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January 3, 2011
Echoes from The Big Short, a book on the financial meltdown: "Either the game was totally rigged, or we had gone totally f@#!ing crazy."
Atlantic Yards Report
Michael Lewis's bestselling The Big Short: Inside the Doomsday Machine is an entertaining, compelling, and tragic narrative that explains how the bond and real estate derivative markets led to the market crash.
Essentially, the few people who did the math saw it coming, and everyone else kept their heads in the sand. And nearly all those who let it happen, and got bailed out, stuck around to get rewarded.
Gulp.
Couldn't that scenario apply to other things, like a project promised to last ten years but instead would last decades?
The AY connection
And, guess what, some firms in Lewis's book play key roles in the Atlantic Yards saga.
There's Goldman Sachs, packager of the Atlantic Yards bond deal, which is considerably less exotic than the "synthetic subprime mortgage bond-backed CDO, or collateralized debt obligation."
While the CDO had been invested to redistribute the risk of corporate and government bond defaults, more recently it was used to disguise the risk of subprime mortgage bonds.
Goldman Sachs managed to get crappy bonds re-rated by the mortgage rating agencies, Moody's and Standard & Poor's, as 80 percent triple-A. No surprise that the rating agencies played along; they get paid by Wall Street.
And, yes, those rating agencies rated Atlantic Yards arena bonds--though not, apparently, the more questionable securities being marketed to would-be immigrant investors.
Posted by eric at January 3, 2011 10:02 AM