December 7, 2007
Why Hillary’s definition of Wall Street matters
I wonder what Hillary Clinton means by "Wall Street". Her speech in New York calling for mortgage lenders to freeze rates on sub-prime mortgages and for a 90-day moratorium on house foreclosures was heavy on rhetoric against the Street.
Wall Street needs to be part of a comprehensive solution that brings to the table all those responsible and calls on them to do their part. Wall Street helped create the foreclosure crisis and Wall Street needs to help solve it.
OK, but does she mean that mortgage lenders and retail banks have to step forward or does she include investment banks that packaged collateralised debt obligations and sold them to investors?
These are clearly uncomfortable times for mortgage lenders such as Countrywide. They are becoming very sensitive times for investment banks as well.
The latter are already under investigation by Andrew Cuomo, the New York State attorney general, for their packaging and selling of sub-prime mortgages. The New York Times carried a front page story yesterday about Goldman Sachs’ packaging of $6bn of securities backed by sub-prime mortgages earlier this year despite its bearish view of the market.
Maybe the New York Times had a interest in providing post-hoc evidence for Ben Stein’s column about Goldman on Sunday. And I don’t think there was anything necessarily bad in an investment bank that hedged its balance sheet against a fall in the housing market also selling sub-prime securities to institutional investors.
But Wall Street’s reputation is still at risk. I do not think it was an accident that Mrs Clinton used the term "Wall Street" when talking about mortgage lenders. She knew that populist sentiment is against financial institutions making big profits in times of financial crisis.
Mmmm. Wall Street?
There have always been two sides to this coin… the buyer and the seller. So, yes, funny, whom the hell is she referring to?
I gather that recent buyers of the untouchable esoteric tranched real (or imagined) estate derivative (or derived) instruments are quite happy with the Paulson-Bush freeze announcement.
But, I feel somewhat for the poor Wall Street fool that sold at pennies on the dollar…
In the end, Hillary’s comments underscore the bottom-line of the issue at stake: illiquidity, which is raising its ugly head because no one knows what the hell those papers are all about… less their market worthiness.
Posted by: Joe Rotger | December 7th, 2007 at 1:24 pm | Report this commentWall Street should take this as a “shot across the bow”. There is no terrific presidential candidate running for president (for either party) so the flip-flopping, mud-slinging will be ugly for the next 12 months. Wall Street is an easy target for the Dems. It’ll be an interesting ride.
Karl Zachar
Posted by: Karl Zachar | December 7th, 2007 at 3:19 pm | Report this commentWittgenstein can solve this one for you. You and Hillary are playing two different language games, and you don’t mean the same thing when you say Wall Street.
You have a tight, accurate, well informed definition of Wall Street, and are writing for a well-informed, financially literate FT audience.
Hillary is speaking to a broad audience that, perfectly understandably, can’t tell an investment bank from a retail bank, or a CDO from a DVD. Wall Street, as she uses it, is just a broad, vague, easily understood shorthand term for Big Money, which is absolutely everyone involved except the guy or gal who’s facing foreclosure.
Posted by: Julian Gough | December 7th, 2007 at 4:47 pm | Report this comment“Wall Street”. Somehow the name now raises the spector of fraud and money laundering - under the guise of packaging, securitizing, and hawking otherwise normal and quantifiable equity and debt obligations (mortgage, commercial, governmental or otherwise).
The term has taken on a negative meaning that connotes intelligent masking of the truth about quantifiable equity or debt quality and risk of loss (by bundling and securitizing thousands of individual and commercial obligations), cozy relationships among banks, compromised investment banking and brokerage houses, compromised credit and securities rating agencies, and murky selling and buying entities such as offshore corporations, private equity and hedge funds - the executives of which skim into private pockets hundreds of millions in “commissions or fees” or whatever term de jure will get also get them off the tax hook for deconstructing a working corporate entity.
We saw this kind of thing in the 1920’s - just on a smaller, national scale. Giant, predatory corporate monopolies played fast and loose with the American economy. Speculation and stock fraud triggered failure of the banking system and the Great Depression took hold on the Country. A series of New Deal laws and programs, including the Securities Acts of 1933 and 1934 were supposed to revitalize banks and the securities industry by providing a separation between banking and securities industries, dissemination of truthful and reliable public information about the structure, economic health and prospects of public corporations, transparency in public corporate business, and real punishment for securities related manipulation and deceit. “Wall Street” - is now, unfortunately, just a synonym for loss of confidence in the American dream.
Posted by: Robert Warner | December 8th, 2007 at 3:32 pm | Report this comment