Slushy liquidity crunches laissez faire

So we’re in the midst of this credit crisis. People are losing their homes. Financial institutions register more quarterly writedowns. Some investors lose big bucks. It’s much harder for anyone to get financing on anything. And many observers fear there is more bad news to come.

Wall Street banks had created their alphabet soup of securitized vehicles and derivative products (expanding them to include mortgages and real estate), traded by incomprehensible computerized programs. Yes, there have been the recent losses, but these companies have raked in countless profits off this activity all in the name of creating liquidity for the markets, which the pr tells us facilitates entrepreneurship, the capitalist engine, growth and prosperity. While recent increases in asset values proved phantom, the transaction fees from deals made in bidding frenzies were paid out in hard cash. A few executives have lost their jobs, but nobody is giving back those big bonuses. And for the last six months and counting instead of more liquidity, we have (a lot) less in the system. Streams of capital from 2005 and 2006 have suddenly turned into gutter slush — that cold, clammy soup which ruins patent leather shoes if the chauffeur driven limo is parked too far from curbside.