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Tuesday, December 20, 2011

The Recessionistas

In 2008, when the housing market collapsed in part due to bad loans, and in part due to snake like underwriters cleverly crafting consumer friendly collateral debt obligations (CDO's). The CDO's were comprised of the bottom tier of an unrecognizable and highly risky mortgage rate interest revenues. In 2008, when the economy turned south I was clueless as to the severity of the crisis. I understood that a record number of homes were being foreclosed; I understood that banks were not lending money as willingly as they had just months before. But I did not, understand how close the US economy and subsequent global economy came to a full scale economic depression with the capacity to rival that of the 1930's.

(This is a short video that explains CDO's)

In 2008, the popping of the economic cherry was surreal, and the severity of the situation was not translatable to the regular investor with limited financial/ financial policy knowledge. The 2008 recession was made real with the Bear Sterns crisis and bail out, and then the bankruptcy of Lehman Brothers. During Bush's presidency, Henry Paulson, a former wall street ninja master was appointed as the Secretary of Finance. Paulson knew the financial game, and feared a moral hazard involving the insolvency issues of major financial institutions. The concept of moral hazard was one of the main arguments against a state assistant bailout of Lehman Brothers. Paulson was unprepared for the systemic risk and impact of the failing of a major financial house. Shortly after Lehman's bankruptcy the largest American financial insurance company filled for bankruptcy. The failing of an insurance company would be detrimental to any economy in a healthy time, let alone amongst the furry of the tropical economic storm CDO.

Alexandra Lebenthal, is the CEO of Lebenthal & Co. LLC, and one of the most successful woman on wall street. In Alexandra Lebenthal book, "The Recessionistas,"she has translated the economic crisis of the 2008 into an understandable and enjoyable read. "The Recessionistas,"  profiles the wall street "esq" characters, and their well pampered wives as the lives of Upper East Siders are buried and pummeled by the financial avalanche of bead risk and unethical profit compromises the stability of the economy. "The Recessionistas," is a truth based tale of the wall street chaos that took place in September of 2008. The book gently colors the crisis in a language that even those least savvy of finance matters, can follow and understand. "The Recessionistas" is a chic lit with a lesson in current affairs, current history, and finance.

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