It’s that time of year again when I vacation with the President and his family on Martha’s Vineyard. Well, we are not exactly together. But the 3 miles that separate us make it almost seem as if we were. The Big O, his lovely Michelle and the girls are just down the road apiece in Chilmark. “Up-island” we call it here on the Vineyard.

It all started the day the world ended. The world as we knew it that is. September 15, 2008, the day Lehman Brothers, the fourth largest investment bank in the modern world, came crashing down. On that day, we began a fast and furious downward debt spiral. Panic set it, fear took over and the rest, as they say, is history.

 In case you had not heard, America’s very own Benedict Arnold, rating agency Standard & Poor’s, downgraded the United States credit from Triple A to Double A in an act of sheer fiscal and political recklessness. The price of credit has just become substantially more expensive at a time when low cost credit is surely the best cure.

That they could do worse than they have already done this past decade is astonishing. But kudos to S&P for showing that they have a spine…even if it is attached to a tail.

Rating agencies have come under fire since the mortgage market meltdown in 2008 primarily due to their major role in bringing about the debacle. To jog the memory, S&P along with Moody’s and Fitch based their solid credit expertise and stellar reputations on whichever client paid the most for their services. Standard & Poor’s was one of the key players in the mortgage securities crisis by giving AAA ratings to any junk bond that came along with a handsome fee attached.

In the ultimate irony, the Show-Me-the-Money S&P star now stands as the credit judge of the largest economy in the world. Just goes to show that big power in the hands of small people is seriously…well small.

Continue reading S&P: The Genius of a Flexible Conscience

Hallelujah! Salvation is here. Or so we are supposed to believe. The 3 Ring Circus that is two branches of Congress and the Administration is finally close to an accord on debt mania madness. What a surprise. Not…

We all knew this would happen—very simply because it had to. First and foremost, if the debt ceiling was not raised, 100 senators and 435 congressional reps would be on the unemployment lines with the rest of America. (Not a bad thought). So to save their jobs and to save face, the government by the self-serving, for the self-serving, of the self-serving finally got something productive done and stopped pushing the world’s largest economy to its knees.

The question was how much peacock posturing between politicians would we have to endure to get here? It was high drama in DC this past month with the Tribe of Orange (Boehner) and the Tribe of Peely Wally (Reid) going head to head in the battle of bungling economics. There is simply no excuse for the dangerous debt ceiling dance these power plays forced the nation and the world to endure. My thoughts? Get yourself a Reality TV Show and save us some precious time and money. We could call it: Pork and Politics.

Greed. Envy. Arrogance. These are the three enemies of humanity according to world-renowned spiritual leader Radhanath Swami at Jivamukti Yoga studio on a recent summer evening.

What kind of disease does greed inflict on the soul and what exactly is greed anyway?

A former investment banking securities salesman whose business was obliterated in the mortgage market meltdown lamented that the greed of others destroys many economic lives. Greed is simply the desire to want more than you have, he explained. “It’s a natural state.” He is right of course. But for some, so is murder and rape. The evolution of our species necessitates we don’t give into every natural desire.

The continuing economic struggle of millions of unemployed, the unending tragedy of massive foreclosures, the vicious battle in Congress over the debt ceiling reveal that greed continues to be a complex force in our society. Much of our current economic hardship can be directly tied to the excessive acts of greed by a few thousand mortgage bankers. Their natural state of wanting and pursuing more has deeply damaged the financial future of the modern world. Yet greed is an old story that has virtually shaped every period in human history. How we can transform its power into a constructive rather than destructive force is the dilemma for 21^stcentury finance.

Defining Greed

Good-b CEO Monika Mitchell is the co-author of the upcoming book: Conversations with Wall Street: The Inside Story on the Financial Armageddon That Was and How to Prevent the Next One.

So here we are again, in economic LaLa land, waiting for the life raft that will save us from ourselves. The financial news this week is bittersweet for both Wall Street and Main Street. We are told the economy is getting “better,” yet the reality experienced on both sides of the Street reveals the truth.

DealBook reports that Wall Street is about to embark on massive layoffs. Credit Suisse, UBS, Morgan Stanley, Goldman Sachs, Bank of America, Deutsche Bank are poised to be among the first to reduce staff. Subprime mortgage traders who against all logic have floated to the top of the heap for the past two years as the rest of us struggled not to sink find their once secure jobs on the line.

So brace yourself- it’s going to be a bumpy ride. For those of you cheering for Wall Street’s soon-to-be unemployed, you might want to reconsider that. After all, if the financial hardship we have experienced since the mortgage market collapse has taught us anything—it has revealed that we are all connected-economically that is. In New York alone, these thousands of layoffs could hurt small business even more than it already has. Those with high paying jobs are often the customers that local businesses and restaurants rely on to pay the overhead. Income taxes support the public workers whose jobs and benefits are at risk.

Have you heard the “good” news?

The End of the World is nigh. Saturday, May 21 to be precise. Uh oh—that’s today! So if you feel any rumblings while reading this—my apologies. According to the co-founder of Family Radio network, the nearly century-old Harold Camping is predicting “the Rapture” will begin this week and in five months the world as we know it will officially end.  This would be a surefire way to end humanity’s problems. Oh, if it were only that easy…

In non-religious terms, the “Rapture” is the transformation from one sphere of existence to another. This very well may become the fate for Wall Street professionals and financial institutions in line for the new wave of criminal prosecutions. 

Hedge Fund CEO, Raj Rajaratnam‘s conviction on 14 counts of insider trading has emboldened the federal prosecutor’s office in New York to pursue other firms. The use of wiretapping for Wall Street trials, normally reserved for mafia racketeering, reveals the place the industry has taken in the minds of the legal system and the public.

This view of the formerly esteemed financial industry is a tragic shame. Wall Street should be the partner of Main Street.  In a more perfect world, both Streets would be connected through a symbiotic relationship where financial innovation supplies the citizenry with jobs and capital. Unfortunately through the past decade, Wall Street has once again become the enemy of the people. 

The diminutive gentleman sitting behind the enormous prop desk of the premier episode of the “The Amazing Federal Reserve” was none other than Chairman Ben Bernanke. The momentous occasion was billed as the “first press conference ever.” The unusual YouTube hour had all the staged contrivance of a tacky reality TV show. Fanfare leading up to the April 27 premier was much more exciting than the disappointing rhetoric that filled it. Like the fake reality show it is, the Federal Reserve wants Americans to believe that all is well in the hinterland.

It is really all in the way you think about it. Is it murder or justice? Debt or equity? Budget deficit or moral deficit?

As we struggle with the do’s, dont’s and maybes of the continuing financial reform debate, pearls of wisdom come from the strangest places. Last week’s press conference with John Travolta, John Gotti Jr. might be assumed an unusual source to derive insight. Yet Gotti Jr.’s words as he sat next to a botoxed Lindsay Lohan and Sister Victoria were profound.

“Some people say, ‘John Gotti was a killer, John Gotti was a gangster.” Yeah, he was, but he was also a man’s man, which is the most important thing. He made a choice to be something in his life and he stood true to those convictions. He never one time deviated from that path, not once.”

For some reason this moving testimony from a devoted son to his misunderstood Pa reminds me of the ongoing financial reform war. The current battlefields are fought on the same issues that created the global economic crisis. Monitoring derivatives, credit ratings, capital rules, and “too big to fail” banks has kicked up another firestorm. Only three years after Bear Stearns crashed and burned under the weight of its recklessness, lawmakers are claiming that regulations to prevent another crisis are unnecessary.

 Readers Note:

GoodB Executive Director Monika Mitchell will be on writing sabbatical until March to finish her new manuscript on The World of Wall Street Finance  due out in ebook in June and print in Fall 2011.

Lately I have been hearing a lot about how Wall Street mortgage market makers who brought the global economies to their knees were “stupid.” MIT Quants, Berkeley physicists, Harvard, Stanford and Wharton MBA’s, we are told, were completely clueless about the upcoming housing collapse. We are supposed to believe that these physics and stochastic calculus majors did not understand that what goes up must come down.

At the 92 Street Y in New York last week, Michael Lewis, the prolific author of “The Big Short” (out in paperback this month), claimed to NPR’s engaging host Ira Glass that most guys on Wall Street did not see the downturn in housing coming. He further declared that only 10-20 people in the whole industry saw the upcoming crisis – the rest are either “fools or crooks.” The handful of credit default swap (CDS) traders aka “short-sellers” in his book are his “heroes.” “I like these guys,” he announced. “I want the reader to like them too.”