Unlike mortgage equity withdrawal by households, where the cash windfall was distributed across the middle class, corporate equity withdrawal through buybacks, buyouts, and takeovers resulted in cash distributions to the very top of the economic ladder. Financial engineering: the ATM of the prosperous classes!

“The Fed should have been embarrassed by the M&A frenzy,” writes David Stockman. Tyco CEO Dennis Kozlowski, Wall Street’s favorite deal maker, put “the rest of the corporate deal junkies to shame.” But “the poster boy for Greenspan’s first stock market bubble and its sudden, violent demise was a wake-up call that was wholly ignored.”

“The Wall Street coddling monetary régime” that Greenspan institutionalized “deeply transformed M&A,” writes David Stockman. It turned a corporate business strategy into “an all-encompassing mechanism for speculative finance” that executives used to build “empires with apparent, if unsustainable, earnings growth” that ended in “spectacular crash landings.”

“All of the checks and balances which ordinarily discipline the free market in money instruments and capital securities were being eviscerated by the Fed’s actions,” wrote David Stockman. “This kind of central bank action has pernicious consequences, however.”

The bond selloff didn’t surprise anyone. Gurus of all stripes had predicted for years that it would happen, that the ridiculously low yields the Fed was imposing weren’t sustainable – only to watch as the Fed opened the spigot even wider. Then the smart money offered a tidbit of immortal wisdom to the  euphoric bondholders: “run – do not walk!” And they did.