Wednesday, December 17, 2008

Wall Street: CSI

“Financial Forensics” could be the salvation for many of Wall Street’s unemployed executives.

The jumble of SIV’s, CDO’s, CDS’s and the rest of the other magically created financial products that are on the books of companies, institutions and portfolios worldwide are a mystery to most. And solving that mystery is a critical step towards regaining financial equilibrium both here and abroad.

After his acquisition of Gen Re - a global provider of reinsurance and related risk assessment services - Warren Buffett, arguably the world’s most successful and savviest investor, lamented that it took his team of financial professionals almost four years to unravel Gen Re’s cache of derivatives, in order to determine exactly what they were and what they were worth.

If it took the Oracle of Omaha’s group four years to untangle the numbers from just one company, imagine how long it will take and how many people are needed to make sense of the rest of this mess. Just do the math.

There are tens of thousands of entities across the globe – public and private companies, pension and mutual funds, foundations, municipalities, charities, high net worth individuals, etc. saddled with these products and without a clue as to their real worth or what to do with them. Trying to unwind, value and unload them could be a business unto itself.

And for the legions of unemployed Wall Street executives familiar with these ephemeral securities, the end result could be long-term assignments trying to make “heads or tails” out of the morass of alphabet soup products now owned by a extensive list of duped, or at least confused, investors.

In short, the most qualified people who can get to the root of this labyrinth of financial maneuverings are those with the right background, skills and knowledge base to actually understand and evaluate them. Who better to do that job than the folks who created and sold these instruments in the first place?

There are now thousands of them in the job market. This is right up their alley and a great opportunity for them to right the economic ship they helped sink while becoming gainfully employed.

Out of the ashes, an industry is born.

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