Sunday, June 07, 2009

Faber: House of Cards

I remember watching David Faber's (at right) CNBC Special House of Cards in February and becoming quite depressed at the time. Tonight I watched it again and have to say that the depression has been replaced by a new sense of outrage.  The reporting is excellent, for which Faber deserves an Emmy nomination to be sure.  

Alan Greespan's smirking and smiling were difficult to take, but his answer to one Faber question in particular elicits overt anger.  Faber asks if perhaps Greenspan should have felt some obligation to maybe at least look at the loans being accepted by banks as Triple A rated to see if they were legitimate... because, after all, he was the nation's central banker and banks were buying subprime mortgage-backed securities (MBS's) at an alarming rate.  Greenspan says: 
“If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress? When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society — would we have been able to do that? I doubt it.”

Excuse me?!  Congress?  The purpose of the Federal Reserve Board, in addition to setting monetary policy to maximize jobs and minimize currency fluctuation,  is also "To supervise and regulate banking institutions" and "To protect the credit rights of consumers."  In addition, the Federal Reserve Board, while it reports to Congress and the President, is designed to act independent of Congress for the obvious reasons.  The fact is that Greenspan's board had the unique power of ordering banks not to accept CDO's or MBS's or any paper that it deemed unsafe.  The various Collateral Debt Obligations (CDO's) and other financial products were, admits Greenspan (at left), not understood by himself or the bankers who bought and sold them. Huh?

Greenspan continues:
"This is one of the most extraordinary things about this whole episode. Looking at the way we all behaved, how is it possible that this species built up such an extraordinary world standard of living that has drawn hundreds of thousands of people out of poverty?  The thing we should be most extraordinarily appreciative of is how far this system has carried us because there is no doubt that somewhere in the future we’re going to have this thing again. It will not be for quite a period of time, but it will occur because the flaws in human nature are such that it doesn’t work."
How is it possible?  How?  Because social institutions have been designed to mitigate the risks of individual greed and avarice!!  If you don't even understand the purpose of government regulation, then how the hell can you collect a salary as a government regulator?  What were you doing all those years?  As for the comment "The way we all behaved"... speak for yourself you sonofabitch.  Some of us, believe it or not, were getting up every day, going to work, living within our means, paying our mortgages, and our taxes (which paid your salary), while you were writing books, dining with banker buddies, praising Ayn Rand, and wringing your hands while the entire world economy melted down on your watch.  And "we all" get stuck with the check.

The other asshat of note on Faber's program is Ann Rutledge of Moody's rating agency: one of three such firms that rated the various financial products Triple A, the highest rating.  She admitted that, although she worked as a bond rater, she had no understanding of how CDO's worked, but she felt it was okay to give them the highest rating for safety anyway.  Asshat.  No make that criminally negligent (at the very least) asshat.  She decried the competitive nature of the business as an excuse for her negligence. From MSNBC:
... the credit rating agencies also had an incentive to award a security the best possible rating. That’s because they were paid for their appraisals by the very banks that issued the securities.  Ann Rutledge says that, during the boom, the business got more competitive.  "You just wanted to make sure you had as much business or more than the next rating agency," she said.
Oh no she didn't...!!!  She didn't just say that, did she?  And she looks blankly at the interviewer; no realization of the fraud to which she has just admitted.  Does she have a lawyer?  Is the the FBI, CIA or Attorney General watching this show?  A gynecologist says on TV "there are only 237,000 uteruses in the county and 30 other gynecologists, so I tell every patient that they need a hysterectomy because you just want to make sure you have as much business or more than the next gynecologist."  Fraud.  You lose your soul, your self-respect, your medical license, and you go to jail.

Watching this show (and I highly recommend it), I cannot fathom how half these people can get before a camera and admit what they have done-- no remorse, not even blinking an eye-- this is a testament to how craven the financial industry has become and how insulated they have become from the social contract.

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