“Leave the gun, take the cannolis.” This classic line from “The Godfather” is pretty easy to understand. This is a stark contrast from the smorgasbord of investment products offered up by the Alchemists employed by some of Wall Street’s biggest firms. While Goodfella, Henry Hill was a thug, his “customers” clearly knew where they stood in the pecking order. If the customer borrowed money, he would pay an interest rate that could exceed triple digits. If this poor soul did not pay it back on time, the compound interest would also include the bonus of being kicked to death by Joe Pesci. Though barbaric, the rules of the contract were clear to all involved for better or worse. Though I would never recommend anyone in their right mind to be involved in such a transaction, no one could honestly question its transparent nature.
Now we move into the civilized world of Wall Street where the rules are much different. Unlike Tony Soprano, the actors in this setting are armed with cleverly written prospectuses instead of brass knuckles. Unlike Sonny Corleone, they come from fancy schools, speak eloquently, and have impeccable manners. In the end, there is a good chance despite these pretenses that you will end up “sleeping with the fishes.” While there is no climatic scene involving machine guns and a toll booth, their weapons are much more lethal to the general population. They collect insurance premiums knowing full well they have no reserves to pay claims. They issue mortgages to unqualified customers and pawn them off onto others. They conspire to get junk rated debt into a AAA classification by the rating agencies. ( a willing participant in their schemes.) They swindle unsophisticated pension fund managers used by teachers, firemen, and police into buying complicated, expensive investment products they do not understand. They design a system where the individual investor cannot use the court system as a recourse against financial chicanery. The list is endless in their nefarious misdeeds.
While in no way, shape, or form do I support any activities of Organized Crime, their terms of business are much clearer and transparent than structured notes or variable annuities. There are no pretenses of legitimacy and Caveat Emptor is the rule. This is more than I can say for the many Vito Corleones of Wall Street. In this case you may believe you are getting an Eataly feast but instead wind up with Olive Garden’s unsalted pasta.