The Blame Game: BuySide vs SellSide vs Main Street

The Bronx cheers raining down on Hank Paulson are tough to ignore; Main Street wants blood, but ain't gonna get it given Wall Street has turned into a turnip. Hank Paulson could probably care less; he is above the law, and polls indicating as few as 7% of the public approve of his plan are not likely to stop this soldier from moving onward.

Blaming hedge funds for the recent debacle has become the national sport but at least one longtime Wall Street professional is putting his foot down when it comes to blaming the BuySide for all that ails us:

One of the great ironies of the current crisis is that the problem emanated to a large extant from a consortium of constituents who are now trying to affix blame, particularly on hedge funds.

The crisis originated in investment banks who took advantage of lax regulation and low interest rates to lever their balance sheets;

it was a result of politicians whose coffers demanded growing amounts of money to run campaigns and to live in a style inhabited by their financial backers; it stemmed from corporate managers who looked upon the corporations they ran as their own piggy bank and whose sense of fulfillment was principally satisfied in the size of their stock option grants; and it came from consumers whose sense of entitlement required larger and more expensive homes than their salaries could reasonably justify.  The common characteristic was greed.

Now that this constituency has been caught, so to speak, with their pants down, they are rapidly seeking a culprit, someone to blame, because, of course, people cannot be responsible for their own actions!.  Hedge funds have become the choice du jour.  Operating outside the normal halls of business, their lack of convention makes them an easy target.  Granted, I am certain, there were nefarious managers who have banded together to press prices lower.  But on balance, this unregulated sector of the market has acted more rationally than any other, certainly more reasonably than regulated sectors.  It was their research that largely exposed the lack of disclosure on balance sheets and the corporate managers who eviscerated their company’s assets.

At this point we should all hope for a speedy resolution, perhaps one that may not satisfy all of our desires, but a resolution that returns confidence to the system.  What I do not expect is any mea culpa’s on the part of our elected officials or from any of those truly responsible.

Sydney M. Williams
Monness, Crespi, Hardt & Co., Inc.

_______________________________________________________________________________________

Did you miss the Hammer on meet the Press this past Sunday?

--------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position

Comments:

<< Back to main