The Financial Sector: Ten Fatal Flaws “When the capital development of a country becomes a by- product of the activities of a casino, the job is likely to be ill- done.” …. John Maynard Keynes
Charles Ponzi and the Ponzi Scheme
Five Sectors of the Global Economy 1.Primary Sector 2.Secondary Industry Sector 3.Service (Tertiary) Sector 4.Information (Quaternary) Sector 5.Nonprofit (Quinary) Sector
1. Primary Sector, Forestry
2. Secondary Industry Sector
3. Service: The Tertiary Sector
4. Information, Quaternary Sector
5. Nonprofit, Quinary Sector
Wall Street
Casino Slots, A Reckless Economy
American Progress
10 Fatal Flaws in the Financial Sector 1.Too Big to Fail Banks 2.Unchecked Deregulation 3.A “Markets Know Best” Federal Reserve 4.Real Estate Bubble & Out of Control Lending 5.Mountains of Debt 6.Dicey Financial Products 7.Financial Speculation 8.Moral Hazard & Lack of Transparency 9.Deceptive Rating Agencies 10.Bloated Compensation Plans
Fatal Flaw #1: Too big to Fail Banks
F.D.I.C.
Shadow Banks
Federal Reserve, Lender of Last Resort
Goldman Sachs
Fatal Flaw #2: Unchecked Deregulation
Commodities Futures Modernization Act, 2000
Fatal Flaw #3: A “Markets Know Best” Federal Reserve
Federal Reserve System
Alan Greenspan, Chair Federal Reserve,
The Punch Bowl
Inflation, United States
Fatal Flaw #4: A Real Estate Bubble & Out of Control Lending
Mortgage-Backed Security Issuances
Growth in Mortgage Loan Fraud
Home Price Trend
UK House Prices
Fatal Flaw #5: Mountains of Debt
Fatal Flaw #6: Dicey Financial Products
Futures Trading, A Derivative
Southwest Airlines Uses Futures Trading to Manage Fuel Costs
Volume of CDOs
from Deusche Bank CDO Trader
Credit Default Swaps
Credit Default Swaps (CDS)
Gambling
The Financial Sector: A House of Cards
Fatal Flaw #7: Financial Speculative Mania
Speculation
Residential & Non-Residential Fixed Investment
Fatal Flaw #8: Moral Hazard & Lack of Transparency
American International Group AIG
Fatal Flaw #9: Deceptive Rating Agencies
McGraw Hill
Credit Rating Agencies Downgrades
Fatal Flaw #10: Bloated Compensation Plans