Only you can prevent economic forest fires

Felix Salmon's analysis of the ever-increasing tendency to label debt as AAA, The horrifying AAA debt-issuance chart, rehashed some of the original report from the Bank for International Settlements.

Salmon made some valid comments, but he completely missed the boat when he said "it wasn't an excess of greed and speculation which led to the financial crisis, but rather an excess of overcaution."  His bias is understandable given the publisher of his blog, Reuters, which is such a Wall Street cheerleader that it recently hired Larry Summers as a blogger, with Summers being one of the fathers of the recent crash.  Summers was Obama's Director of the White House United States National Economic Council until just recently and Clinton's Secretary of the Treasury.

Speaking of Summers, his blog entry, Europe’s dangerous new phase, included the astonishing statement that "there must be a clear and unambiguous commitment that whatever else happens, the failure of major financial institutions in any country will not be permitted."

From the perspective of Summers and other Wall Street toadies, banks and their employees are the only things that matter.  The outsourcing of manufacturing, call center, medical, and other jobs is just fine, just don't let banksters suffer the indignity of going a day without a bonus.

The BIS report stated: "While during the period 1990-2006, the average percentage of corporate issues with a AAA rating, compared with total corporate issues, was 9 per cent, this proportion reached 48 percent for sovereign issues, and 75 percent in the case of securitisations.  In other words, over the course of less than a decade, securitisation had created the most AAA-rated securities."

We did not create copious amounts of securities which an honest person would rate as AAA in one decade; we simply allowed government-sanctioned grifters to classify previously low-grade investments as AAA-rated ones so they could make truckloads of loot selling them to less sophisticated buyers.

Many observers, from Nomi Prins to Gretchen Morgenson to the creators of the movie Inside Job, have noted that this growth is the result of Wall Street hucksters knowingly packaging sub-prime mortgages into supposedly AAA-rated securities.  How is that not greed and speculation?

Banksters want to return to the good old days of securitization, i.e. before the fall of Lehman Brothers.  BIS noted that banksters "indicated that it was important to remove the negative perception attached to securitisation products."

Of course they do.  They want people to forget that they played a major role in the recent crash.

BIS noted another admission of banksters: "Risk transfer was another important motivator for securitisation and was cited by those originators interviewed as an important reason for engaging in securitisation."

Sure, they want to get rid of their faulty creations before they blow up again in another crash.

Since the securitization of mortgages was a major factor in the recent crash, why not severely regulate all securitization products?  We label tobacco with warning labels to ensure that smokers are at least made aware of the risk they are taking, so why not mandate that all securitization products are truthfully labeled?

"WARNING: This investment product is a collection of sub-prime mortgages and may be hazardous to your financial health!"

We killed Osama bin Laden because he killed 3000 people and did severe harm to our country, yet banksters who have done severe damage to our country, not to mention the rest of the world, are not being thrown into jail by the busload.

Only you can prevent economic forest fires.  Kill a bankster today.