Before the Great Recession and way back before 401K retirement plans, I think the general public attitude toward what transpired on Wall Street was it was just some strange money game with arcane rules that no one really needed to know about anyway.
But 401Ks were tied to the stock market so that drew a little more interest — but not as much as one might think.
But as the years progressed and technology was introduced things began to move more quickly and the boys and girls on Wall Street came up with new and improved ways of making a quick buck, all based on securities, to include traditional shares in corporations called stocks (which are a form of securities), and even things such as “mortgage backed securities” or “collateralized debt obligations (CDOs)”.
Mixed in with all of this, the practice of taking out what had been called second mortgages went from something one did in near shame or desperation to something people did almost as a status symbol (see how much I can borrow with my assets). The euphemism “home equity loan” came into use.
And along with all of this there was this ongoing effort by liberals and conservatives and Democrats and Republicans and real estate people and lenders to promote the idea that everyone should have their own home.
But in the past in order to do that folks often had to scrimp and save for years and years just to make a down payment. And as inflation made home values rise, many people found it hopeless to ever save enough money to buy a home or even be able to make the necessary monthly payments on a mortgage.
And then came the government programs that made it possible for people to get into homes for virtually nothing down.
That would not be such a problem as long as folks could at least make their monthly mortgage payment, but people who do not have money to put down just might not be able to be counted upon to make monthly payments over the long haul.
There is much difference of opinion over what originally caused the housing boom or bubble and no doubt there are many factors involved.
But the housing bubble created such a panic in home buying that people who did not have money could not only get into a house, they did not have to worry about making payments because they could actually sell the house they never bought at a profit and “buy” a bigger one.
And along with all of this came the adjustable rate mortgage. Get in at a cheap interest rate and then by the time the interest rates went up, you’d be so rich in equity that you’d be able to afford it.
And then at some point things got so crazy that the nation’s whole economy became dependent upon consumer spending (much of it based on home equity loans).
Manufacturing declined as part of the economy, while importing gadgets from overseas and making money off of entertainment and services and on investing in other investments rather than tangible things became the engine of the economy.
Along with all of this was a lot of fraud — not all on Wall Street.
And then the bubble burst.
By this time, while most people still did not really understand Wall Street, nearly everyone was paying attention.
But I think even many who should have understood what was going on did not, to include possibly George W. Bush and Barack Obama. I mean George W. had an MBA degree and Brack Obama was intelligent.
Even many or most of the senior investment people did not really understand it all. They were outmaneuvered by some younger whippersnappers who threw all notions or pretenses of ethics and even normally accepted business principles out the window. They were aided by some math experts who using logarithm formulas designed investment vehicles called derivatives that they claimed were so sophisticated and revolutionary that they could spread out risk to such a degree that one could not lose.
While the various schemes involving derivatives were certainly complex and clever, to a large extent they seem to have amounted to not much more than a modern variation of the old Ponzi scheme.
Most people would probably be better off to go back to their lives and forget about Wall Street, if they could.
If individuals invested closer to home and if our government catered more to its citizens than Wall Street we would be better off.
But if you want something for nothing, Wall Street would like to help:
Somewhere I read today that the Goldman Sachs attitude in selling questionable securities was that people wanted them and the rule is: “if the ducks quack, feed them”.