Bar the gates; a mere nine months after the meltdown began, the risk takers are back in control on Wall Street. If we're not careful, a new bubble could be building.
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Bar the gates; a mere nine months after the meltdown began, the risk takers are back in control on Wall Street. Have we learned anything from the near-collapse of the financial system, or are we worse off now than when we started? It's a fair question.

The question is prompted by news last week that the very same cowboys who brought Lehman Brothers, and the rest of the world economy, to its knees last September have now been rewarded with the unthinkable--the chance to make billions on the very same toxic assets that blew up the firm in the first place.

Yes, you read correctly. Reports have it that Mark Walsh, the former global head of real estate at Lehman, will return with a team of his former Lehman colleagues to "manage" a big chunk of Lehman's crippled real estate portfolio. According to the Wall Street Journal: "They stand to profit if the portfolio of distressed assets--for which they once paid top dollar--recovers some of its value." Currently the toxic paper goes for less than 50 cents on the buck, so the upside is considerable.

So who is Mark Walsh? He's not a household name, but in many people's estimation he's as responsible for Lehman's demise as his old boss former CEO, Dick Fuld. Walsh, who helped pioneer the practice of slicing and dicing commercial mortgages and then getting Lehman to pocket some of the riskiest pieces itself, was once hailed as the most "brilliant real estate financier on Wall Street." At one point Walsh's portfolio generated about 20 percent of Lehman's profits. By last fall, his $43 billion dollar division ultimately helped bring down the 158-year-old bank.

Wacky bets on deals like Tishman Speyer's $22 billion dollar acquisition of 360 luxury apartment buildings at the height of the market, helped seal Lehman's fate. In addition, Federal prosecutors are investigating whether Walsh's real estate team helped hide the weakness of Lehman's balance sheet by over-valuing it's commercial real estate assets.

So what's the fallout for Walsh and his cronies? Well there is no fallout it seems. Instead, the folks who took these irresponsible and out sized risks are getting a second chance at the brass ring. Isn't this new era of responsibility really cool?

The sheer madness of putting Walsh & Co. back in charge of the carnage it left behind nine months ago was the decision of the Lehman Estate, which chose the Walsh team over four others, presumably because they know where the bodies are buried. Heck, by that estimation, why not put Bernie Madoff in charge of the SEC!

The word on Wall Street has it that Walsh is an OK guy, and a smart cookie when it comes to real estate. But I'm getting pretty weary of hearing about all the financial geniuses who somehow happened to bring the global economy to the precipice when they weren't attending their Mensa meetings. Didn't any of these smarty pants see this coming? For my dollar, I wouldn't put Walsh in charge of negotiating my summer rental in the Hamptons.

Indeed, if one were to assemble a rogue's gallery of faces culpable in the financial meltdown it might look something like this: tan-man Angelo Mozillo representing unscrupulous mortgage lenders, Senator Chris Dodd standing in for corrupt politicians turning a blind-eye to the situation and Walsh representing the covetous, careless bankers that helped make the whole scheme possible. None of the three may have broken the law, but they did help break the part of the American dream. You'd think there would be a huge public outcry for some accountability.

But so it goes. Walsh and his merry band of real estate cowboys get a do-over, another chance to amass unbelievable wealth. But what about the rest of us? Do the thousands of retirees who lost millions when the Reserve money market fund imploded on the day of Lehman's demise get any of their nest egg back? Will investors who watched the Dow plunge 733 points that Black Monday get a second chance at recouping their losses? Of course not.

But with the Dow now comfortably flat for 2009, the bull market in outrage appears to have run its course. The banks that took us down the financial rat-hole are being recapitalized on the heels of government stress tests that glossed over their problems, and the executives that run them remain comfortably in power. Ironically, news of the resurrection of the Lehman real estate team came on the same day that President Obama gave broad and expanded authority to the Federal Reserve in regulating the financial markets for the foreseeable future.

There is a certain sad symmetry to all this. For it is the Fed's lax oversight during the Bush years (especially at the Geithner-led New York Fed) that bears responsibility for allowing the excesses to occur in the first place.

The handwriting is on the wall on Wall Street. It isn't business as usual just yet, but the venom is fading. If we're not careful, a new bubble could be building. If that happens, the world won't get a second chance at averting another Great Depression.

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