60 Minutes – Yes, It Was All A Scam

60 Minutes – Yes, It Was All A Scam

Posted by Karl Denninger

Janet Tavakoli appears 9:20 into this clip, which is worth watching in full.  Here is part of what she said, along with a bit more…

Poking through the wreckage, many experts believe the root cause was a perfect storm: a monsoon of gullibility colliding with a tidal wave of greed.

“This was a massive Ponzi scheme. And it’s the biggest crime against the American economy in our lifetimes, in fact, ever,” analyst Janet Tavakoli explained.

Tavakoli is an analyst specializing in derivatives, the exotic financial instruments at the heart of the meltdown. She argues that the bad mortgage loans that fueled the crisis were repackaged by investment banks, sliced into increasingly complex derivatives and resold to other investors, even though the underlying mortgages were often virtually worthless.

“You had various traders buying each others’ products to artificially keep the prices up so that the bubble didn’t collapse,” she told Safer.

Not only that. But the mortgage derivatives being traded were so mind-numbingly complicated, nobody understood them fully. Certainly not the pigeons: the buyers at banks, mutual funds, pension funds and insurance companies who wound up holding a bag full of worthless paper.

“But these guys are smart guys. They’re all graduates of the finest business school, correct?” Safer asked.

“Yes. If they were gullible, they’re sophisticated investors. So they can’t really go back to the investment banks that sold them this product and say, ‘We’ve been had.’ Because they held themselves out to be experts in these kinds of securities,” Tavakoli replied.

All of which proves that whether you’re on Wall Street or Main Street, brain power is no defense against con men. In fact, smart guys may be the biggest suckers of all.

JT Note:

Also from the interview: “’We wouldn’t want to live in a world where we couldn’t be conned because in effect we would then be living in a world where we mistrusted or refused to trust anyone. So this is the price we pay,’ [Ricky] Jay said.”

I agree with Mr. Jay.  Who would want to live in a world like that?  But equally, who would want to live in a world where trusting hardworking taxpayers are unprotected by government so they become the easy prey of exploiters?  That’s why we have laws.  That way, we can remedy wrongs and make criminals pay the price.  It’s time to put that theory into practice.

Here’s the unasked question though (except by Janet!) – conning people is still against the law!  How comes we don’t see anyone being perp-walked among all those who conned these “wise men”?