Wall St. Debacle ... Tough Times, Obscure Words
In the wake of this financial upheaval we've seen over the past couple of weeks, we're going to see a lot of "blame game" coverage. It's a natural consequence. Main Street will eventually feel the effects from Wall Street just as soon as 401k statements and pink slips start hitting the mail early next month. People will want to know who's responsible.
Unfortunately, there won't be an easy answer. And the headlines will be peppered with the "run away" phrases and words — jargony terms say to the reader "reading this story is going to be work." (My previous rant on the subject is here)
Terms like ...
Credit Default Swaps — Essentially an insurance policy on an investment. (See Vince Farrell's discussion here if you want a deeper dive).
FASB 157 — The accounting rule that set up the following jargon term.
Mark-to-market — This is an accounting rule making firms price their assets at market prices. (Steve Forbes had some choice words about this).
Naked Short Selling — (actually, some people probably would look at a headline with this term, because of the "naked," but they'd be disappointed). There's been some attempts to curb it lately.Jim Cramer has some thoughts.
Uptick Rule — An old SEC rule requiring short sales to be made a price higher than the previous transaction.
Glass-Steagall Act — The law preventing banks from getting into non-bank types of investment business and vice-versa. That law went away in 1999.
It's a shame these things, and many others I haven't listed, have such complicated, even obscure, names, because I think they all played a role in the current debacle to some degree. And I think it's important for people — not just Wall Street types — to understand them, especially since they are all like to be rejiggered.
I guess the challenge for us in the business journalism business is to make them understandable. First step? Our glossary of financial terms.