On the plane ride back from the Booth Investment Management Conference in Chicago on Sunday, I read the great new book by veteran financial journalist Bethany McLean, Shaky Ground: The Strange Saga of the US Mortgage Giants. The book tells the story of Fannie Mae and Freddie Mac, the two massive GSEs (government sponsored enterprises) that buy, package, and sell pools of mortgage loans. It’s a fascinating, if distressing history. Unfortunately, because our government failed to do away with Fannie and Freddie during the 2008 financial crisis, that history is still unfolding.
It’s been five full years since the financial meltdown of 2008 and it’s still fashionable to bash Wall Street. People who know nothing about finance or investing routinely blame everything from the real estate bust to the financial crisis to our crappy economy and high unemployment on Goldman Sachs and other dominant investment banks. A lot of folks in my business reflexively defend Big Finance against these attacks. But the truth of the matter is, Wall Street hasn’t gotten enough blame for the way it operates, and even though a couple of firms paid fines for their behavior during the housing mania, The Street is still reaping massive profits by screwing its own clients.
Including guys like me.