Bet The House

But the real problem is that this huge mass of subprime business was sliced and diced in so many ways that it makes one long for the relative simplicity of Lucy’s Vitameatavegamin. And once the slicing and dicing was done, the pieces were distributed far and wide to lots and lots of hungry buyers, including mutual funds, other banks, insurers and others of our most trusted financial institutions.

I am pained by all the agony that is going to result from foreclosures on homes of people who couldn’t afford them in the first place. Yes, I can hear some of you saying already that these subprimers should have known what they were doing and it’s their responsibility. But no one can tell me that subprime loans shoot to over 20% of all home mortgages without an intense push from mortgage companies and dollops of fraud thrown in for good measure.

Another thing that really bothers me about the subprime fiasco is that nobody–and I mean nobody–knew what they were doing. Yet that ignorance was unstoppable, spurred on as it was by sheer greed and the need to produce spectacular returns for Wall Street analysts, who can make or break companies and careers based on a quarter’s poor earnings.

Companies like Citi and Merrill and their executives literally bet their house–not to mention millions of other houses–on something they didn’t really understand and ultimately couldn’t control. It was a situation with no transparency whatsoever. The results now are huge losses, shredded trust and havoc in the housing market that has all but kicked the economy into a recession.

Considering how close to pure gambling this came, wouldn’t it just be simpler in the future to give Wall Street executives a boatload of money and send them off to the roulette or craps tables in Vegas?

At least then we’d have transparency and could decide if we wanted to go along for the ride.