Those were the words of a manager to me after an in-house attorney nixed the squirrely deals with Enron that the manager had been pursuing. I listened and mouthed something that could pass for empathy for the manager's difficult job. As the attorney was very sharp and the manager wasn't, I needed no more information to know who had made the right call. Of course the attorney and manager weren't speaking the same language. The attorney was only concerned with the legal implications of the deal while the manager was confident that Enron could buy its way out of any legal difficulties that in this particular deal were unlikely to materialize.
Businessmen and businesswomen are suckers for deals that promise high returns and no risk. Throw caution to the wind. Ignore the rules, the law and/or financial principles. Only the plodders, risk averse and mental midgets need rules, laws and principles. Financial giants and geniuses make their own rules and can defy gravity.
In my little world, I've never met men like Sandy Weill or Robert Rubin. But I've met plenty that pitched deals with embedded poison pills. Occasionally been shocked at the number of suckers they've managed to find. Saddened when the deals blew up that the deal-makers mostly profited and the collateral damage was spread widely among innocent people.
One would think that the Big Boys (banks and stockbrokers) would have learned a thing to two from the meltdowns of LTCM and Enron. Some did, after all, take billion dollar hits on Enron. Or Democrats who couldn't make political issue out of Enron because they were only slightly less dirty. (Just as the S&L debacle had been a bi-partisan effort.) Apparently not. William Greider(one of my favorite business/political journalists explains)in Citigroup: Too Big to Fail? points out that Wall Street remains as delusional as ever and unlike 1929, Democratic politicians were a major part of the problem. (That's not a reference link; please Click and READ it.)
Just like Congressional Democrats today keep expecting Bush/Cheney and the GOP to play fair and be nice, the Clinton administration expected Wall Street to do the same. Not to revert to their true nature after they got what they wanted. What a naïve bunch of boobs!
Of course, the bankers and brokers were also a naïve bunch of boobs. Or managed to convince themselves that residential property in the US beginning in 2000 was so undervalued that high profits and low risk were theirs for taking. Slice and dice those loans enough and nobody could lose. If one can believe that wholesale tax cuts increase tax revenues, one can believe almost anything with a dollar sign in the proposition.
One doesn't need an MBA or Phd in economics to grasp 99% of business proposals. Always question the variable assumptions. How stable? For how long? How manageable? What is the worst case scenario for the variables? What is the endgame in the worst case scenario?
In my next diary, I'll present more on what many should have looked at in the beginning of this latest housing bubble and take a look at the legislation that is under consideration in Congress to provide some relief to the homeowners at risk for foreclosure.