I was in grad school getting a degree in mathematical physics a few years ago. The smartest guys in all my classes got jobs on Wall Street to create models of human psychology, politics, economics, and energy.
They use these models to execute trades, buying stocks and selling them a millisecond later to make a couple of million dollars.
Every tiny bump up by any company on the Big Board is immediately sold for a profit by one of the Too Big To Fail (TBTF) firms. If the stock goes down they make money as well. Every tiny rumor, right or wrong, moves stocks, and that movement creates profits for the TBTF firms.
The film shows accurately how the mortgage-backed securities caused the TBTF firms to tank. All the mortgages in these bonds were subprime mortgages, therefore worthless. The bonds were still AAA rated and countries all over the world bought them.
This is one reason why Greece went bankrupt, and why many other nations are on the brink: Ireland, Portugal, Iceland, Spain. The European Union itself is on the verge of collapse, because of a half dozen TBTF banks on Wall Street.
The film makes it seem as if the bankers were as surprised as everybody else when the bottom fell out. The sad truth is that financial institutions have gotten fat on mortgage-backed securities seven times in the last 80 years. All failed miserably, causing recessions of increasing magnitude.
The bankers knew damn well what was going to happen. That’s why many of them made a bundle on the meltdown.
You’re kidding yourself if you don’t think the TBTF’s huge computer models don’t factor in the government’s bail out. They use this so they can take on more risk. “Uncle Sam will always bail us out, so let’s increase our leverage from 30 (the average of the TBTF banks) to 50.”
The new “Wall Street Reform” law codifies the Federal Reserve’s access to $2 trillion for any future meltdown. The big banks won’t even need to beg Congress for the money. These TBTF can add $2 trillion to our national debt any time they damn well please, as often as they like.
The only banks in the U.S. that survived the financial meltdown in good shape (without federal money) are the southern banks. These traditionally more conservative banks took less risk to begin with (fewer subprime loans, for example).
The new “Wall Street Reform” law forces these conservative banks to now assume some of the extreme risk still being assumed by the TBTF banks.
Now the TBTF banks not only have the confidence of a bail out by Congress to ratched up their risk factor, but ALSO a bail out by the Federal Reserve, PLUS access to all the assets of the conservative banks in the South.
Next time Wall Street craters, they’ll take every last penny in the U.S. with them.
And there will be a next time.
It’s inevitable.
