Looking for an uplifting article to restore your faith in humanity? Then you’ve landed on the wrong web page. Try this one instead. Seriously, it’s adorable. But if you’re looking for an article that will crush your soul, then you’ve come to the right place.
Basically, it’s the same story you’ve heard before, just way more disgusting this time. In March of 2007, a bunch of Morgan Stanley bankers created one of those toxic asset bombs that helped annihilate the world economy. They had to come up with a name for their $500 million subprime mortgage CDO before they could start selling it, so they emailed around a few hilarious ideas. And by “hilarious,” we mean “completely nauseating and not even funny in the first place.”
Among their suggestions: ”Subprime Meltdown,” “Hitman,” “Nuclear Holocaust,” “Mike Tyson’s Punchout,” and our favorite, “Shitbag.” They settled on the more marketable “Stack 2006-1.”
Ultimately, China Development Industrial Bank bought some of the shitbag, and Morgan Stanley shorted against it. Surprisingly, things did not go well for the Chinese bank from there on out. Now they’re suing.
Jesse Eisinger provides a nice analysis of Morgan Stanley’s defenses. The most prominent one, which has previously been successful for other banks selling ”sacks of shit,” is that the banks also happened to be partially invested in these same CDOs and therefore lost a lot of money.
Which is insane. Morgan Stanley accidentally got stuck with some of their own shitbags when the music stopped, and now they think they shouldn’t be liable to all the innocent schmucks who bought them.
But that’s just the civil stuff. What about criminal charges for any these guys? Of course not! See, in order to get a conviction for fraud, prosecutors would need to prove the defendants had criminal intent. How on Earth could prosecutors ever dig up documentary proof that these Morgan Stanley guys actually knew they were selling “shitbags” that were sure to cause a “nuclear holocaust” once the “subprime meltdown” occurred? Oh wait.
But apparently prosecutors don’t think emails like these are enough to bring criminal charges. None of these guys are being prosecuted, and Frontline reports that none of the whistle-blowers in similar cases are being contacted by authorities, which implies that the government isn’t even investigating.
So where are these Morgan Stanley guys now? Both Philip Blumberg (the Morgan Stanley lawyer who composed most of the names) and Jonathan Horowitz (the manager of the group who said of the names “I like it”) are still working for major banks. According to LinkedIn, Horowitz is a Managing Director at J.P. Morgan now…meaning is salary is somewhere around $300,000 and his bonus is probably in the vicinity of $1 million.)
Here, click on this before you kill yourself.
Photo: BK and EP via Flickr