No industry is safe from a good ol’ shake-up. Titans of the Wall Street, namely Bear Stearns (should’ve named Bull Stearns just to be safe) became defunct in the 2007–2008 financial crisis. The movie The Big Short showcases not only the deception behind the mortgage ratings at that time (like people getting cat-fished in Tinder) but how money can talk (and again, Tinder applies here).
Bear Stearns (short for BS) made the first public securitization of Community Reinvestment Act Loans in the US which encouraged bank lendings such as mortgage loans. One of the subsidiaries from Bear Stearns Asset Management called ‘High-Grade Structured Credit Strategies Fund’ comprised of derivatives backed by home mortgages. Due to the housing bubble in 2006, the weren’t able to even bring ‘beta’ returns (mostly ‘gamma’) and by the time they were asking around for investors to fund more in exchange of collateralized loans, the housing bubble burst. Two of their subprime funds, ‘High Grade Structured Credit Enhanced Leverage Fun’ and ‘High-Grade Structured Credit Strategies Fund’ lost most of its value along with their reputation, if not all, most of it due to lack of ‘due diligence’ (and not naming themselves Bull Stearns).
It is still being discussed whether the lack of ‘due diligence’ swept through the Wall Street or the actual impact from the housing market. In accounting, there’s a concept called ‘going concern’ where one ‘presumes’ business will go as usual for the foreseeable future. From the example of Bear Stearns’ fall, mismanagement of ‘due diligence’ or ‘going concern’ shouldn’t come to the limelight but rather the supervisory governance. Lack of a better example, the movie “The Wolf of Wall Street” depicts how it’s only about money, money and money in Wall Street, which hits the spot on how Bear Stearns ran their business. After the financial crisis, investment banks are now supervised by the Federal Reserve with more enforcement than the Securities and Exchange Commission who acts as a slap to the hand from a mother when reaching for the cookie jar. However, this is merely just a change in the ‘parental role’.
The Federal Reserve comprises of private banks and loans the U.S. government money by printing out Federal Reserve Notes with interest. The U.S. government creates a bond for the loan, owing the Federal Reserve the face value with interest for printing their own money (yes, i know). This system for printing out American dollars can be construed in such manner: A rigged money-printing machine that only takes cartridges from the manufacturer himself, for himself.
Some say all this was the Fed’s master plan, working their way up the hill, no matter what it takes to control and rig the system by swallowing up the investment banks when vulnerable (even if it took bear down, just like global warming).
