As I am reading about the meltdown occurring, there are lots of complex terms and ideas being used that discourage people — like myself — from believing I could understand what is really going on. But you don’t have to understand everything to know when things are going wrong. I thought of that when I came across this nytimes.com blog that said this:
“It was a couple of years ago that we learned AIG had sold, and bought, so-called finite insurance to manipulate financial statements. At the time, the predominant reaction among Wall Streeters was amazement that Hank Greenberg would do that when AIG was so strong without it.
I thought, but don’t think I ever wrote, that perhaps we should wonder if the strength we thought we saw reflected other games that we had not recognized.
Lesson: If you find out management is willing to cut corners in the financial statements, you should flee.“
I put the lesson in bold, because the smart money does flee when it sees things like this.
Smart People I Know 