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Sunday, September 19, 2010

The Real Thing

Forget Gordon Gekko's the real thing. Watch all 6 trailers- "Inside Job." Mishkin is embarrassing.

The movie's thesis seems to be that the whole housing crisis/meltdown was engineered. This, I believe, is way off base. Were a lot of people stupid? Sure. Were there a lot of bad/illegal things done? Surely.

But was there a gigantic conspiracy? Hardly. Consider this:

The new owners loaded up with so much debt—$2.9 billion from Wachovia, $1.4 billion from Merrill Lynch (BAC)—that there was no room for error. They didn't expect the property to be cash-flow positive until 2011, according a private placement memorandum. Until then, they planned to cover interest payments—$262 million in the first year alone—from a reserve fund Verrone had arranged. Source: The Ballad of "Large Loan Verrone," Bloomberg/BusinessWeek.

Note that one of the owners was BlackRock--a huge player in the capital markets. The problem was the age-old problem of excessive arrogance, hubris, and greed. It wasn't a case of an elite group deliberately setting out to bring the system down.

At least, that's my take.

1 comment:

  1. It's hard to comment on a movie without having seen it. But the financial meltdown was hardly a conspiracy, unless you call the partnering of government (Congress, The Administration, The Fed, The Treasury, The SEC) and the bankers and Wall Street to try to juice the home ownership market a conspiracy. To me it is more like a story of incompetence, greed, hubris, and arrogance run awry. Some might call it crony capitalism. But it was not a vast conspiracy by either the right or the left to destroy the system.