Mad Meat! A Parable

Hat tip to Yves Smith who found this gem and points out the author:

Eric Von Berg (a commercial property mortgage banker and was the President of the California Mortgage Bankers Association during the heat of the market who has been watching “Regulatory Reform” as a member of the Commercial Board of Governors of the Mortgage Bankers Association of America). This is an absolutely must read!

From Mad Meat! How securitized lending collapsed the financial system:

For example, one of the Competing Regulators, the Spork Exactitude Commissioner (SEC) had broad powers, but adhered diligently to the “Two Guiding Principles” and thus chose only to focus on whether Tinker-Traders labeled products truthfully and disclosed risks and conflicts of interest.

The Tinker-Traders were allowed to sell anything. And, because, they could – they did. They even put dried turds and butcher trimmings in a box and sold them to the public, which was legal because the boxes contained broad disclosures. The Tinker-Traders branded this product Cow and Chicken Dung and Offal, or “C2DO” for short. The disclosures were typically so numerous and farfetched that the real risks were overlooked.

Product Disclosure: People who eat dried turds
might be: hit by a meteor, struck by lightning, sit on
needles in hay stacks, get sick, swallowed by sink
holes, stampeded by snipes or singed by dragon’s
breath. Nutritional value may vary.

Sponsor Disclosure: Sponsor has various conflicts
of interest. Not Printed: We set up a book-making
operation taking bets as to whether you will get sick
and die from this product. Are we also making bets?
”You betcha!” Which side are we betting on?
According to the SEC we are allowed to tell you:
“None of your business!”

Like all parables, this one presents a moral at the end of the story:

Parables shift the context of cultural blindness. Under a new light common sense can breathe and cultural myths can be deflated. If any other industry in our country, beside Wall Street, sold products that the vendors knew were dangerous, that cost the public their fortunes, jobs and dreams – that industry would be so regulated it would feel like a gentleman with a turban going through DHS screening on RED alert. Yet, at this time, more than a year after Lehman’s demise – NO MEANINGFUL NEW REGULATIONS ARE IN PLACE! And, the too-big-to-fail banks are vastly bigger. The wisdom of our forefathers that separated depository institutions and investment banks was proven to be correct, yet our government to save the I-Banks merged the two industries.

Share this one with the kids!