60 Minutes – Pigeon Fever and Ponzi Schemes on Wall Street

In the wake of the most recent Matt Taibbi polemic “Wall Street’s Bailout Hustle,” I think the video below about financial fraud is appropriate viewing. I liked the Taibbi piece – although it certainly had a certain over-the-top gonzo feel to it which Taibbi’s detractors use to discredit his work. However, Taibbi was very much on point regarding how Wall Street has come back from the dead using accounting wizardry and all manner of government bailouts and backstops.

Below, the video goes more to Ponzi schemes and fraud of the Bernie Madoff variety. The connection to the established players and the Taibbi piece is the lax regulatory environment and general credulity in which all of this took place – a key element that created both the housing bubble and the Ponzi finance and financial fraud which most certainly went along with it. Janet Tavakoli makes the case that the credit crisis was a big Ponzi scheme at about 10 minutes through the video. 

The bezzle is shrinking now. But, I should point out that no major housing bubble related criminal prosecutions (for predatory lending or anything else) have taken place as yet.

Also see John Hussman’s weekly commentary, The Federal Reserve’s Exit Strategy: Unlegislated Bailout of Fannie and Freddie. It demonstrates that the GSEs Fannie Mae and Freddie Mac are a key tool in recapitalizing the banking industry by sticking Fannie and Freddie with losses on mortgage-backed securities – something I anticipated in September 2009 with my post The nationalization of America’s mortgage problem.