Over the Hill

Swimming with Wall Street sharks

phild2008@sbcglobal.netOctober 4, 2012 

Phil Dirkx

It was good financial news for a change. On Page A5 of Tuesday’s Tribune, the headline said, “Wary Americans saving more.”

We Americans increased our savings last spring by almost 5 percent, a total of $6.9 trillion. That’s the most since 1945. The article also said Americans are shunning the stock market and are reluctant to buy homes.

However, the story didn’t congratulate us. Instead, it warned that our wariness and increased savings are signs “that ordinary people are missing out on a booming stock market and recovering real estate sector.”

I think it’s more likely that “ordinary” people finally noticed Wall Street is really a casino where, as usual, the house has a big advantage. I’m glad Americans are getting wary. Wary is the opposite of gullible.

Look where gullible got us. The Census Bureau says our median household income is now 8.1 percent lower than in 2007. It’s no coincidence that 2007 was the year before the thundering 2008 collapse of our banks and stock market. We’re still recovering.

After the crash, we learned that mortgage brokers and bankers were routinely making loans on overpriced houses to unqualified borrowers. The lenders sold those loans to Wall Street firms, who in turn, riffled and shuffled them to use as the security for bonds, which they sold to unsuspecting investors.

The last straw

It was also in 2008 that I first heard of credit default swaps. Time magazine reported that the market in credit default swaps in 2007 exceeded $45 trillion. That’s trillion with a T. They were also involved in the crash.

 As far as I can tell, credit default swaps are sort of like credit insurance against defaults in big financial deals. They are unregulated. No agency makes sure the insuring party has enough capital to cover potential losses. Anybody can buy, sell or swap them. In some cases, they’re just side bets on other people’s deals.

They were the last straw. I cashed in my stock mutual-fund shares. I realized I was just as out of place in the stock market as I’d be in a Texas hold ’em tournament. I’m too ignorant of the many forces that affect the market.

America still hasn’t recovered from 2008, but the stock market has. If I’d kept my stock-fund shares, I’d be ahead of the game. But I still won’t reinvest, especially after what I read this summer about a survey of Wall Street executives. Twenty-four percent of them admitted they believe unethical or illegal conduct may be necessary to succeed.

How many others also believe that but won’t admit it?

Phil Dirkx writes special to The Tribune. Reach him at phild2008@sbcglobal.net.

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