The worst thing about this financial meltdown is the sheer volume of issues that I do not understand, and probably never will understand. Like, for example, the request of Morgan Stanley and Goldman Sachs to become Bank Holding Companies. Again, I do not understand the intricacies, but for an acknowledged financial idiot like me, the chain of events looks like this:
1.) Massive widespread panic on the markets last week. Several of the “immortals” fail.
2.) Goldman and MS get caught up in it, despite having good earnings reports.
3.) Short-sellers prey on MS and Goldman.
4.) Short-selling stopped, ginormous bailout proposed.
5.) MS and Goldman, under the cover of the short-selling ban, rush to change their status so they do not go down.
Am I missing anything? It sure looks to someone on the outside that MS and Goldman knew, internally, that they were not solvent, either, and rushed to get out while they still existed, unlike Lehman. What do they know that we do not? What does the Fed know that we do not? According to this NY Times piece, the Fed and SEC has had teams of regulators at the investment banks since March. If I were Matt Drudge, looking at what I see, I would have a red siren up stating that it is pretty obvious that Morgan and Goldman were going to fail this week.
Am I missing something? Am I way out in left field on this? Again, I know nothing about this sort of thing, I can only look at what is published officially and the reaction people have to come to my conclusions. Am I just completely wrong because this is stuff I admittedly do not understand?