One-Two-Three on the Buyout from Slate
“One of the scary things about the current crisis, however, is that the flight to safety may not just be a short-term gyration of the markets. The world credit markets are saying, in certain terms, that the risks of many loans—and especially the real-estate loans that set this in motion—have been grossly underestimated. For this they have compelling evidence, such as the catastrophic failure of the ratings agencies, whose habitual grade inflation turned the AAA rating into a gentleman’s C.”
- What if Bank Bears are Right?
“If Paulson were serious about recapitalizing rickety U.S. banks, he would infuse them with hundreds of billions of dollars of fresh government money, in exchange for ownership stakes. And if he wanted to create market liquidity for all those troubled assets on their books, he would be ordering banks to disclose everything there is to know about them, so Mr. Market could figure out their present value.”
“The carefully synthesized financial instruments now seeping toxically from the hulls of Lehman Bros. and Washington Mutual are vastly more complicated than the martingale. But they suffer the same fundamental flaw: They claim to create returns out of nothing, with no attendant risk. That’s not just suspicious. In many cases, it’s mathematically impossible.”
- How the Financial Markets Fell for a 400-Year-Old Sucker Bet
Note: The Big Money is “part of The Slate Group,” hence the title.
