Wall Street isn't Vegas

Imagine a casino where other people pay you to bet for them. Obviously, if you bet you get paid, win or lose, so why not?

Let's say the game is "21". Most players only look at the back of their cards which says "Rated AAA by Standard & Poors" (or Moody's, or...). They develop fancy algorithms to estimate how many cards they can take after the first two are dealt. They all play their systems, advertising their successes in order to attract more folks who want them to bet, thereby increasing their fee income.

None bother to look at the cards, except one, who actually looks and counts the numbers.

One day the name of the game is changed to "Old Maid". Still, only one player looks at their cards. Strangely, he never ends up with the Old Maid.

The Goldman Sachs furor is of this species. I'm told that Goldman even had a teeny appraisal department, doing what I've unsuccessfully promoted to many - quality control checking the appraisals of the security underlying the mortgages presented for securitization. In the normal course of things this wasn't a decisive strategy, but probably improved profitability marginally. However when the appraisal reject rate went from 5% to 40% it was obvious that the game had become Old Maid...

Moral of the story? In the land of the blind, the one-eyed man's a swindler...