The Wizards of Wall Street

The Wizards of Wall Street ‘As the unraveling began many on Wall Street confronted a market unlike any they had ever encountered- one gripped by fear and a disorder that no invisible hand could tame. They were forced to make the most critical decisions of their careers, perhaps of their lives in the context of a confusing rush of rumors and policy shifts all based on numbers that were little better than best guesses. Some made wise choices, some got lucky and still other lived to regret their decisions. In many cases, it still to early (2009) to tell whether they made the right choice. In 2007 at the peak of the bubble the financial services sector had become a wealth creation machine (In Economics we speak of ‘invisibles’ and most of what was happening here was in that text book term part of those invisibles) ballooning to more than 40 per cent of total corporate profits created in the United States. Financial products- including an array of securities (this word has maybe lost its meaning- once upon a time it meant keeping money safe!) so complex that even many CEOs (Who didn’t want to know either) and boards of directors didn’t understand them- were an ever greater driving force of the nations economy (40% of corporation profit –what does this tell you about the role of Empire State- New York ?) The mortgage industry was especially important component of this system, providing loans that served as the raw material of Wall Street’s elaborate creations, repackaging and then reselling them around the globe. With all the profits that were being generated Wall Street was minting a new generation of wealth not seen since the debt fueled 80s. Those who worked in the finance industry earned an astonishing 453 billion in total compensation in 2007 (Take home pay) Goldman Sachs ranked the top of the five leading brokerages at the outset of the crisis accounted for $20 billion of the total, which worked out to more than $661,000 per employee (And what do I receive? Ed play the violins here) The company CEO Lloyd Blankfein alone took home $68 million. P3-4 Too Big to Fail A R Sorkin Penguin New York 2009 Living through a previous property bubble in the early to mid 90s when China decided to test weapons and assemble and army next to Taiwan- a billion dollars of Taiwan money came into our nation but that just encouraged local speculators to join in so that in my poor part of town most of the available houses sold and were consequently repainted for those sales while the price of a house doubled in a short time… while my own response to the make houses unaffordable was to work with Habitat for humanity with us building 50 new homes in about 12 years from our first one. But this appears to be bigger Made in Empire State story here.