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.

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Presentation transcript:

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