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Monthly Archives: November 2010

If you think acronyms and abbreviations are innocuous, you need to read The Big Short by Michael Lewis, a stark account of ┬áthe 2008 subprime mortgage wipeout– especially his analysis of language used by the Wall Street bond market where “terminology was designed less to convey meaning than to bewilder outsiders.” A CDO, or collateralized debt obligation, sounds a whole lot better than a bag of subprime mortgages given to people with no jobs and no intentions of getting jobs. A subprime mortgage bond was called ABS, or asset backed security. Who cares what the asset is, or whether it even is one? Everyone wants to have nice ABS, right? And there were a whole universe of such acronymic “products” available: RMBS, HELs (as in “going to HEL”), HELOCs, Alt-A (which meant an alternative to creditworthy) and they even changed the word to “subprime” to “midprime”. According to Lewis, “any acronym or abbreviation could more clearly be called a ‘subprime loan’, but the bond market didn’t want to be clear. ‘Midprime’ was kind of a triumph of language over truth.” It’s all a Semantic Hallucination Inducing Timebomb.

In reality, this use of language is the kind of re-branding you’d find in basic marketing 101, (if you built a subdivision on a former garbage dump, just call it “Renaissance Valley”) it just happened be used to help mask the greatest unregulated Ponzi scheme in world history. When your language is fraudulent, so is everything behind it. The fact that anyone outside Wall Street would invest in any bond Wall Street has to offer, in the form of an acronym or not, is a mystery to me. Until it is regulated and entirely transparent at the very least and maybe not until the financial sector can no longer buy Washington through lobbyists or direct payment.

If you’re an outsider like me and have an interest in the gory details of how the fraud came undone, read The Big Short. 13 Bankers by Simon Johnson gives a more thorough account of how powerful the Wall Street bankers are right now and some historical context for how it could be dealt with. Teddy Roosevelt once took on the richest Trusts in the nation and broke them up, recognizing that there is no free market when a handful of people own almost everything. Perhaps the same can be done with the banks that are “too big to fail” which really means, even according to Alan Greenspan, “too big to exist”. TBTE!