Through the kindling glass: Uncle Ben in ’08

History is fascinating when you get into it.

Today I’m remembering the fall of 2008–that perilous time when the financial crash was pummeling down all around us. The reason I’m remembering this is: I’m reading on kindle Ben Bernanke’s book Courage to Act:

http://www.amazon.com/The-Courage-Act-Memoir-Aftermath-ebook/dp/B00TIZFP0I

So I’m remembering.

My day job during that time was working with students at a local elementary school. The workday began every morning at 8 a.m. I have vivid memories of sitting in my old Subaru wagon in the school parking lot each morning, catching the latest financial news before going inside to punch in. I’d be sitting in the car during the last ten minutes of the 7 o’clock hour while listening to Marketplace Morning on NPR.

Not that I had any real money or assets to work with, mind you, just a little nest-egg house that wife and I had just about paid for, and a little spare change we had after the three young’uns had finished college, etc. just like most folks our age.

But here’s why the memory of those news reports clings to my unfettered mind so tenaciously. Those fateful September days of seven years ago released megalithic destructive financial forces of mayhem and immense complexity that changed forever the economic world as we kno(e)w it.  Perilous WallStreet cluster-fuds suddenly opened a flood of financial and fiscal confusion unprecedented in the history of the world. The only thing that compares to it would be the crash of ’29, but of course that was then and this was now.

In Uncle Ben’s book, Courage to Act, through which he strives to shine a light of transparency into the workings of the Fed and its relationship to the financial powers that be, he explains, in chapter 12, the demise of one particular entity (the AIG insurance conglomerate) that fell during that month’s frantic rearrangement of dominoes. He describes the problem this way:

 “AIG FP’s risk was compounded by the difficulty in valuing its highly complex position, in part because the securities that the company was insuring were so complex and hard to value.”

This universal fragility about value (or sudden loss of value) of toxic assets would be something akin to a global computer-virus, but in the financial world. Nobody knew how, when, or where, the infection of overnight falling  asinine asset prices could obliterate the richness of previously fat portfolios. It was like Ebola on WallStreet.

During that third week of September of 2008, the bankruptcy of investment bank Lehman Bros, and then the unraveling of worldwide cluster-fudded AIG, damn near brought the whole house of WallStreet et al etc cards of down.

I guess US Treasurer Hank Paulson and a few other arm-twisting high-flyers later put the fear of dog into Congress and into whomever else was in charge of this country at the time, so that the gov-softened crash landing of worldwide money tranches wasn’t nearly as bad as when something like that happened in ’29 and the whole dam American economy fell apart.

As I told you before, I was just a detached observer at the time, September 15 2008, a regular guy with no skin in the game trying to figure out what the hell was going as I heard about events on the car radio.

Now reading Uncle Ben’s memoir, I see a little more clearly what was going on behind the scenes. I guess his transparency mission is being realized; at least it is on me.

I see the light. I think I understand. Fear, as Joni Mitchell once sang, is like a wilderland.

Fear is a big part of this whole things fall apart deal that we see in life sometimes.

In the case of the investment banks and Wall Street and all that derivative-induced shenanigans that came unwounded in fall of ’08, it was fear of losing value on a massive scale, fear of diminishing assets on a global scale, and hence fear of metastasizing money-loss on a megadential scale.

But hey, there are worse fears in life. . .fear of dying?

Speaking of death, we could say that old folks are generally closer to it than young ones. But the fear of death can be, I feel, softened somewhat by the sense that one has lived a fulfilling life, or maybe an adventurous life, or perhaps a prosperous life, whatever attribute of the good life floats your boat.

Here’s something Uncle Ben wrote in his memoir about the old-timers on Wall Street during that fateful fall of ’08:

“For Wall Street old-timers, the events of the (Lehman weekend) weekend would evoke some nostalgia. Two iconic Wall Street firms that had survived world wars and depressions, Lehman (Bros.) and Merrill (Lynch), had disappeared in a weekend. I felt no nostalgia at all. I knew that the risks the two firms had taken had endangered not only the companies but the global economy with unknowable consequences.”

Unknowable consequences. That’s what you get when a bunch of old (or young) wise guys play fast and loose with a world-class pile of other people’s money.

But hey, that was then and this is now; it could never happen again.

At least not the same way.

 

Glass Chimera

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