Category Archives: Media watch

FCIC Insider: “I Can’t Believe They Suborned Brooksley Born”

The Financial Crisis Inquiry Commission released its report yesterday and went into PR overdrive. Journalists and the public are still digesting the weighty document, and various tidbits, like the report that Goldman did indeed profit from the AIG rescue, are touted as news when the basic facts were already in the public domain.

What is troubling about the report is the manner in which it hews to conventional wisdom. Its ten major findings are hardly controversial, yet they are still insufficient to explain why the financial system seized up and appeared close to failure. And telling a familiar-sounding story assures that the status quo will remain unchallenged, and serves to validate the inadequate reforms now underway. After all, they are premised on the very same superficial beliefs.

I participated in a blogger conference call with FCIC commissioners Phil Angelides and Brooksley Born. I’m clearly not cut out for public life. It was disconcerting to hear them thumping their talking points.

But the stunning part were Angelides’ and Born’s answers to my questions.

FCIC Insiders Say Report Gives Wall Street a Free Pass, Simply Sought to Validate Conventional Wisdom About Crisis

From the very outset, the Financial Crisis Inquiry Commission was set up to fail. Its leadership, particularly its chairman, Phil Angelides, was seen as insufficiently experienced in sophisticated finance. The timetable was unrealistic for a thorough investigation of a crisis this complex, let alone one international in scope. Its budget and staffing were too small. The investigations were further hampered by the requirement that subpoenas have bi-partisan approval along with Its decision to hold hearings with high profile individuals, including top Wall Street executives, before much in the way of lower-level investigation had been completed. The usual way to get meaningful disclosure from a top executive is to confront him with hard-to-defend material or actions; interrogations under bright lights, while a fun bit of theater, generally yield little in the absence of adequate prep.

So with expectations for the FCIC low, recent reports that the panel urged various prosecutors to launch criminal probes were a hopeful sign that the commission might nevertheless come out with some important findings. But correspondence from insiders in the last few days suggests otherwise. One, for instance, wrote, “I’m still in the process of getting the stink out of my clothes.”

These ideologically-neutral sources close to the investigation depict the commissioners as having pre-conceived narratives and of fitting various tidbits unearthed during the investigation into these frameworks, with the majority focusing more on the problems caused by deregulation and the failure of the authorities to use even the powers they had, while the minority assigns blame to government meddling, particularly housing-friendly policies.

These insiders see both sides as wrong, and want to encourage investigative reporters to challenge both the majority and dissenting accounts. They contend that both versions help perpetuate the myth that Wall Street was as much a victim of the crisis as anyone else.

One of these sources sent this document in an effort to question the notion that any of the reports coming out of the FCIC were the result of a fact-based investigative process…

Greenspan Put, aka “Be Nice to Banks”, Trumped Recognition of Housing Bubble in 2005

In an interesting bit of synchronicity, we’re getting other “how did we get there” snippets from the global financial crisis today. Bloomberg reports that the Federal Reserve actually did see that a housing bubble was underway, but stuck to its guns of measured interest rate increases. The problem is that its account is far too kind to the Fed and comes awfully close to being revisionist history:

Federal Reserve staff and policy makers identified a housing bubble in 2005, and failed to alter a predictable path of interest-rate increases to slow down the expansion of mortgage credit, transcripts from Open Market Committee meetings that year show….

The FOMC in June heard presentations from staff economists, with some raising alarms about housing markets, the transcript shows. Those warnings didn’t translate into a more aggressive policy. The committee raised the benchmark lending rate a quarter-point at that meeting and said “policy accommodation can be removed at a pace that is likely to be measured.”..

“The 20 Most Influential Blogs in Financial Media”

Thanks to Minyanville for publicizing this study by MindfulMoney on the nature and reach of social conversations in the investment arena. But even bigger thanks go to loyal readers and contributors for their frequent comments, leads, and critiques. The success of a blog depends on its community and I am very grateful for all the input so many of you have generously provided.

Perhaps the most interesting finding (boldface ours):

The research confirms the existence of a network of investment super-connectors with extraordinary media influence and reach. These super-connected new influentials are, for the most part, not well established voices in the media but individual bloggers who fiercely champion their independence….In the US, the network functions as the unofficial voice of Wall Street & the US federal bank with no mainstream media players at the centre of the network.

Floyd Norris Repeats “Big Banks Are Necessary/Desirable” Canard

Aargh, can someone please acquaint economists with the economics of banking? Consider the embarrassing premise of a piece by Floyd Norris of the New York Times:

If big banks start failing again, what will replace them?

“Summer” Rerun: CNBC Publicizes This Blog

This post first appeared on June 8, 2008

I suppose I should be pleased, since readers wrote to inform me that Charles Gasparino of CNBC made mention of us on Friday (this clip, starting at 1:30) for our coverage of Lehman. However, I would have been happier if the statements made were correct. It’s remarkable that a seasoned journalist would assert that a critic of a company was short its stock, which implies an intent to manipulate its price, with no factual basis for that view, and no effort made to verify that statement. And indeed it is untrue, for I have never been short Lehman or indeed, any stock.

It’s even more remarkable that that same journalist called me a couple of hours later to threaten litigation over the accuracy of my reporting.

“Summer” Rerun: MBIA Lies in Attack on New York Times

This post first appeared on June 19, 2008

Let’s start with some admissions: Gretchen Morgenson, one of two authors (the other is Vikas Bajaj) of a takedown piece on MBIA yesterday, has some detractors in the blogsphere because, frankly, her understanding of credit instruments leaves something to be desired. Her critics overlook her solid work on executive comp and corporate malfeasance. When she has access to court documents and SEC filings. she is specific and accurate.

Based on watching months of the slugfest between MBIA and Bill Ackman, where MBIA would make vitriolic charges against Ackman which (aside from the obvious fact that he was short) often deliberately misconsrued what he had written (written, mind you, so it was possible to track things back), I’d take Morgenson over MBIA in general, and in particular, since the first two items (the most important ones by far) in its salvo against the piece are a bald-faced lie followed by an attempt at obfuscation that actually confirms the NYT’s position.

Google Rates Website Wonkiness

This post’s headline misrepresents the apparent intent of a new Google filter in its advanced search function. Per the SearchEngineLand report, “Google Lets You Dumb Down Your Search Results With “Reading Level” Filter,” the aim is apparently to allow web surfers to steer clear of pages that might be too taxing.

Lender Processing Services Makes False Statements About Pending Litigation in SEC Filing

Shortly after Lender Processing Services became the target of class action lawsuits for alleged illegal legal fee-splititing in early October, an investor commented that he had never seen a company do such a poor job of crisis management. The company halted trading at 3:45 PM for the not legitimate reason that they didn’t like how […]

“So You Want to Be a Journalist”

Some comic relief, hat tip reader Scott:

Paul Jackson’s Largely Irrelevant Responses to Mortgage Securitization Critics’ Case

When I worked for Goldman, and later McKinsey, professionals at each firm would joke about presentations that passed the weight test. That tag line referred to documents heavy enough to land on a client desk with an impressive “thunk” so as to seem intimidating even before opening them. The implication was that length could and […]

Is It Verboten to Talk About the Securitization Buyers’ Strike?

There is a perfectly fine article up at the Wall Street Journal on the current, probably weakening, state of the housing market, save that it fails to discuss the elephant in the room, that of the continuing moribund conditions in the so-called private label securitization market.

Bill Black: No, Mr. President, you did not negotiate a winning tax deal

By Bill Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City and a former senior financial regulator

This column analyses Obama’s claim that he got the better of the Republicans in the negotiations.

The administration (implicitly) argues that its claim of extraordinary negotiating success represents a miraculous accomplishment given the facts that the Republicans were holding all legislation hostage to their non-negotiable demand that the Bush tax cuts for the wealthiest of Americans be extended and the administration’s irrevocable decision that it could not call the Republican’s bluff because the economy would likely sink back into recession unless tax cuts for the middle class were immediately passed…..

The third problem is that no element of the claimed miracle is true….