A system-wide failure...

The investment profession has taken a significant setback over the past couple of months, losing practically all the credibility it had garnered over the years. One has to look no further than 10 year treasury yields (currently approaching a record low of 2%) or the spread between 3 month libor and 3 month treasuries (still at record levels) to get a feel of the extent of damage and distrust in the system. What is disturbing in the current environment is not only the sheer monetary scale of losses involved but also its scope. Never mind that Madoff, a master illusionist successfully conned a large number of investors (including banks) for years when the whole financial system itself resembles a giant ponzi scheme. From the unscrupulous lenders who began selling mortgages to individuals that could ill afford them, to the banks that repackaged those same mortgages into so called "quality" tranches before dumping them on unsuspecting investors, to the rating agencies that issued bogus ratings on products that they did not even understand, to Greenspan, the "oracle" that did everything in his power to suppress any form of regulation, particularly with regards to the over the counter derivatives market, to Chief Executives at major banks that continued to claim that everything was under control when the truth was otherwise and to the SEC that preferred to ignore credible warning signs regarding Madoff.

The whole system it seems was rife with incompetence, greed, deceptiveness and other unethical behavior. No wonder then that confidence has sunk to record lows and shows complete indifference to the incessant government actions and pledges to fix the problem. It will take a lot more than plain rhetoric to restore trust that is so critical to the proper functioning of an economy.