A former investment banker for Goldman Sachs who is a frequent commentator on cable news shows, John R. Talbott, has written seven (7) books on the economy and the financial industry. His latest, The 86 Biggest Lies on Wall Street, is an eye-opener for anyone who wants an understandable explanation of how we got into the current financial crisis. Examples of “The 86 Biggest Lies” on include:
Lie #2: “This was simply a subprime mortgage problem that no
one could have foreseen.”
Lie #9: “Investment banks, commercial banks, ratings agencies
and other middlemen are paid to represent your interests.”
Lie #28: “Before investing, you should talk with a financial advisor
whose professionalism and long-term investing perspective
will end up saving you a great deal of money over time.”
Lie #63: “Complex financial instruments are tailored to benefit both the
issuer and the investor.”
Lie #84 “The SEC prevents insider trading and market manipulation.”
And so on. Talbott not only criticizes the present system, but he offers provocative solutions ranging from fundamentalist (i.e., capping banks’ debt equity ratios so that they cannot be over-leveraged) to downright radical (limiting the size of banks so they are not too important to fail, restructuring executive compensation, etc.). Whether you agree with him or not, he will get you thinking outside the box.
In a discussion of how venture capital firms defrauded investors with IPO’s during the high tech bubble, Talbott makes the following observation:
“I believe vanity got in the way, as these investors would rather lick
their wounds and quietly go away than publicly admit that they had been taken
for tens of millions of dollars in such scams.”
Talbott, The 86 Biggest Lies on Wall Street (2009), p. 122. Ten years later, however, investors are more vocal about dishonesty and abuse in the financial markets. “Fraud and unfair dealing have become so pervasive that very few of today’s investors are willing to take this lying down,” says attorney Craig T. Jones, whose law firm represents hundreds of defrauded investors.
In the closing chapter of the book, Talbott urges his readers to take action:
“‘As a society, we have been much too forgiving of people who lie to us
and cheat us’. Do not let liars and cheaters off the hook. Publicly call
them on their unethical behavior and embarrass them. If it involves
financial dealings, arrest them. But do not let them get away with it.”
Id. at 234. According to attorney Jones, “we cannot force the SEC or criminal prosecutors to put all the crooks in jail, let alone to recover money for their victims. But investors can file their own lawsuits, and many are doing just that.” Jones’ firm, Page Perry, is based in Atlanta but handles investment fraud cases all over the country.
Jones encourages all investors to educate themselves about what went wrong in the market: “The more you read, the madder you will get.”