Saturday, December 8, 2007

Citigroup at Work

"Everything was supposed to be different in the post-Enron era, wasn't it? Yet here we are just six years after that calamity, and it feels as though someone hit rewind. ... Just as Enron's investment-grade rating ... turned out to be an illusion, so did the investment-grade ratings on many mortgage-backed securities. 'Structured finance,' as the Street calls the black art of making one thing look like something else, couldn't transform Enron from a money-losing company into a moneymaking one, and it couldn't make subprime mortgages into investment-grade debt", Bethany McLean (BM) in Fortune, 26 November.

Structured finance (SF) is all smoke and mirrors. The FBI could do something useful. Get search warrants for all investment banks SF departments and cart away every computer and piece of paper it finds. Who knows what might be there? See my 7 and 16 October posts mentioning SF. BM has another article about Citigroup and its Enron machinations in Fortune, 10 December. Way to go Bethany! Citigroup is fighting a $5 billion equitable subordination claim. I hope Citigroup loses. I suspect there are enough indictments that could be handed out on Wall Street for SF, the feds could build a new minimum security prison just for SF criminals, excuse me, "professionals". Sorry about that, I just jumped the gun a bit.


Anonymous said...

Hey,they could these folks to staff a call center for that "hope now" thingie!

Ann Rutledge said...

Skeptical CPA, you know less about this topic than I know about accounting from the two terms I took at the GSB. The RMBS situation is more complex than that. But, as far as SIVs and ABCP conduits are concerned, you probably haven't gone far enough.