Good Writing on the Insolvency Mess

I have to say, this is a damn find lede.

Blowing up the Lab on Wall Street
By Richard Bookstaber

Looks like Wall Street's mad scientists have blown up the lab again. The subprime mess that is cutting so wide a swath through financial markets can be traced to the alchemy of creating collateralized debt obligations (CDOs) compounded by the enormous amount of leverage applied by big hedge funds. CDOs are derivatives — synthetic financial instruments derived from another asset.

His point is that Wall Street has created instruments so leveraged, and so removed from reality that people are literally spending billions on nothing at all.

The cause for this, to me anyway, Mr. Bookstaber^* does not make this point, is that the systematic dismantling of the FDR era banking and securities regulations have allowed this to happen.

It's human nature to go for a quick buck, and to believe that the good times never end, and the deregulation of banking and securities has had this predictable result.

^*Isn't that name almost Dickensian in character?