Sunday, December 27, 2009

the end (of the year) is neigh

For some reason, editors are forcing their writers to compose "best of" and "worst of" lists for the 2000s, even though this decade started in 2001 and ends in 2010. Nevertheless it is worth dwelling on this period because (a) it just happened and (b) the world feels like it is rapidly changing.

Through shortsighted greed, both financial and political, we ended up with a series of economic bubbles where very few people got extremely wealthy on paper and not a whole lot positive resulted from this greed. Sure, lots of marble countertops were made and stainless steel appliances, along with acronyms for financial products that did nothing but rake in fees for large banks, but people have lost their retirement funds, their jobs, and their lives in ill-conceived wars and policies that left us as a whole worse off.

I am reminded of this fact nearly every day that I enjoy a great job, with health insurance and fun co-workers. How can one not feel a bit guilty to have so many blessings while others around you suffer due to the poor choices of those in New York and Washington, D.C.? Worse still, almost none of them have been been adversely affected by their piss poor decisions.

Here is but one example of what I am talking about:

[B]etween 2004 and 2006, [Credit Suisse] was not above making more than $3 billion of senior secured "predatory" (according to one judge) loans to high-end real estate developers operating mostly in the western United States.

Within the last year, at least eight of the real-estate developments that received the Credit Suisse (CS) loans are either operating under bankruptcy court protection, have been liquidated or have been foreclosed upon. ...

The portfolio of loans was the brainchild of David Miller, a Managing Director at Credit Suisse, who was co-head of the U.S. capital markets business within the syndicated loan group. When Credit Suisse made the loans, it got paid millions in fees and then syndicated them all off to investors, who will be fortunate to get back pennies on the dollar during the various bankruptcy proceedings. (Credit Suisse currently has a minimal exposure to the original loans.)

Miller was well aware of the golden goose he had on his hands. In an August 2005 email to a colleague, Miller wrote, "[T]hese are aggressive deals and it is in all of our best interests, that the investors are protected, because if one of them should blow up, you will see these investors pull out of this land development mkt [market] and our gravy train will stop."


As for David Miller, he remains at Credit Suisse and was recently promoted to co-head of the firm's U.S. Loan Syndication business. [CS spokesman Brian] King declined to make Miller available to be questioned about the loan to the Yellowstone Club, the judge's decision in the case or whether the "gravy train" had ended.
Credit Suisse created CLOs (Collateralized Loan Obligations) that blew up in every resorts face. Meanwhile, Goldman Sachs raked it in with CDOs (Collateralized Debt Obligations), which they proceeded to bet against at the same time. The only God's Work that goes on here is that these i-bankers were treated like gods and no one seems willing to punish them for the destruction that they wrought.

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