Fed Hires Bear Stearns Risk Chief…To Supervise Bank Soundness

You cannot make this stuff up. From the Federal Reserve Bank of New York’s web site:

Michael Alix has been named a senior vice president in the Bank Supervision Group of the Federal Reserve Bank of New York. He will serve as a senior advisor to William L. Rutledge, executive vice president, Bank Supervision Group….

Most recently, Mr. Alix worked for the Bear Stearns Companies, Inc., where he served as chief risk officer from 2006-2008 and global head of credit risk management from 1996-2006. His prior experience included eight years at Merrill Lynch & Company where he was a director, Asia chief credit officer and a vice president, head of North America financial institutions credit. He began his career with the Irving Trust Company where he served as an assistant vice president and lending officer.

As John Carney of Clusterstock, who found this remarkable tidbit, noted:

We suppose that Alix at least has plenty of experience with unsound banking institutions. He was the chief risk officer of Bear Stearns from 2006 until 2008. So, basically, he was the guy on the mast charged with yelling “iceberg” just before the Titantic introduced its bow to a floating hunk of ice.

We have our own paranoid pet theory as to how this appointment might have come about. Who would know better what was in the dreck pool that the Fed has parked over at BlackRock than the former chief risk officer? If Alix knows a few embarrassing things, might be wise to give him an incentive not to talk them up.

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  1. alexblack

    The writers at The Onion are kicking themselves that they didn’t make up this story last week. It would have been right up there with their recent “Angry Americans Demand a New Bubble”.

  2. Anonymous

    Who better than Mr Alix? He knows where the bodies are buried.

    Unemployment for these guys is provided by…you guessed it…US.

    No soup lines, no gaps in the ol resume, no selling the second home, just a seemless transition from private sector to public sector. Rinse and repeat.

  3. eh

    Maybe he came cheap.

    In finance it seems it is generally thought there is no such thing as incompetence. Just bad luck. A victim of circumstance.

  4. D

    eh: It would seem you’re right. But, it’s a very particular kind of bad luck, where you fail upwards.

    I think we’re getting close to the ‘torch and pitchfork’ threshold — that point where otherwise sane people who have played by the rules, as they knew them, have their ‘Falling Down’ moments.

    What is worse: that our public servants are party to institutional corruption, or that they’re no longer feel that they need to maintain even the appearance of impropriety? It just adds insult to injury.

    Alexblack: The Onion was right: “Our Long National Nighmare of Peace and Prosperity Is Finally Over”

  5. Jojo

    Who knows? Maybe he was the guy who actually did his job, fighting for less risk taking, but got told to pipe down by management who didn’t want the spiked punch bowl taken away?

    There is mention of this idea here:
    How Wall Street Lied to Its Computers

    One can hope anyways [lol]…

  6. fresno dan

    I saw some story about how we can’t have a great depression because the guys now at the FED and Treasury are sooooooooooo smart, have studied the great depression, etc.
    We’re gonna have a great depresssion.

  7. Anonymous

    “He began his career with the Irving Trust Company where he served as an assistant vice president and lending officer.”

    Would explain a lot. No need for experience.

    We couldn’t have got this moke to spill his guts for a cell with a view ?

  8. Anonymous

    OK, let’s assume you miss a law enforcement office – and definitely you need people to enact the rule-: what’s the first thing you look for? And where do you look for it?

  9. Anonymous

    The fact that Bear failed doesn’t mean that risk management failed. Alix repeatedly raised red flags concerning RBMS, but his cautious stance was ignored by other managers. Even the best risk management can’t do much if its advice are ignored.

  10. Anonymous

    Jojo — the article you refer to in support of Alix is hilarious — it extensively quotes Leslie Rahl for expert opinion on risk mgt. She was on the board of Fannie, hahaha.

  11. Matt Dubuque

    The Fed is ALWAYS presumed guilty. For some in the pitchfork crowd, it’s an irrebuttable presumption.

    De riguer in the USA.

    Matt Dubuque

  12. Stuart

    He either foresaw the risks, their scale and implications, or he did not. If he did not, albeit he has alot of company, the appropriateness of this hire is clear. If he did, then failure resides with efficacy of communications to Sr. Management unless one presumes that he was just simply ignored, overruled, or swept aside, stampeded by more greedy ambitions of vested interests. BSC took on too much risk.

  13. Anonymous

    It’ll get even better then this just wait until all the Goldman Sachs guy in the current administration hit the street. The US Banana Republic is a short across the board.

  14. River

    The US plans to market $500 Billion more in Treasuries this quarter.

    Brad Setzer has some interesting comments about these sales:

    …snip…’I would be surprised, though, if it is all bought by central banks. Or even if most of the new Treasury will be absorbed by central banks. For the first time in a long time, I suspect Americans — not the world’s central banks — will be the main source of new lending to the Treasury.

    Why? The last few months have been marked by three trends:’…snip…

    Maybe Alix should have been employed by Treasury?


  15. Walter

    “The fact that Bear failed doesn’t mean that risk management failed. “

    You can certainly argue that it wasn’t a failure to recognize and report the risk (I have no idea on that count).

    But “risk management” clearly failed spectacularly. I can’t say if the failure was one of recognition, communication, or influence. But clearly the risk was not managed, so by definition failure.

  16. Anonymous

    Well, let’s stop pretending that we do or do not know what Mr. Alix’s aptitude for risk management. Maybe he could be very good or maybe not. The fact that he worked at Bear Stearns means that he was NEVER taken seriously or was window dressing. That shop was built and run by their traders. Thus, risk management, legal and accounting were glorified “YES” men and it was one big echo chamber since the traders were the only ones allowed to do the talking. In a rising market, there was no risk as far as they were concerned. Now, could Mr. Alix be a better risk manager than say a former commercial bank risk manager? Absolutely, since he has seen much more products, hedging practices or trade ideas in the mortgage space than most. He also saw what worked and what didn’t so experience is nothing to dismiss. However, let’s not judge him as a savvy or awful manager of risk because he worked at Bear. Whatever his opinions there, they more likely than not, would have been ignored. Wonder who the other candidates were… and yes, they DO shoot messengers in DC.

  17. sc

    Alix is one of the best risk managers I have ever met. Mgmt of BSC is another story. Just as economists in the Fed were telling Greenspan to regulate it doesn’t mean management chooses to hear it. Alix is an outstanding hire for the Fed and he is one guy that will not be BS’ed by banks because he knows more than 99% of risk managers out there.

  18. Matt L

    umm… Is it me or does it seem like the foxes have been hired to watch the hen houses? Its not just Alix after all, its the whole lot of them at the Fed and Treasury. Many of the experienced civil servants disappeared years ago and were replaced by political hacks and opportunists.

  19. baychev

    a man with dignity who understands what he is doing would not let a company take excessive bets while he is supposed to ring the panic bell before the senior management and the SEC if he feels his concerns were not addressed adequately.
    so much for alix’ skills and competences. maybe the fed needs an obedient dog that will close his eyes and not escalate problems, maybe they need another clueless punk. but if they need someone to supervise, this certainly is not the man.

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