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The Scam Wall Street Learned from the Mafia

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Re: The Scam Wall Street Learned from the Mafia

#61

Post by bstpierre »

mafro wrote: post #35
tumult wrote: post #31

Matt Taibbi is awful. This article, and all of his others, are hyperbolic demagoguery. This one is particular is so bad that I can't even bring myself to tear it apart line by line. You're doing yourself an injustice by reading it. Unless you take pleasure in misinforming yourself and becoming angered over falsehoods, you're just playing into the hands of a particularly nefarious and persistent rabble-rouser.

I'll give you that 75% of this article is unnecessary hyperbole which adds nothing to the central message. The central message is very interesting though.

"[Top executives were] plunged into years of nut-crushing negotiations [...]"

Perhaps unnecessary hyperbole, but entertaining nonetheless. If you want "just the facts" without the hyperbole, read the indictment [1]. FWIW, I find the RS article to be a more pleasant read.

[1]: http://www.justice.gov/atr/cases/f261600/261602.htm

Re: The Scam Wall Street Learned from the Mafia

#62

Post by laserDinosaur »

Some of these sections are a little confusing. Can someone help me out? Hopefully Planet Money on NPR will do an episode on it soon :)

"So it goes to Wall Street, which issues a bond in your town's name to raise $100 million, attracting cash from investors all over the globe"

Why would investors put money into a school? Are they hoping for returns on their investmant later on like shares in a company? I can't image the profit margins on a school would be very lucrative. Why would people invest in these projects?

"While that unspent money is sitting in the town's account, local officials go looking for a financial company on Wall Street to invest it for them."

So the town raised money for a school which they then invest back into wallstreet, to make money? That seems like an odd process. Would it not be possible for towns to say "We are going to build a $300 million dollar theme park", get the money, and say "construction isn't due to start until, oh I don't know, 2023?", meanwhile just earning huge amounts of interest?

"the broker would tell the pre­arranged "winner" what the other two bids were" If the three banks are colluding, why does the broker need to be the one to pass on the information of what the other bids where? Can't the banks just talk to each other directly and plan in advance what they are going to bid?

Re: The Scam Wall Street Learned from the Mafia

#63

Post by tedunangst »

SideburnsOfDoom wrote: post #46
tedunangst wrote: post #26

Earlier quoted context omitted.

There are people who think three bid systems actually work? Everyone I've ever talked to about three bid systems knows they mostly exist to give a faint dusting of propriety to the fact that somehow the mayor's brother in law is always the guy winning the contract. Are there roads in your town? Do you think they were paved by the honest lowest bidder?

What are you trying to say? The argument that "everyone knows it's crooked" does not make it legal. It does not make a prosecution impossible.

Of all the ways that municipalities and hospitals and whatnot get cheated, banks skimming a little interest is among the least interesting. What would have been interesting is a nice shiny pie chart showing where all the graft goes, but that would relegate this particular scandal to a sideshow.

Re: The Scam Wall Street Learned from the Mafia

#64

Post by tedunangst »

jbooth wrote: post #57
tedunangst wrote: post #26

Earlier quoted context omitted.

There are people who think three bid systems actually work? Everyone I've ever talked to about three bid systems knows they mostly exist to give a faint dusting of propriety to the fact that somehow the mayor's brother in law is always the guy winning the contract. Are there roads in your town? Do you think they were paved by the honest lowest bidder?

You're pretty far off, here. I used to be in an elected position and would sign off on stuff like this. The "lowest bid" thing does actually tend to be enforced, at least where I was, and it was a huge pain in our butt for totally different reasons. You're presuming that every deal is a gladhanded corruption thing. Sometimes, but not most of the time. Often we would know what we wanted, have a good deal for it, it's…

The lowest (or highest, in this case) bid was also enforced in this case. I totally agree with your point about small purchases, I've also dealt with it in the situation where you could walk down to Staples and buy something for $200, but we'd spend $300 because that was the best offer from an approved vendor.

Re: The Scam Wall Street Learned from the Mafia

#65

Post by tedunangst »

laserDinosaur wrote: post #62

Some of these sections are a little confusing. Can someone help me out? Hopefully Planet Money on NPR will do an episode on it soon :) "So it goes to Wall Street, which issues a bond in your town's name to raise $100 million, attracting cash from investors all over the globe" Why would investors put money into a school? Are they hoping for returns on their investmant later on like shares in a company? I can't image t…

The investors don't care about the school, they care about the interest payments they will receive. Bonds are often considered lower risk because the income is fixed.

Earning "huge" amounts of interest is exactly what they are doing. They get cash, they put it back in the bank. The lawsuit is about the "huge" interest rate being rigged.

Oh, you ask why they don't do that and never build the project? Because they're paying interest on it in excess of whatever they're earning. The earned interest is only to minimize the cost of sitting on the borrowed money.

Using a broker to decide the winner leaves less paper trail. It'd be weird for three competing banks to have a three way call every time this happened.

Re: The Scam Wall Street Learned from the Mafia

#66

Post by laserDinosaur »

mafro wrote: post #35
tumult wrote: post #31

Matt Taibbi is awful. This article, and all of his others, are hyperbolic demagoguery. This one is particular is so bad that I can't even bring myself to tear it apart line by line. You're doing yourself an injustice by reading it. Unless you take pleasure in misinforming yourself and becoming angered over falsehoods, you're just playing into the hands of a particularly nefarious and persistent rabble-rouser.

I'll give you that 75% of this article is unnecessary hyperbole which adds nothing to the central message. The central message is very interesting though.

Yeah, sentences like "this was like the scam in Office Space, multiplied by a factor of about 10 gazillion: Banks stole pennies at a time from towns all over America, only they did it a few hundred bazillion time" struck me as really poorly written.

Re: The Scam Wall Street Learned from the Mafia

#67

Post by tedunangst »

brazzy wrote: post #44
tedunangst wrote: post #26

Earlier quoted context omitted.

There are people who think three bid systems actually work? Everyone I've ever talked to about three bid systems knows they mostly exist to give a faint dusting of propriety to the fact that somehow the mayor's brother in law is always the guy winning the contract. Are there roads in your town? Do you think they were paved by the honest lowest bidder?

Do you have a link that explains what exactly a "three bid system" is? The top hit on Google for the term describes a card game...

In general, you want to buy something. You have to get a quote from at least three vendors, then you pick the lowest. For contracts, like to build something, paint city hall, whatever, you solicit bids by publishing a notice in the local paper. Usually the bids are sealed, which "guarantees" people make a fair bid without undercutting their competitor by a dollar.

Re: The Scam Wall Street Learned from the Mafia

#68

Post by mjwalshe »

16s wrote: post #54
mjwalshe wrote: post #50

Earlier quoted context omitted.

But presumably these "working class" peopel had a morgage that is highly leveraged - did they not see the diference?

33% (or slightly more) of homeowners have no mortgage at all. Edit - Some sources: http://www.ritholtz.com/blog/2012/04/debunking-the-housing-r... http://www.irishexaminer.com/ireland/kfsneyqlidgb/rss2/

Well don't forget that in the USA housing is reltivly cheap.

Re: The Scam Wall Street Learned from the Mafia

#69

Post by tedunangst »

pja wrote: post #49
mafro wrote: post #35

Earlier quoted context omitted.

I'll give you that 75% of this article is unnecessary hyperbole which adds nothing to the central message. The central message is very interesting though.

But without the hyperbole, people won't get engaged, they won't get angry. Now, to some extent that engagement is being sought in order to sell Rolling Stone, but I think that both Matt and the Rolling Stone editors believe that they're talking about something that matters & that people should be angry about. Hence the hyperbole. If they wrote a dry academic paper and published it in some economics journal somewhere…

If they wanted to get people angry, they should follow the money and show where all the money used to build a new hospital goes, but Taibbi's axe doesn't grind that way.

Re: The Scam Wall Street Learned from the Mafia

#70

Post by laserDinosaur »

tedunangst wrote: post #65
laserDinosaur wrote: post #62

Some of these sections are a little confusing. Can someone help me out? Hopefully Planet Money on NPR will do an episode on it soon :) "So it goes to Wall Street, which issues a bond in your town's name to raise $100 million, attracting cash from investors all over the globe" Why would investors put money into a school? Are they hoping for returns on their investmant later on like shares in a company? I can't image t…

The investors don't care about the school, they care about the interest payments they will receive. Bonds are often considered lower risk because the income is fixed. Earning "huge" amounts of interest is exactly what they are doing. They get cash, they put it back in the bank. The lawsuit is about the "huge" interest rate being rigged. Oh, you ask why they don't do that and never build the project? Because they're p…

That clears a lot of it up. Cheers!
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