I Come Here to Bury, not to Praise

And unlike Marc Antony, I mean it.  Karen Martinez has retired as local counsel for the SEC, and the hagiographies are everywhere.  Pardon me if I don't join in.

As I've said numerous times on this blog, its companion, and elsewhere, the 2007 crash was an obvious thing, and it happened because the regulators were ignoring what was going on.  Of course, the regulators had been ignoring most things since Reagan took office, ratcheted it up several notches with the introduction of derivatives in the late 80s, and went into full snooze mode after the repeal of Glass-Steagall.  By 2005, there were billboards and radio and TV ads for straw buyers, no doc liars' loans were everywhere, appraisers were making up values, and rating agencies were making up risk levels.  The banks knew their game was crooked, but they were making to much in commissions and fees to stop it.  I have no doubt they also gave orders to the regulators to look the other way.

Then in Fall 2007 the banks figured out the merry-go-round was coming to a halt, so they woke up Martinez and everyone like her, pulled a Louis Renault, "We're shocked, SHOCKED to find that mortgage fraud is going on here," threw them some of their own people as sacrificial lambs, pointed them to the smaller players and ordered them to crack down on the small graft because it was interfering with large graft, and reminded them to leave the large graft alone.  And Martinez and everyone like her dutifully obeyed.  And along the way they slandered me all over the territory because they had decided I was the kingpin of one operation because they flunked Corporations 101 by not being able to tell the difference between a registered agent and a principal.

Now she's retired with her federal pension.  I wish I were compensated so well for accomplishing so little.  So I shall not be praising Caesar, now or any time in the foreseeable future.

But There Isn't a Problem with the Financial Sector

Dick Fuld, the financial genius whose leadership ran Lehman Brothers into the ground (Yes, I know he had plenty of help from several other financial deities, notably Goldman Sachs, but it wasn't like he was resisting their siren songs.), crawled out from under his rock last week for the Marcum Microcap Conference.  He immediately blamed the government for the financial crisis, by "forcing" lending to "unsuitable borrowers."

I'll be the first to say the government screwed up in this mess, and that it in fact made things worse by pumping up the bubble by expanding the pool of "eligible" borrowers beyond what was advisable.  But what really caused the mess, people?  Fast and loose fund raising by the banks?  Even more fast and loose lending with fraudulent appraisals and credit checks?  Definitely.  If the government was to blame, it is because it was criminally asleep at the switch in controlling all this fraud.  But the banks were the core of the problem and remain so because of people like Fuld, who remain in charge and continue to blame anyone but themselves.