AndrewChia.com

Source:  Starbizweek 1 May 2010
Article by Andrew Sheng

The Greatest Show of Earth – How Wall Street brought the Financial Crisis on Itself.  There is a cast of thousands, from the most famous to the most guilty. Never have so few made so much money from so many.

See how the Financial Crisis Inquiry Commission (FCIC) and the US Senate Subcommittee summon almost every week the stars from Wall Street to show how they did it.

The Senate subcommittee chairman, Democratic Senator Carl Levin, said, “Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got credit agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.”

We must admire the US for its high level of transparency and its willingness to go after the big guns.  What these open hearings reveal is the degree of greed and fraud that Wall Street has perpetrated against the whole world in its pursuit of ever-growing profits.

The three major rating agencies in the world – Moody’s, Standard & Poor’s and Fitch – helped to mislead investors into parting with their hard-earned savings.  They thought they were buying super-safe securities rated AAA. But in reality, 91% of the AAA subprime RMBS (residential mortgaged-backed securities) issued in 2007, and 93% of those issued in 2006, have since been downgraded to junk bonds.

This is only the beginning of the dirt that is coming out of Wall Street.  The show will continue.

Datuk Seri Panglima Andrew Sheng is ajdunct professor at Universiti Malaya, and Tsinghua University, Beijing.