didn’t actually get put on paper?
The man observes the following pattern that occurred and is still occurring in Wall Street :
* Most of the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house and a family in the suburbs.
* College was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place.
* That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.
* When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Answer: The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All these guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.
IT TOOK A WHILE BUT THE SMART GUYS ( THOSE WITH HIGH IQ ) FINALLY DID IT -— THE COLLAPSE OF WALL STREET !!
10 years ago was 1998, the year the internet stock bubble (from 1994-1998) burst.
So really, we can blame the near collapse on the Universities?! I like that idea...
Fits right in with my personal theory that Harvard and Yale are responsible for ruining the country if they havn’t already finished the process.
the author, ‘Trillin’ was the tipoff. Best known for his columns in free indy city papers. He’s worth what you pay him.
It was both the smart guys (I tried to be for a billionaire here but he was too stupid. long story). But the only way the balloon could happen is with government protecting the failures. Fannie and Freddie and Fed pumping etc all added fuel to the fire.
I wouldn’t get my Wall Street interpretations from Calvin Trillin. It’s like listening to all these folks who intone rants about derivatives, while something in their voice as they pronounce the word “derivatives” tells you they have no clue what a derivative is. They just know they don’t like it.
There may be some truth in that analysis, but the Ivy League & MBA types started invading Wall Street during the Reagan Administration. The influx of of the college-trained was a major theme of the book “Liars Poker” which was about the commoditization of the home mortgage market.
That would mean he took his savings off the market during the dot com bust, which means he lost a lot of money and apparently lived by the addage of "buy high, sell low" - if he really knew half as much as he claimed he would have left his money in for another 4-5 years, recouped his losses and then sold before the latest bust.
This is all ignoring that as you get closer to retirement age a lesser portion of your 401k should be invested in stocks. Nothing to do with any specific conditions; the stock market is always volatile, it goes up and it goes down. If you need your investment to be secure than place it anywhere but stocks.
Please enlighten us - what exactly is a derivative?
I can also, from personal observation, support the conclusion that if you REALLY want to screw anything up, you need to put it in the hands of people who think like this: "I am so smart I make myself sick."
Smart as a whip does, all too often, translates into dumb as a hoe handle in the real world. I've seen that, too, at many institutions and in many eras.
Congressman Billybob
Oh, what a nice story -— must’ve been written by O’Henry for the NYTimes... It’s hard to find another article that would be similarly devoid of content (facts and logic).
Yes, the big drop was still to come. But the tech industry had already hit some peaks.
Real smart people understand that there is lot more that they don’t know, than what they do know.
It reads like a Jayson Blair “article.” What stupidity.
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