My Two Cents

Which is what my AIG stock will likely soon be worth.

You've heard various theories as to how we got to the collapse of Wall Street. Here's mine. It is comprised of several interlocking parts.

• The repeal of the Glass-Stegall Act which prohibited a single company from engaging in regular banking, investment banking and insurance.
• The belief that everyone should own a home. As some people cannot pitch in the National League, some don't earn enough to own a home.
• The rise of securitization, whereby the local bank did not hold your mortgage but sold it to another company that packaged your mortgage with hundreds of others as quickly as it could and, in turn, sold the package to another company that combined this package with other packages. Along the way, the credit companies rated these packages and were able, through magic, to figure out that I was a better risk than you and so they told the current packager that they could sell my mortgage and the other hundred mortgages so rated to another packager as an AA-rated security. This credit rating took place in Lake Woebegon, where everyone is above average. This re-packaging went on ad nauseam, with no one really knowing much about the underlying assets.
• The rise of computer modeling as a religion which analyzed and evaluated risks attendant on securities very few understood.
• The acceptance of supposed market values placed on securities not publicly traded.
• Over-reliance on leverage
  
• And, of course, greed.