> December 7, 2007, Counterpunch > Wall Street's Bad Boys and Their Washington Enablers > Banksters Gone Wild > By PAM MARTENS
<clip> > Here's what happened the first time around: a Merrill Lynch stockbroker, > Michael Stamenson, sold billions of dollars of complex securities to Orange > County, which ran a pooled investment fund for close to 200 cities and > school districts in the county. The county lost $1.7 billion when the highly > leveraged fund imploded, the county filed bankruptcy, resulting in serious > job losses and cutbacks in social services to the poor. In all, Merrill made > approximately $100 million in fees with Stamenson collecting $4.3 million in > just the two-year period of '93 and '94. <unclip> We should remember that each transaction has two sides, with even con jobs requiring willing marks. OC voluntarily walked into this deal. First, circa 1982, the county leaders judged the political climate in that GOP-dominated county as saying "no new taxes." (Prop. 13, the "tax revolt" proposition, has passed in 1978.) Second, growing population and rising infrastructure needs (think Disneyland) meant a greater need for funds. So what's a county to do? Selling bonds was increasingly unpopular, so instead of borrowing, OC's leaders decided to make money by lending -- or rather, by speculating. They wanted the high return that "high leveraged funds" usually give. Of course, with higher returns come higher risks. But I guess the decision-makers decided the problem could be left for later office-holders to deal with. (It's like the calculation applied by Dubya at each stage of his administration.) -- Jim Devine / "The conventional view serves to protect us from the painful job of thinking." -- John Kenneth Galbraith
