Rule Over the Environment, 4

And two birds with one stone is precisely what happened, when they dared to raise their heads from under the radar, into activities which were a matter solely for the big fishes, namely engineering corporate deconglomerations and takeovers. Not−so−junk bonds were targeted, and both not−so−junk bonds and thrift institutions were shot down. The first move was defaming these high−yield securities by labelling them not merely “not investment grade” but “junk”. The second move, built on the first, was having a law passed requiring thrift institutions to get rid of that “junk” to “protect the public”. The result was an interesting chain reaction. The imposition on thrift institutions to get rid of them struck a blow to the value of those securities; thrift institutions forced to liquidate them at once took a loss on the sale; that loss weakened them and pushed them slipping down the slope from thriving to basket cases; as such they became affected by endemic insolvency and by the ensuing addiction to government support; in exchange to that government support they yielded their control or even ownership to the Resolution Trust Company, an agency of that same government who crashed them; the Resolution Trust Company thus become the country’s biggest owner of those securities flooded the market with them and further destroyed their value; the creators of this new market of smaller companies’ high−yield securities faced a tide of lawsuits from government regulators, aggrieved investors and “justice” seekers; the big fishes of Wall Street bought up those securities at bargain prices and took control of that new market; when the securities recovered, it was the big fishes of Wall Street who profited from that instead of the thrift institutions; and still the big fishes of Wall Street from then on became the leading traders of those securities. And they all lived happily ever after, isn’t it?