the visible hand

it is the theory which decides what can be observed – einstein

Wall Street Trader Draws Some Subprime Lessons

Posted by ecoshift on September 7, 2007

I imagine some of you will see this anyway, but just to be sure you don’t miss it… here’s the link:

Bloomberg.com: News
Wall Street Trader Draws Some Subprime Lessons

By Michael Lewis
Sept. 5

So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.

Don’t get me wrong: I have nothing personally against the poor. To my knowledge, I have nothing personally to do with the poor at all. It’s not personal when a guy cuts your grass: that’s business. He does what you say, you pay him. But you don’t pay him in advance: That would be finance. And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn’t allow to invest in my hedge fund.)

That’s the biggest lesson I’ve learned from the subprime crisis…

There’s a reason the rich aren’t getting richer as fast as they should: they keep getting tangled up with the poor. It’s unrealistic to say that Wall Street should cut itself off entirely from poor — or, if you will, “mainstream” — culture. As I say, I’ll still do business with the masses. But I’ll only engage in their finances if they can clump themselves together into a semblance of a rich person. I’ll still accept pension fund money, for example. (Nothing under $50 million, please.) And I’m willing to finance the purchase of entire companies staffed basically with poor people. I did deals with Milken, before they broke him. I own some Blackstone. (Hang tough, Steve!)

But never again will I go one-on-one again with poor people. They’re sharks.

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