This exchange from Institutional Risk Analytics is a bit light on the vitriol, but the observation is acute:
The IRA: But speaking of certainty, don’t you believe that it is impossible to give our leaders a pass with respect to the mortgage bubble? How can we look at Alan Greenspan, Larry Summers or Bob Rubin and allow them to say that they were surprised by the magnitude of the bubble and the horrible consequences?
Timothy Dickinson: Well, partly because these massive egos believe that they had “fine tuned” things and would not take any of the consequences of a break. They thought that their record of qualification would distinguish them and keep them from being blamed. The reality is, in my view, than none of them had the courage to overturn a few apple carts early in the game and thereby forewarn the public before the 18-wheeler overturned.
And a great jab from Jeremy Grantham’s July newsletter (no online source):
Didn’t we all expect at least modest competence from most of our financial companies? I always thought it was the Bear Stearns of the world who knew what was going on, and that when the music stopped, the financial junk would be safely (from our point of view) in the hands of, say, Taiwanese banks. How did the guys who put some dead rats in the pot end up eating some of their own stew? (To be charitable, perhaps the head chefs did not realize that the kitchen staff was throwing in the odd rat to increase their Christmas bonus!)….
Given the growing perception of incompetence that is broadly distributed throughout the system, we run a serious risk of a meltdown in confidence in leadership totally unlike anything we have seen since World War II. And with substantial justification! Why should we trust the financial system the way we used to? We should distrust the general competence of financial management: of governments and of corporations and of all bankers, whether commercial, investment, or central bankers.
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Yves–
You can get the Jeremy Grantham letter at the GMO website: http://www.gmo.com. I think it requires you to sign up, but anybody can do that.
It’s vital to the proper functioning of a market economy that firms managed so as not to make a profit go out of business.
I started to write, “… firms managed bu incompetent managers …”, but from the standpoint of personal profit, the managers of our financial system have been hyper-competent, extracting enormous amounts of wealth from their companies even as they produced concealed losses equal to the entire amount of illusory profits they reported to the shareholders they were defrauding.
And there’s no way to claw those bonuses back, or even to throw the knaves in jail, as one would need to prove “criminal intent”.