In article ,
F. George McDuffee wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
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Thanks for the link. Very insightful article.

Welcome.

By the way, I think that Michael Lewis may be coming out with a book on
the subject.


At what point does stupid and arrogant become criminal?

Gee I hope never ... the prisons are far too small, and already full.


Is there such a thing as financial malpractice?

Oh sure. Many kinds. Some of it is also against the law.


These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability.

I would dig a little deeper than "these people", as there are many
actors and motives, not all being evil, not all being stupid.

People have always been greedy and stupid, and always will be, so we
need a system that works despite human frailty and folly, and ideally
harnesses frailty and folly to the common good.

By definition, present company excluded, half of all people are below
average intelligence.


At the very least it appears to be fraud,

The central fraud is that the rating agencies (Moodys, Dun and
Bradstreet, and Fitch) became lazy and later corrupt, and were giving
very high ratings to trash.

I always wondered how the rating agencies could physically do due
diligence on so many offerings, especially the very complex ones
featured in the current drama. By back of the envelope calculation,
they could not be spending more than a few minutes studying each
offering. Now I know the answer.

Many fortunes were lost and innocent companies ruined because people
believed the three rating agencies. Without the false ratings, the
whole current crisis would not have happened.

Eliot Spitzer also helped, by effectively shutting off the income stream
that supported the independent analysis that would have tempered the
influence of the rating agencies.

Now, finance people start spitting nickels at mention of Moodys in
particular. One likely casualty of the current crisis is that nobody
believes the rating agencies any more, and so will neither require nor
acquire ratings from these agencies, which will likely fail within five
or ten years. Why so long? Because many contracts and laws require use
of these ratings, regardless of worth.

This is actually a good thing, as purchasers of securities will then all
need to have their own research staffs, far too many for all of them to
be fooled and/or corrupted. There were exactly three organizations
providing ratings, far too few, so it was too easy to corrupt them all,
and too much rode on their honesty and diligence, which meant that a
crash was inevitable.


... possibly under the
various anti "fortune telling" statues.

Not really. Nor does the SEC regulate fortune tellers.

A number of high-profile analysts have been kicked out of the securities
business for lying to their clients. This fits the legal definition of
fraud in the English Common Law going back centuries, never mind modern
securities law.


If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS

Because Goldman has better lawyers for sure?

If one outlaws error, there will soon be no predictions. Honest
analysts can be wrong - it happens all the time - and analysts are smart
enough to see the personal risk. The result will be mealymouthed
pablum, or silence.


Joe Gwinn