Banker's Guide to New Small Business Finance: Venture Deals, Crowdfunding, Private Equity, and Technology, + Website

Chapter 3Capital Market Disruptions, Post-2008

The new millennium seemed to get off to a roaring start despite the fact that the twentieth century fizzled out with the dot-com bust and the tumultuous weeks following 9/11. Overall, the years leading up to 2007 seemed to be the most robust of any age for capital creation. It was merely a matter of inventing new ways to create money.

During these years a combination of game-changing financial deregulation, new product innovation, unprecedented global portability of money, and a surge of optimism inevitably created the capital market’s swelling to titanic proportions. Too much of a good thing cannot be good for any of us and, alas, it was not.

Former Federal Reserve Chairman Alan Greenspan made a half-hearted effort to calm folks down with a paltry reference to the market’s irrational exuberance, but frankly there was just too much inventory and potential in the markets. Everyone was determined to get their share of it before it was gone.

The Federal Open Market Committee minutes from late 2006 reflect that they didn’t seem concerned about housing market conditions that were evolving from a classic case of too much money crowding in to finance a shrinking demand for housing. The resulting price inflation eventually exploded among mortgage-backed security holders globally, whose insatiable demand for easy profits made them vulnerable marks for the oldest economic fraud on record: selling anything that glitters as gold.

DIDN’T ANYONE ...