Prescient Beings, Dirty White Horses, Happy Pale Riders
originally posted 2008-10-10 03:16:07 - bumped - cho
There were ample indications the foundations that subprime built were in danger long before they became anchors to be leveraged. ProPublica mentions three:
Long before the financial crisis claimed headlines, U.S. regulators and law enforcement officials had begun sounding alarms about dangerous lending practices and Wall Street’s headfirst jump into the subprime market. Some were brushed off by their superiors. Others led agencies like the Federal Deposit Insurance Corporation and the Treasury’s Office of Thrift Supervision, which at least one lawmaker has accused of acting sluggishly to avert the crisis.
No mess this large is capable of a rapid cleanup, especially in times when the sky-fallers dominate the ledes. But over the long-term (for the nano-second-attention-spanners that means years or decades) to the extent fault may be found, lawyers in both private and public practice will have a field day introducing Richistani-wanna-be's to Povertyland:
Robert Graham, a former senior lawyer at General Re Corp., faces life in prison for doing what his defense attorney calls a "few hours work" on a fraudulent deal. Prosecutors want to sentence Graham to a "substantial" term -- up to 230 years behind bars -- for his role in a sham insurance deal with American International Group Inc.
The filing frenzy is likely to continue as more bank failures are expected. . . That means "new waves of litigation could still emerge," said Jeff Nielsen, who heads Navigant's financial services disputes and investigations section. .. "One lesson of the S&L crisis is that while a bank can be seized and even reconstituted over a weekend, the resulting litigation can linger for years."
Crisis management of late is like trying to repair the brakes as the train gathers speed downhill. In a marginally rational world a good mechanic would have pulled the engine out of service for a few days to make repairs before it left the yard.
Now would be a good time, as I've suggested many times before, to simply shut the thing down until the proper repairs are made. Or we can continue to watch a runaway train.