Paper Assets No Safer Today than in 2008
In 2008 in order to justify the taxpayer-funded Wall Street bailout, the world was pitched a three-page term sheet explaining how ATMs would go dark and McDonalds wouldn’t be able to pay its employees. The premise: either pay for financier blunders, or else.
Strong-arm fascism was employed, more or less, while brokers quietly took to Federal Reserve facilities for funding, after their ultra-levered businesses threatened to send American account holders to the bankruptcy courts as creditors—meaning many almost had to say good bye to access to their retirement funds, at least until the bankruptcy concluded.
Brokers, a part of Morgan Stanley and Jefferies, amidst others, have come under fire for holding dubious securities at the corporate level while utilizing significant leverage by lending cash short-term against client securities.
In 2008, Citibank’s Matt King penned “Are The Brokers Broken?,” asking if this funding model was a risk to the industry at large; a touch later, this question was not at all seen as theoretical.
Today Morgan Stanley is being sued by an ex-auditor, claiming that senior executives and audit officers ignored at Morgan Stanley "whitewashed" concerns over too much credit risk prior to the start of the global financial crisis.Continue Reading →
“This looks like to me like 2007 all over again, but even worse,” said William White, the Bank of International Settlement’s former chief economist