WorldCom, the telecommunications monster frankensteined from MCI, LDDS, UUnet and others (including, almost, Sprint) went mams up in '03. A partial reason may have been that CEO Bernie Ebbers couldn't make the margin calls on his own company's stock. Fearful that he may have to dump stock and further drive down its price, his board loaned him a bridge. Whoops.
Read about either of these disasters and inevitably the same words, phrases and adjectives occur: 'hidden', 'masked', 'opacity', 'false picture of financial growth' to name but a few. Such expressions frame perfectly the world of finance, both low and high during the 0z Decade.
It was ten years of derivatives and dodgy debt, hedge funds and financial instruments, frothiness and full-fledged bubbles. It was peak oil, it was falling oil, it was record profits for oil amidst the $1.50 cost of a litre of gas.
And ultimately, it became about the NINJA. Not the shadowy, Japanese warrior/assassin caste so beloved by Tarantino, though the metaphor of a hooded, masked and unseen force is apt. Rather, it was 'No Income, No Job or Assets? No Problem?'. It was a perfectly crazy deal where someone with All Those Qualifications could get a mortgage Just For Them.
Then, that crappy debt was 'securitized' - whatever that has come to mean. Said 'securities' were then packaged and sent of into the world by both establishment banks and - wait for it - the shadow banking system.
All kinds of nifty new concepts - like ABCPs, SIVs CDOs or CDS appeared. And they all had cool initial-type names to make them seem more shadowy and spy-like which, one supposes, made them irresistible to investors, big and small: "Hey, I don't understand this shit! It must be good." The rating agencies gave the big thumbs up. The big pensions funds screamed, 'We want in'.
Sadly, anyone who dared peek behind the curtain saw it for what it was: A bunch of really smart math geeks creating computer models of theoretically never-ending profit. Their employers could only rub their hands with glee as the money tsunami-ed in. And any economist, journalist, academic who dared question or report what he or she saw was ridiculed and shouted down by the bullish bullies who continued to profit mightily from the house of cards they had created.
Of course, they shorted everything. Just in case.
And then, Bear Stearns - Bang!, Lehmans - Biff!, WaMu - Kerassh!, Northern Rock - Pow! Like villains taking a good whuppin' from Batman they all went down.
In 2009, the last year of the 0z decade, approximately 140 banks weren't 'too big to fail'.
So, if you're sitting here in the first days of the second decade of the new millenium, wondering where your pension, your retirement, your future went, the answer's somewhere in the twisted financial entrails of the ten years just passed.
Not very reassuring, to be certain. But, hey, it could have been way worse and weirder. At one point the Bush administration was pushing mightily to put one of America's most cherished entitlement programs - Social Security - into the very hands of the gong show performers who ultimately ruined the market. And McCain could have won and dredged up the ghost of Herbert Hoover, while Palin shook her pom-poms.
And it could get better. There's talk in the U.S. of re-instating the parts of the Glass-Steagall act whose repeal is widely blamed for kick-starting the mess we're in. This would return some much needed regulation - not to mention sanity - to the American financial industry. Plus, if you have investments they've likely risen to the tune of almost 40% over the last 18 months. If you got out and dove back in early enough, congratulations! You pretty much made a killing. But, then, you were probably never fooled by these shenanigans in the first place.
So, let's all hope, as we head out of 0z, we're in a 'V', or a 'U' at least. Anything but the dreaded 'W".
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